Medical Cost Reference Guide

2008 Medical Cost Reference Guide Facts and Trends Driving Costs, Quality and Access Click here to begin

Welcome to the interactive PDF version of the 2008 Medical Cost Reference Guide. Click on the title of the chapter you wish to view or use the tabs at the top of each page to move between chapters. You can also use the Index of Tables to jump directly to a specific chart or table. Click on any of the charts to launch a PowerPoint presentation slide of the information. Any slide can be saved to your desktop for future reference. Use the Escape key or the button at the bottom of each page to close this document and return to your desktop. Contents 1 2 3 4 5 Index of Tables 2

Dear Colleague: The United States continues to spend more on healthcare than other nations, but there are some positive indicators on the horizon. spending as a percent of Gross Domestic Product (GDP) is 16 percent in the U.S. and rises to 19 percent of total national government spending. As the healthcare leaders in the U.S., Blue Cross and Blue Shield companies continue to aggressively manage healthcare costs in providing high value healthcare that is quality-driven, affordable and accessible. For the fourth year in a row, growth in health insurance premiums declined in 2007 and the rate of growth is currently at its lowest level in seven years. There are also positive indicators in other key areas. Growth in consumer engagement measured by enrollment in consumer driven health plans (CDHPs), utilization of health information, consumer health tools and health management programs to make more informed healthcare decisions are all increasing. While these bode well for the future, the nation still must work aggressively to better manage overall healthcare costs, which are rapidly approaching $2.3 trillion. Now in its sixth year of publication, the Medical Cost Reference Guide provides comprehensive information on healthcare economics, utilization and management trends from credible, peer-reviewed sources. We hope the 2008 Medical Cost Reference Guide continues to meet the needs of all healthcare stakeholders. Yours in good health, President and Chief Executive Officer Blue Cross and Blue Shield Association 3

New to this year s edition, the 2008 Medical Cost Reference Guide features a section on that includes information on how U.S. health spending compares to other countries. It also provides health spending and utilization information at the global and national levels, with specifics on public and private-sector healthcare spending and utilization. Following that initial section, the Medical Cost Reference Guide is organized into several key areas: Information on employer-based and government health insurance trends, as well as trends on individual health plan purchases and the uninsured. Information on healthcare costs, utilization of health information, tools and programs geared to help consumers make better healthcare decisions and live healthier lives. with Providers Information on hospitals, physicians, nurses and prescription drugs examining purchasing trends and provider costs. Information on programs and technologies that can impact rising healthcare costs. The Medical Cost Reference Guide also provides comprehensive information on other health statistics and healthcare cost and utilization data. A CD-ROM is included in the back of the Medical Cost Reference Guide with an interactive PDF version for access to PowerPoint slides of each table. For more information about the Blue Cross and Blue Shield companies and the 2008 Medical Cost Reference Guide, visit www.bcbs.com. 4

Section 1 International International Health Spending as a Percentage of Gross Domestic Product (GDP).......................... 7 National Government Spending on Health for Select Countries......... 8 Health Expenditures of Selected Countries by Source of Funds.......... 8 National Components of GDP, Q3 2007............................ 9 National Health Expenditure (NHE), 2003-2015................... 9 Expenditures per Capita, 2003-2015.........................10 The Nation s Dollar, 2005........................10 NHE by Source of Funds, 2003-2007.........................11 Growth Rates of NHE by Source of Funds, the CPI and Wages and Salaries, 2002-2006.......................... 12 Government Contributions to NHE, 2003-2007.................. 12 NHE by Use of Funds, 2003-2007.......................... 13 Growth Rates of NHE by Use of Funds, and the CPI, 2002-2006......... 14 Comparison of Public, Private and Out-of-pocket Dollar, 2005... 14 Private Insurance Dollar, 2005..................... 15 2008 Medical Cost Reference Guide Blue Cross and Blue Shield Association Print 5

Summary Health expenditures in the United States continue to grow and the U.S. spends more on healthcare than any other nation. also continues to be a major part of the economy. Health spending is expected to grow over the next several years, with National Health Expenditure rapidly approaching $2.3 trillion. The federal government contributed 46 percent of healthcare payments in 2006. Although the government s overall contribution to healthcare spending has been rising, the percentage the government contributes is expected to be about the same in 2007 as it was in 2006. Hospitals, physicians and prescription drugs continued to be the top three healthcare spending areas for both public and private funders. Three-quarters of the private health insurance dollar goes toward hospitals, physician and clinical services, and prescription drugs. While still increasing, out-of-pocket healthcare spending by Americans continues to be lower than most other developed countries. In addition, out-of-pocket payments are being distributed across more areas today, including prescription drugs and dental services. 2008 Medical Cost Reference Guide Blue Cross and Blue Shield Association Print 6

International Health Spending as a Percentage of Gross Domestic Product (GDP) The United States leads the world in healthcare spending as a percentage of GDP, with healthcare accounting for 16.2 percent. Highlights The U.S. spends the most on healthcare 16.2 percent of the GDP in 2007. Health spending in Germany, France, Austria and Switzerland accounts for between 10.1 percent and 13.0 percent of GDP. In Canada, the United Kingdom, Australia, Norway and Sweden, health spending accounts for between 8.1 percent and 10.0 percent of GDP. Japan and Finland spend between 5.1 percent and 8.0 percent of GDP on healthcare. In China health spending accounts for 4.7 percent of GDP. International Health Spending as Percentage of GDP Less Than or Equal To 3 3.1-5.0 5.1-8.0 8.1-10.0 10.1-13.0 More Than 13 No Data Source: World Health Organization (2006-2007) 2008 Medical Cost Reference Guide Blue Cross and Blue Shield Association Print 7

National Government Spending on Health for Select Countries Health Expenditures of Selected Countries by Source of Funds The U.S. government spends a higher percentage of funds on healthcare than most other nations. Unlike most other nations, private spending exceeds government health expenditure in the U.S. U.S. Australia Germany Canada United Kingdom France Brazil Mexico South Africa China United Arab Emirates India 39% 2.9% 8.1% 10.8% 10.1% 12.9% 15.4% 14.2% 18.9% 18.5% 17.3% 17.1% 15.9% 0% 4% 8% 12% 16% 20% Government Spending on Health as a Percentage of Government Spending Out-of-pocket Expenditures as a Percentage of Private Health Expenditures 100% 80% 60% 40% 20% United Kingdom (14%, 92%) Germany (23%, 58%) France (22%, 35%) United Arab Emirates (30%, 71%) Canada (30%, 49%) Brazil Australia (46%, 64%) (33%, 62%) Global (44%, 52%) Mexico (54%, 94%) China (62%, 87%) United States (55%, 24%) South Africa (60%, 17%) India (83%, 94%) 0% 0% 20% 40% 60% 80% 100% Private Expenditures as a Percentage of Total Health Expenditures Source: World Health Organization (2007) Source: World Health Organization (2007) 8

Components of GDP, Q3 2007 National Health Expenditure (NHE), 2003-2015 is the largest sector of the U.S. economy. The NHE is projected to increase by more than 70 percent between 2007 and 2015, with healthcare expected to account for almost 20 percent of GDP. 18% $5,000 19.2% 15% 16.2% $4,000 $3,875 Percentage of GDP 12% 9% 6% 10.6% 9.6% 4.8% NHE in Billions $3,000 $2,000 $1,000 15.8% 15.9% 16.0% 16.0% $1,859 $1,988 $2,123 $1,733 16.2% $2,262 3% 3.1% 2.6% $0 2003 2004 2005 2006(p)* 2007(p)* 2015(p)* 0% National Health Expenditure (NHE)* Housing Food National Defense Motor Vehicles and Parts Gasoline, Fuel Oil and Other Energy Goods NHE Percentage of GDP *Annual figure for 2007 projected by Centers for Medicare and Medicaid Services (CMS) Note: NHE measures the total amount spent in the U.S. to purchase healthcare goods and services during the year. The amount invested in medical sector structures and equipment and in non-commercial research in the U.S. is also included. Source: Bureau of Economic Analysis (2007), Centers for Medicare and Medicaid Services (2007) *Projected by CMS Source: Centers for Medicare and Medicaid Services (2007) 9

Expenditures per Capita, 2003-2015 The Nation s Dollar, 2005 On a per capita basis, NHE has been growing at a projected Compound Annual Growth Rate (CAGR) of almost six percent over the last five years. Public payments (Medicare, Medicaid and other public sources) account for 46 percent of the nation s healthcare dollar; private health insurance accounts for 35 percent. Where it Came From: Where it Went: $14,000 10% Prescription Drugs Per Capita Spending $12,000 $10,000 $8,000 $6,000 $5,952 $6,322 $6,697 $7,092 $7,498 $12,062 16% Medicaid and SCHIP* 13% Other Public 35% Private Insurance 6% Nursing Home Care 7% Program Admin. and Net Costs $4,000 $2,000 $0 2003 2004 2005 2006(p)* 2007(p)* 2015(p)* 17% Medicare 7% Other Private 13% Out-of-pocket 21% Physician and Clinical Services 31% Hospital 25% Care Other Spending** *Projected by CMS Source: Centers for Medicare and Medicaid Services (2007) *SCHIP is State Children s Program. **Other spending includes dental services, other professional services, home healthcare, durable medical products, over-the-counter medicines and sundries, public health activities, research and construction. Source: Centers for Medicare and Medicaid Services (2007) 10

NHE by Source of Funds, 2003-2007 Rate of growth of public payments outpaces growth of other sources of NHE funds. Where it Came From Spending in Billions $2,500 $2,000 $1,500 $1,000 $1,733 $127 $225 $604 $778 $1,859 $134 $236 $652 $838 $1,988 $141 $249 $694 $903 $2,123 $152 $251 $727 $993 $2,262 $163 $266 $776 $1,058 Sources of Funds CAGR 2003-2007 Public Payments 8.0% Private 6.5% Out-of-pocket Payments 4.3% Other Private Funds 6.4% Total NHE 6.9% $500 $0 2003 2004 2005 2006(p)* 2007(p)* Public Payments Out-of-pocket Payments Private Other Private Funds *Projected by CMS Note: CMS defines each as follows: Out-of-pocket payments includes direct spending by consumers for all healthcare goods and services, including coinsurance, deductibles and any amounts not covered by insurance. Private health insurance equals premiums earned by private health insurers, including premiums paid to Blue Cross and Blue Shield, commercial insurance, HMOs, self-insured plans and property/ casualty insurance coverage for healthcare. Public payments are payments made by federal, state and local governments. Other private funds are funds received through philanthropic support, as well as income from the operation of gift shops, cafeterias, parking lots and educational programs. Source: Centers for Medicare and Medicaid Services (2007) 11

Growth Rates of NHE by Source of Funds, the Consumer Price Index (CPI) and Wages and Salaries, 2002-2006 Historically, the growth rates of all NHE payment components have been higher than the growth rate of the CPI. Government Contributions to NHE, 2003-2007 In 2007, the government contribution to NHE is projected to increase in absolute dollars, but the percentage of contribution is projected to stay at 12.6 percent. Where it Came From Where it Came From Annual Change From Previous Year 12% 9% 6% 3% 10.5% 9.2% 9.1% 5.7% 1.6% 9.6% 8.1% 7.9% 7.7% 7.8% 7.2% 6.3% 5.5% 5.0% 2.6% 2.3% 2.7% 10.0% 7.7% 6.9% 6.8% 6.6% 6.5% 5.8% 5.0% 5.1% 4.8% 3.4% 3.4% Percentage of NHE 35% 30% 25% 20% 15% 10% 5% 31.9% $778 13.0% 32.3% $838 12.8% 32.4% $903 13.0% 34.2% $993 12.6% 34.1% $1,058 12.6% 0% 0.8% 2002 2003 2004 2005 2006(p)* NHE Private Wages and Salaries Public Payments Out-of-pocket Payments CPI 0% Federal 2003 2004 2005 2006(p)* 2007(p)* State and Local Total Public Expenditure in Billions Contribution to NHE CAGR 2003-2007 Total Public 8.0% Federal 8.7% State and Local 6.2% *Projected or estimated Source: Centers for Medicare and Medicaid Services (2007), Congressional Budget Office (2007) *Projected by CMS. Source: Centers for Medicare and Medicaid Services (2007) 12

NHE by Use of Funds, 2003-2007 Hospital care remains the largest user of NHE funds, spending 31 percent of annual healthcare expenditures. Where it Went Spending in Billions $2400 $2000 $1600 $1200 $800 $400 $1,733 $556 $111 $175 $367 $525 $1,859 $594 $115 $190 $394 $567 $2,123 $1,988 $684 $632 $126 $122 $214 $201 $447 $421 $612 $652 $2,262 $729 $132 $230 $474 $698 Use of Funds Hospital Care 7.3% Physician and Clinical Services CAGR 2003-2007 6.6% Prescription Drugs 7.1% Nursing Home and Home Health 4.6% Other Spending ** 7.0% Total NHE 6.9% $0 2003 2004 2005 2006(p)* 2007(p)* Hospital Care Prescription Drugs Physician and Clinical Services Nursing Home and Home Health Other Spending** *Projected by CMS **Other spending includes dental services, other professional services, durable medical products, over-the-counter medicines and sundries, public health activities, research and construction, and government administration and net costs of private health insurance. Note: Numbers may not add up due to rounding. Source: Centers for Medicare and Medicaid Services (2007) 13

Growth Rates of NHE by Use of Funds, and the CPI, 2002-2006 spending components have grown faster than the CPI but the growth rates are declining. Where it Went Comparison of Public, Private and Out-of-pocket Dollar, 2005 More than 60 percent of private health insurance and public sources spending goes towards hospitals, physicians and prescription drugs. Out-of-pocket spending is spread across multiple areas. Where it Went 16% 100% Annual Percentage Growth Rate 12% 8% 4% 0% 14.0% 10.0% 8.2% 7.9% 4.1% 1.6% 10.6% 8.5% 8.0% 7.5% 4.5% 2.3% 8.6% 7.9% 7.4% 7.0% 4.1% 2.7% 7.9% 7.0% 7.0% 6.0% 5.8% 3.4% 8.0% 2002 2003 2004 2005 2006(p)* 6.6% 6.1% 5.6% 3.4% 3.4% Percentage of Total Spend 80% 60% 40% 20% 0% 14% 3% 6% 14% 29% 31% 1% 1% 24% 4% 8% 2% 6% 17% 39% Private Health Insurace Public Out-of-pocket 1% 18% 2% 13% 6% 15% 20% 17% 8% Hospital Care Prescription Drugs Other Spending** Physician and Clinical Services Nursing Home and Home Health CPI Hospital Prescription Drugs Physician and Clinical Services Dental Services Other Professional Spending Nursing Home Home Health Other* *Projected or estimated. **Other spending includes dental services, other professional services, durable medical products, over-the-counter medicines and sundries, public health activities, research and construction, and government administration and net costs of private health insurance. Source: Centers for Medicare and Medicaid Services (2007), Congressional Budget Office (2007) *Other spending includes dental services, other professional services, durable medical products, over-the-counter medicines and sundries, public health activities, research and construction, and government administration and net costs of private health insurance. Source: Centers for Medicare and Medicaid Services (2007) 14

Private Insurance Dollar, 2005 Nearly 75 percent of the private insurance healthcare dollar goes toward hospitals, physician services and prescription drugs. Nation s Dollar Where it Came From 16% Medicaid and SCHIP* 13% Other Public 35% Private Insurance 1 Home Health Care 3 Other Professional Services 14 Admin. Cost* 17% Medicare 7% Other Private 13% Out-of-pocket 31 Hospital 29 Physician and Clinical Services 14 Prescription Drugs 6 Dental Services 1 Nursing Home *Includes government administration and net cost of private health insurance Source: Adapted from Centers for Medicare and Medicaid Services (2007) 2008 Medical Cost Reference Guide Blue Cross and Blue Shield Association Print 15

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Overall by Type of, 2006....................19 Percentage of Growth in Private, Medicare and Medicaid Contributions to the National Health Expenditure, 2002-2006......19 Hospital Payment-to-cost Ratios for Medicare, Medicaid and Private Payers, 1995-2005.............................. 20 Employer-based Percentage of Firms Offering Health Benefits, 2002 and 2007.......... 21 Percentage of Employers Offering Health Benefits to Employees and Retirees, 2003-2007................................. 21 Growth Rates of Premiums, Overall Inflation and Workers Earnings, 2003-2007........................... 22 Growth Rates in Premiums by Plan Type, 2003-2007..... 22 Average Annual Premium Contribution for Family, 2003-2007.... 23 Average Consumer Pharmacy Copayments by Tier, 2003-2007......... 23 Distribution of Covered Workers Facing Different Cost Sharing Formulas for Prescription Drug Benefits, 2003-2007..................... 24 Top Strategies to Control Costs, 2007................. 24 Top Strategies to Control Costs by Firm Size, 2007.......... 25 Types and Characteristics of CDHPs........................ 25 Employer-Based Members Enrolled in CDHP, 2007................ 26 Among Firms Offering Health Benefits, Percentage that Offers an HDHP/HRA or an HSA-qualified HDHP, 2005-2007................. 26 Percentage of National Accounts Offering CDHPs, 2005-2007.......... 27 CDHP Adoption Rate by National Account-Based Enrollees, 2005-2007..... 27 Percentage of Employees in HSAs whose Employers Contribute to Their Accounts, 2005-2007............................ 28 Percentage of Employers Contributing to Employees HSAs Individual, 2006-2007.......................... 28 Individual Section 2 Individually Purchased Plans, 2007............... 29 Percentage of Nonelderly Individuals Living in Families with Out-of-pocket Expenditures on Health Care and Insurance Premiums Exceeding $2,000, $5,000, and $10,000, 2003................... 29 Government Medicaid and Medicare Beneficiaries, 1980-2005................. 30 Medicaid and Medicare Expenditures, 1980-2005................. 31 Enrollment in SCHIP, 1998-2006........................... 32 Federal Spending for SCHIP, 1998-2006...................... 32 for Persons Age 65 and Over, 1992-2003...... 33 Medicare Advantage (MA) and Prescription Drug Plan (PDP) Enrollment, 2006-2007...................................... 33 Uninsured Percentage Uninsured Within Each Income Level, 2002-2006.......... 34 Uninsured Americans by Eligibility for Medicaid and SCHIP and Affordability of, 2004........................... 35 Shares of Uninsured Americans by Age and Parental Status, 2004....... 35 Demographics of the Uninsured, 2002 and 2006................. 36 Percentage of Adults Facing Serious Problems Paying Medical Bills in the Past Two Years by Income Level, 2006.................... 36 Percentage of Adults Facing Serious Problems Paying for Insurance in the Past Two Years by Income Level, 2006.................... 37 Reduced Access to Medical Care During the Past 12 Months Due to Cost, 1997-2004....................................... 37 Proportion of U.S. Physicians Providing Charity Care, 1996-2005........ 38 Changes in Medicare Covered Physician Services, 1997-2005.......... 38 2008 Medical Cost Reference Guide Blue Cross and Blue Shield Association Print 17

Financing Trends Summary Nearly 68 percent of all Americans were covered by a private insurance plan during 2006 and another 27 percent received medical coverage through government programs. Sixty percent of employers currently offer health benefits to their employees, a trend that has been stable since 2003. In the same period, the growth rate in health insurance premiums has been cut by more than half, from 13.9 percent in 2003 to 6 percent in 2006. Companies continue to look for ways to stretch their healthcare dollars and are instituting a variety of cost-saving strategies. For example, many are adopting programs to change employee behavior and perceptions to better control healthcare costs such as promoting generic drug utilization, disease management programs and preventive health and behavior programs. While growing in overall numbers, the uninsured rate remains at about 15.8 percent. Blue Cross and Blue Shield companies are joining other industry leaders in pursuing public-private sector programs to extend health coverage to uninsured Americans. 2008 Medical Cost Reference Guide Blue Cross and Blue Shield Association Print 18

by Type of, 2006 The majority of the U.S. population is covered by employer health insurance plans. Percentage of Growth in Private, Medicare and Medicaid Contributions to the NHE, 2002-2006 Since 2004, growth in Medicare contributions to NHE has outpaced growth in private health insurance contributions. Any private plan Employment-based private insurance 59.7% 67.9% 24% 22.1% Any government plan 27.3% 18% Uninsured Medicare Medicaid Direct-purchase private insurance Military health care* 15.8% 13.6% 12.9% 9.1% 3.6% Percentage of Growth 12% 6% 10.5% 10.5% 7.3% 9.6% 9.1% 6.7% 10.3% 7.9% 7.5% 9.3% 7.2% 6.6% 4.8% 0% 10% 20% 30% 40% 50% 60% 70% 0.1% Private Insurance Government Insurance 0% 2002 2003 2004 2005 2006(p)* Private Medicare Medicaid *Military health care includes Comprehensive Health and Medical Plan for Uniformed Services (CHAMPUS)/Tricare and Civilian Health and Medical Program of the Department of Veterans Affairs (CHAMPVA), as well as care provided by the Department of Veterans Affairs and the military. Note: The estimates by types of coverage are not mutually exclusive; people can be covered by more than one type of health insurance during the year. Source: U.S. Census Bureau, Current Population Survey, 2007 Annual Social and Economic Supplements *Projected by CMS Source: Centers for Medicare and Medicaid Services (2007) 19

Hospital Payment-to-cost Ratios for Medicare, Medicaid and Private Payers, 1995-2005 Private payers pay hospitals at a higher rate than Medicare and Medicaid. 130% 120% 124% 122% 118% 116% 115% 116% 117% 119% 122% 129% 129% Payment-to-cost Ratio 110% 100% 90% 99% 94% 102% 95% 104% 102% 96% 97% 100% 96% 99% 95% 98% 96% Break Even (Payment = Cost) 98% 95% 96% 92% 92% 92% 90% 87% 80% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Private Payers Medicare Medicaid Note: Payment-to-cost ratios indicate the degree to which payments from each payer covers the costs of treating that provider s patients. Data are for community hospitals and cover all hospital services. Imputed values were used for missing data (about 35% of observations). Most Medicaid managed care patients are included in the private payers category. Source: Adapted from the American Hospital Association and Avalere Health TrendWatch Chartbook 2007: Trends Affecting Hospitals and Health Systems 20

Percentage of Firms Offering Health Benefits, 2002 and 2007 More than 83 percent of firms with 25 or more workers offer health benefits, while small businesses of fewer than 10 workers often do not. Percentage of Employers Offering Health Benefits to Employees and Retirees, 2003-2007 The number of employers offering benefits has stabilized since 2003, while retiree health benefit offerings have remained somewhat static. Percentage Offering Health Benefits 100% 80% 60% 40% 20% 66% 60% 58% 45% 76% 70% 86% 83% 95% 94% 98% 99% Percentage Offering Benefits 70% 60% 50% 40% 30% 20% 10% 66% 38% 26% 63% 36% 23% 60% 61% 60% 35% 33% 33% 31% 28% 24% 0% All Firms 3-9 10-24 25-49 50-199 200 or More Number of Workers per Firm 2002 2007 0% 2003 2004 2005 2006 2007 Offering Health Benefits* Offering Retiree Health Benefits** Offering Health Benefits to Part-time Workers* Source: Employer Health Benefits 2007 Annual Survey, (#7672), The Henry J. Kaiser Family Foundation and Health Research and Educational Trust, September 2007 This information adapted with permission from the Henry J. Kaiser Family Foundation. The Kaiser Family Foundation, based in Menlo Park, California, is a nonprofit, independent national healthcare philanthropy and is not associated with Kaiser Permanente or Kaiser Industries. *Among all firms **Among all firms with 200 or more workers offering health benefits to active workers Source: Employer Health Benefits 2007 Annual Survey, (#7672), The Henry J. Kaiser Family Foundation and Health Research and Educational Trust, September 2007 This information adapted with permission from the Henry J. Kaiser Family Foundation. The Kaiser Family Foundation, based in Menlo Park, California, is a nonprofit, independent national healthcare philanthropy and is not associated with Kaiser Permanente or Kaiser Industries. 21

Growth Rates of Premiums, Overall Inflation and Workers Earnings, 2003-2007 In five years, growth in health insurance premiums has been cut by more than half. Growth Rates in Premiums by Plan Type, 2003-2007 Across all plan types, the growth in insurance premiums has slowed since 2003. Annual Percentage of Growth 15% 12% 9% 6% 3% 13.9% 3.0% 2.2% 11.2% 2.1% 2.3% 3.5% 9.2% 2.7% 7.7% 3.5% 3.8% 6.1% 3.7% 2.6% Percentage Increase 16% 12% 8% 4% 13.9% 11.2% 9.2% 7.7% 6.1% 14.3% 11.1% 5.0% 8.4% 7.3% 15.2% 12.0% 9.4% 8.6% 8.9% 13.7% 10.9% 9.4% 7.3% 5.3% 13.2% 11.3% 9.1% 8.4% 5.7% 7.7% 6.3% 0% 2003 2004 2005 2006 2007 0% All Plans Conventional HMO PPO POS HDHP/SO* N/A Premiums* Workers Earnings Overall Inflation 2003 2004 2005 2006 2007 *Data on premium increases reflect the cost of health insurance for a family of four Source: Calculated based on Employer Health Benefits 2007 Annual Survey, (#7672), The Henry J. Kaiser Family Foundation and Health Research and Educational Trust, September 2007 This information adapted with permission from the Henry J. Kaiser Family Foundation. The Kaiser Family Foundation, based in Menlo Park, California, is a nonprofit, independent national healthcare philanthropy and is not associated with Kaiser Permanente or Kaiser Industries. *High deductible health plan with savings option Note: Data on premium increases reflect the cost of health insurance for a family of four. Source: Employer Health Benefits 2007 Annual Survey, (#7672), The Henry J. Kaiser Family Foundation and Health Research and Educational Trust, September 2007 This information adapted with permission from the Henry J. Kaiser Family Foundation. The Kaiser Family Foundation, based in Menlo Park, California, is a nonprofit, independent national healthcare philanthropy and is not associated with Kaiser Permanente or Kaiser Industries. 22

Average Annual Premium Contribution for Family, 2003-2007 In 2007, employers annual health insurance premium contribution declined 2.2 percent from 2005 to the lowest level in the past five years. Average Consumer Pharmacy Copayments by Tier, 2003-2007 Copayments for generic drugs have been relatively stable but copayments for other drug tiers have been increasing. Average Annual Premiums $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 $12,106 $11,481 $10,882 $9,950 $3,281 $2,973 $9,068 $2,713 $2,661 $2,412 75.1% 74.1% 73.3% 72.9% 73.4% $8,169 $8,508 $8,824 $7,289 $6,656 2003 2004 2005 2006 2007 Average Copayments $75 $60 $45 $30 $15 $11 $10 $10 $9 $11 $25 $25 $23 $22 $20 $40 $38 $35 $43 $43 $74 $71 $59 $59 Employer Contribution Employee Contribution Percentage of Employer Contributions $0 Generic Drugs Preferred Drugs Non-Preferred Other (Tier 1) (Tier 2) Drugs (Tier 3) (Tier 4*) 2003 2004 2005 2006 2007 N/A Note: is for a family of four. Source: Calculated based on Employer Health Benefits 2007 Annual Survey, (#7672), The Henry J. Kaiser Family Foundation and Health Research and Educational Trust, September 2007 This information adapted with permission from the Henry J. Kaiser Family Foundation. The Kaiser Family Foundation, based in Menlo Park, California, is a nonprofit, independent national healthcare philanthropy and is not associated with Kaiser Permanente or Kaiser Industries. *Fourth-tier drugs are drug products, such as lifestyle or injectable drugs, that are paid for using new types of cost-sharing arrangements that typically have higher copayments or coinsurance. The average copayment for fourth-tier drugs is calculated using information from only those plans that have a fourth-tier copayment amount. Source: Employer Health Benefits 2007 Annual Survey, (#7672), The Henry J. Kaiser Family Foundation and Health Research and Educational Trust, September 2007 This information adapted with permission from the Henry J. Kaiser Family Foundation. The Kaiser Family Foundation, based in Menlo Park, California, is a nonprofit, independent national healthcare philanthropy and is not associated with Kaiser Permanente or Kaiser Industries. 2008 Medical Cost Reference Guide Blue Cross and Blue Shield Association Print 23

Distribution of Covered Workers Facing Different Cost Sharing Formulas for Prescription Drug Benefits, 2003-2007 The growth in two-, three-, and four-tier formularies indicates that insured beneficiaries are facing higher prescription cost structures. Top Strategies to Control Costs, 2007 To control healthcare costs, employers are focused on prescription drug spending. Percentage of Workers Facing Cost Sharing Formula 100% 80% 60% 40% 20% 2% 1% 2% 2% 13% 10% 3% 7% 3% 8% 4% 8% 5% 6% 23% 20% 15% 16% 16% 63% 65% 70% 69% 68% 0% 2003 2004 2005 2006 2007* Payment is the Same Two-tier Three-tier Four-tier Other Percent Change 2003-2007 Payment is the Same -7% Two-tier -7% Three-tier 5% Four-tier n/a Other 1% Use formulary or benefit design to encourage the use of favorably priced medications Increase generics usage Increase employee cost sharing Promote preventive health benefits and behaviors Increase disease management efforts for complex cases and chronically ill employees Offer a CDHP to employees 10% 12% 15% 27% 27% 23% 26% 38% 60% 68% 65% 78% 0% 15% 30% 45% 60% 75% 90% Plan to Use Currently Use *In 2007, other also includes No cost sharing after deductible is met, which is 2 percent, Source: Employer Health Benefits 2007 Annual Survey, (#7672), The Henry J. Kaiser Family Foundation and Health Research and Educational Trust, September 2007 This information adapted with permission from the Henry J. Kaiser Family Foundation. The Kaiser Family Foundation, based in Menlo Park, California, is a nonprofit, independent national healthcare philanthropy and is not associated with Kaiser Permanente or Kaiser Industries. Base: 925 U.S. respondents who provide employees health insurance Source: Will Plans Abandon $1.4B in Annual CDHP Profits?, Forrester Research, Inc., February 2007 2008 Medical Cost Reference Guide Blue Cross and Blue Shield Association Print 24

Top Strategies to Control Costs by Firm Size, 2007 Types and Characteristics of CDHPs Larger firms are more active in adopting health management and formulary design strategies to control healthcare costs. Both employers and consumers are showing increased interest in consumer directed health plans (CDHPs). Use formulary or benefit design to encourage the use of favorably priced medications Increase generics usage Increase employee cost sharing Promote preventive health benefits and behaviors Increase disease management efforts for complex cases and chronically ill employees Offer a CDHP to employees 24% 21% 17% 27% 59% 57% 72% 79% 76% 70% 51% 61% 71% 45% 53% 72% 83% 83% 0% 15% 30% 45% 60% 75% 90% 1,000 or More 250 to 999 Fewer than Employees Employees 250 Employees Eligibility Requirements for Associated Health Plan Contribution Sources and Annual Limits Annual Rollover and Portability Year Authorized Health Reimbursement Arrangement (HRA) Depends on employer None Employer only Unused funds may be rolled over but generally not portable Health Savings Account (HSA) Anyone not enrolled in Medicare 2006 Minimum deductible: $1,050/$2,100 2006 Maximum OOP limit: $5,250/$10,500 Employer or individual; Lesser of deductible or $2,700/$5,450 in 2006 Unused funds may be rolled over and are portable Flexible Spending Account (FSA) Depends on employer None Individual; employer may set an upper limit Unused funds are forfeited at the end of year 2002 2003 1978 Base: 908 benefits executives at various firms. Source: Benefit Managers Favor an Ounce of Prevention for Controlling Health Costs, Forrester Research, Inc., October 2006 Source: Congressional Budget Office (2006) Consumer-directed Health Plans: Potential Effects on Health Care Spending and Outcomes 25

Employer-based Members Enrolled in CDHP, 2007 In 2007 CDHP market adoption increased 129 percent from 2005. Among Firms Offering Health Benefits, Percentage that Offers an HDHP/HRA or an HSA-qualified HDHP, 2005-2007 Employers are expanding their HDHP offerings. 12% 8.0 10% Millions of Enrollees 4.1 4.7 3.5 2.7 2.1 3.9 1.4 2.0 2005 2006 2007 Percentage of Firms Offering 8% 6% 4% 2% 2% 1% 3% 2% 6% 7% HSA Enrollees HRA Enrollees 0% HDHP/HRA HSA-Qualified HDHP 2005 2006 2007 Sources: Blue Cross and Blue Shield Association (2007) National Account Resource Guide Source: Employer Health Benefits 2007 Annual Survey, (#7672), The Henry J. Kaiser Family Foundation and Health Research and Educational Trust, September 2007 This information adapted with permission from the Henry J. Kaiser Family Foundation. The Kaiser Family Foundation, based in Menlo Park, California, is a nonprofit, independent national healthcare philanthropy and is not associated with Kaiser Permanente or Kaiser Industries. 26

Percentage of National Accounts Offering CDHPs, 2005-2007 CDHP Adoption Rate by National Account-based Enrollees, 2005-2007 Since 2005, employers have expanded CDHP offerings and consumers have increased CDHP adoption. Percentage of Employers 25% 20% 15% 10% 5% 12% 15%* 17% 10% 14%* 19% Percentage of Consumers with Choice 40% 30% 20% 10% 19% 19% 19% 31% 33% 35% 0% HRA Offers HSA Offers 0% HSA-eligible Enrollees HRA Enrollees 2005 2006 2007 *Significantly different from 2005 result at a 95 percent confidence level Source: Blue Cross and Blue Shield Association (2007) National Account Resource Guide 2008 Medical Cost Reference Guide Blue Cross and Blue Shield Association Print 27

Percentage of Employees in HSAs whose Employers Contribute to Their Accounts, 2005-2007 Percentage of Employers Contributing to Employees HSAs Individual, 2006-2007 The percentage of employers contributing and the amount contributed to employees HSAs are increasing. 80% Percentage of Employers Contributing to Employee HSA Plans 60% 40% 20% 37% 42% 45% Amount Contributed $1,000+ $500-$999 $1-$499 $0 7% 11% 18% 17% 22% 26% 53% 46% 0% 2005 2006 2007 0% 10% 20% 30% 40% 50% 60% 2006 2007 Source: Blue Cross Blue Shield Association (2007) CDHP Member Experience Survey, Blue Cross and Blue Shield Association (2007) National Account Resource Guide 28

Individually Purchased Plans, 2007 One in five consumers who individually purchased insurance selected either a high-deductible or consumer-directed health plan. Percentage of Nonelderly Individuals Living in Families with Out-of-pocket Expenditures on Health Care and Insurance Premiums Exceeding $2,000, $5,000, and $10,000, 2003 Out-of-pocket health expenditures increase with age. Preferred Provider Organization (PPO) 27% 75% Health Maintenance Organization (HMO) High-Deductible Health Plan (HDHP) Traditional/Indemnity Point of Service (POS) Consumer-Directed Health Plan (CDHP) 6% 7% 10% 14% 25% Percentage of Nonelderly Individuals 60% 45% 30% 15% 45% 15% 28% 48% 16% 58% 24% I Don't Know 11% 0% 5% 10% 15% 20% 25% 30% 0% 7% 3% 1% 3% Age 0-17 Age 18-34 Age 35-54 6% Age 55-64 $2,000 $5,000 $10,000 Base: 433 online consumers with an individually purchased health insurance plan Source: The $115 Billion Individual Market, Forrester Research, Inc., October 2007 Source: Agency for Research and Quality (2006) Out-of-pocket Expenditures on Health Care and Insurance Premiums Among the Nonelderly Population, 2003; March 2006 29

Medicaid and Medicare Beneficiaries, 1980-2005 Since 1980, the number of Medicaid recipients has more than doubled and the number of Medicare beneficiaries has grown by about half. 75 60 Beneficiaries in Millions 45 30 15 21.6 28.0 27.3 25.3 33.7 32.6 42.8 39.3 37.3 46.0 39.7 37.7 49.3 40.1 38.0 52.0 40.7 38.6 41.4 39.1 42.0 39.6 0 1980 1990 2000 2001 2002 2003 2004 2005* 1.2 1.8 Total Medicare 28.4M 34.3M 39.7M 40.1M 40.5M 41.2M 41.9M 42.5M Beneficiaries Medicaid Medicare Hospital Insurance Medicare Part B Medicare Part D *Preliminary Figures Source: Centers for Disease Control and Prevention (2006) Health, United States, 2006 30

Medicaid and Medicare Expenditures, 1980-2005 Since 1980, Medicaid and Medicare spending has increased nearly 10-fold. $250 Medicare Spending in Billions $200 $150 $100 $50 $0 $23.3 $25.6 $11.2 $64.9 $67.0 $44.0 $168.3 $131.0 $90.7 $186.3 $143.4 $101.4 1980 1990 2000 2001 2002 2003 2004 2005* $213.5 $152.7 $113.2 $233.2 $154.6 $126.1 $170.6 $137.9 $0.4 $182.9 $152.9 $1.0 Total Medicare $37B $110B $222B $245B $266B $281B $309B $336B Expenditures Medicaid Medicare Hospital Insurance Medicare Part B Medicare Part D *Preliminary Figures Source: Centers for Disease Control and Prevention (2006) Health, United States, 2006 2008 Medical Cost Reference Guide Blue Cross and Blue Shield Association Print 31

Enrollment in SCHIP, 1998-2006 Federal Spending for SCHIP, 1998-2006 Enrollment in SCHIP has grown 10-fold since 1998 but has been stable since 2003. Spending for SCHIP has increased annually. Beneficiaries in Thousands 7,000 6,000 5,000 4,000 3,000 2,000 2,014 3,358 4,603 5,534 5,985 6,103 6,114 6,622 Federal Spending in Millions $6,000 $5,000 $4,000 $3,000 $2,000 $1,929 $2,672 $3,776 $5,452 $5,656 $5,089 $4,645 $4,276 1,000 660 $1,000 $922 $122 0 1998 1999 2000 2001 2002 2003 2004 2005 2006* $0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007* *Preliminary Figure Note: SCHIP is the State Children s Program. Source: Congressional Budget Office (2007) The State Children s Program *Projected by the Congressional Budget Office Source: Congressional Budget Office (2007) The State Children s Program 2008 Medical Cost Reference Guide Blue Cross and Blue Shield Association Print 32

for Persons Age 65 and Over, 1992-2003 Government sponsored plans cover about two-thirds of persons over 65. Medicare Advantage (MA) and Prescription Drug Plan (PDP) Enrollment, 2006-2007 Total enrollment in MA and Standalone PDPs have increased by almost 9 percent since September 2006. 40 30 Enrollment in Millions 35 30 25 20 15 10 5 29.1 2.7 2.9 9.9 12.5 1.1 29.3 2.8 2.6 3.1 9.5 11.3 30.4 2.7 5.9 3.5 7.6 10.7 31.1 3.0 4.5 4.5 8.1 11.0 31.5 3.3 4.3 4.4 8.2 11.3 Millions of Beneficiaries 25 20 15 10 5 23.9 24.3 25.3 25.6 1.3 1.4 1.0 1.0 7.0 6.5 6.6 7.2 16.4 16.7 17.0 16.9 26.1 1.5 7.4 0 September 2006 December 2006 March 2007 June 2007 September 2007 Enrolled in Standalone PDPs Enrolled in MA-PD Plans* MA Only 17.1 0 1992 1995 2000 2002 2003 Employer-sponsored Plan Medicare Risk HMO Medigap Medicaid Medicare FSS or Other Percent Change 2006-2007 MA Only 48.3% Enrolled in MA-PD Plans 14.6% Enrolled in Standalone PDPs 4.3% Total 8.9% Source: Centers for Disease Control and Prevention (2006) Health, United States, 2006 * MA-PD is a MA with PDP. Source: Kaiser Family Foundation. Tracking Medicare Health and Prescription Drug Plans Monthly Reports. September 2006 September 2007 This information adapted with permission from the Henry J. Kaiser Family Foundation. The Kaiser Family Foundation, based in Menlo Park, California, is a nonprofit, independent national healthcare philanthropy and is not associated with Kaiser Permanente or Kaiser Industries. 33

Percentage Uninsured Within Each Income Level, 2002-2006 After dropping slightly in 2005, the percentage of uninsured Americans rose half a percentage point in 2006. 28% 23.5% 24.2% 24.3% 24.2% 24.9% Percent Uninsured 21% 14% 19.3% 11.8% 19.9% 19.8% 20.1% 13.0% 13.3% 12.5% 21.1% 14.4% Income Level Percentage Point Change 2002-2006 $75,000 + 0.3% $50,000 - $74,999 2.4% 8.2% 8.2% 8.2% 7.7% 8.5% $25,000 - $49,999 2.1% <$25,000 0.9% 7% Total Percent of Population Uninsured 14.6% 15.2% 15.6% 15.3% 15.8% 0% 2002 2003 2004 2005 2006 <$25,000 $25,000 - $49,999 $50,000 - $74,999 $75,000 + Note: Income levels per the Income, Poverty and in the United States report. Source: U.S. Census Bureau (2007) Income, Poverty, and in the United States: 2006 34

Uninsured Americans by Eligibility for Medicaid and SCHIP and Affordability of, 2004 More than half of the uninsured population are ineligible for public programs but have difficulty affording health insurance coverage. Shares of Uninsured Americans by Age and Parental Status, 2004 Lower uninsured rates are observed in children compared to adults because of Medicaid and SCHIP. Ineligible but need financial assistance 56% Ineligible but can afford coverage (at or above 300% of poverty) 20% 40% 30% Eligible but unenrolled for public programs under current rules (below 300% of poverty) 25% Percentage Uninsured 20% 10% 10.3% 16.4% 23.2% 0% Children (Age 0-18) Parents (Age 19-64) Childless Adults (19-64) Note: Figures do not add up to 100% due to rounding. Copyrighted and published by Project HOPE/HEALTH AFFAIRS as Dubay, L., Holahan, J., Cook, A. (2006) The Uninsured and the Affordability of. Health Affairs 26, no.1 (2007): w22-w30 (published online 30 November 2006; 10.1377/hlthaff.26.1.w22). The published article is archived and available online at www.healthaffairs.org. Copyrighted and published by Project HOPE/HEALTH AFFAIRS as Dubay, L., Holahan, J., Cook, A. (2006) The Uninsured and the Affordability of. Health Affairs 26, no.1 (2007): w22-w30 (published online 30 November 2006; 10.1377/hlthaff.26.1.w22). The published article is archived and available online at www.healthaffairs.org. 35

Demographics of the Uninsured, 2002 and 2006 More than one in every three Hispanic adults and more than one in five African American adults were uninsured in 2006. Percentage of Adults Facing Serious Problems Paying Medical Bills in the Past Two Years by Income Level, 2006 About half of adults with incomes of less than $50,000 have experienced problems paying medical bills in past two years. Percentage Uninsured 40% 30% 20% 10% 10.7% 10.8% 20.5% 20.2% 18.4% 15.5% 34.1% 32.4% 0% White, Not Hispanic Black Asian Hispanic Percentage with Problems Paying Medical Bills 80% 60% 40% 20% 0% Total Less than $35,000 $50,000 $75,000 $35,000 $49,000 $74,999 or more 2002 2006 Very Serious Somewhat Serious 38% 19% 19% 50% 22% 28% 48% 18% 30% 34% 23% 11% 22% 16% 6% Note: Racial Classification per the Income, Poverty and in the United States report. Source: U.S. Census Bureau (2007) Income, Poverty, and in the United States: 2002 and 2006 Source: C. Schoen, S. K. H. How, I. Weinbaum, J. E. Craig, Jr., and K. Davis, Public Views on Shaping the Future of the U.S. Health System, The Commonwealth Fund, August 2006 36

Percentage of Adults Facing Serious Problems Paying for Insurance in the Past Two Years by Income Level, 2006 Fifty percent of adults with incomes of less than $50,000 have experienced problems paying insurance in the past two years. Reduced Access to Medical Care During the Past 12 Months Due to Cost, 1997-2004 Since 1997, more Americans are not getting or are delaying appropriate healthcare or prescription drugs. 80% 10% Percentage with Problems Paying for Insurance 60% 40% 20% 38% 17% 38% 21% 47% 20% 27% 50% 19% 31% 34% 15% 19% 23% 13% 10% Percentage of Firms Offering 8% 6% 4% 2% 4.5% 5.2% 5.4% 7.7% 7.3% 7.1% 4.7% 6.2% 7.1% 0% Total Less than $35,000 $50,000 $75,000 $35,000 $49,000 $74,999 or more Very Serious Somewhat Serious 0% Did not get care Delayed care due Did not get prescription due to cost to cost drugs due to cost 1997 2003 2004 Source: C. Schoen, S. K. H. How, I. Weinbaum, J. E. Craig, Jr., and K. Davis, Public Views on Shaping the Future of the U.S. Health System, The Commonwealth Fund, August 2006 Source: Centers for Disease Control and Prevention (2006) Health, United States, 2006 37

Proportion of U.S. Physicians Providing Charity Care, 1996-2005 Changes in Medicare Covered Physician Services, 1997-2005 Fewer physicians are providing care at reduced or no cost. Medicare covers more physician services each year; however, the percentage of covered physician services has declined. 100% 3,000 100% 97% 95% 93% 88% Physicians Providing Charity Care 75% 50% 25% 76.3% 71.5% 68.2% Covered Physician Services 2,250 1,500 750 1,615 1,657 1,874 1,867 1,916 0% 1996-97 2000-01 2004-05 0 2000 2001 2002 2003 2004 Percentage of Total Covered Physician Services Covered Physician Services Note: Charity care includes both free or reduced cost care. Source: P.J. Cunningham and J.H. May, A Growing Hole in the Safety Net: Physician Charity Care Declines Again, Center for Studying Health System Change, Tracking Report No. 13, March 2006. Reprinted with permission of the Center for Studying Health System Change, Washington DC. www.hschange.org Source: Congressional Budget Office (2007) Factors Underlying the Growth in Medicare s Spending for Physicians Services 38

Empowering Consumers Section 3 Cost Average Expenditures as Percent of Before-tax Income, 2005.... 41 Percentage of Consumer Expenditures by Type, Lowest and Highest Quintiles, 1984 and 2005.............................. 41 Tracking Health-related Costs Percent of Consumers Tracking Health-related Expenses, 2007......... 42 Percent of Consumers Tracking Health-related Expenses, 2007......... 42 Growth in Number of HSAs, 2006-2007...................... 43 Percent of Eligible Consumers Who Have Opened an HSA, 2007........ 43 Accessing Health Information Percentage of Internet Users Accessing Health Information on the Web, 2006.................................. 44 Utilization of Health Information by Type of, 2007........... 44 How Consumers Evaluate the Quality of a Provider, 2007...... 45 Online Consumers Preferences in Evaluating Provider Quality, 2007...... 45 Health Program Engagement Consumers Comfort With Sharing Personal Information, 2007......... 46 Types of Wellness Incentives Encouraging Employee Participation, 2007.... 46 Percentage of Consumers Indicating Participation in Health Management Programs, 2007........................... 47 Reported Results Due to Participation in Available Health/Wellness Activities by Plan Type, 2007............................ 47 Chronic Disease Leading Causes of Death, 1980 and 2003,..................... 48 Expenditures for the Top Five Most Costly Conditions, 2000 and 2004..... 49 Number of People with Expenses for the Top Five Most Costly Conditions, 2000 and 2004............................. 49 Lifestyle Smoking: Cost in Dollars, Deaths and Associated Diseases........... 50 Second Hand Smoke: Cost in Dollars, Deaths, Prevalence and Associated Diseases.............................. 51 Cigarette Smoking in the U.S., 1979-2004..................... 52 Mental Health and Substance Abuse (MHSA) Disorders: Types, Prevalence and Costs....................................... 53 Individuals Age 20-74 by Weight Status, 1960-2004................ 54 Children and Adolescents Considered Overweight by Age Group, 1971-2004.............................. 54 Relationship Between BMI and Costs, 2007.............. 55 2008 Medical Cost Reference Guide Blue Cross and Blue Shield Association Print 39

Summary It is more important today than ever before for consumers to be engaged and empowered in dealing with healthcare costs and information just as they are when it comes to housing, food, transportation and other important consumer issues. The Blues and other healthcare companies have launched a number of initiatives to help individual consumers become better healthcare decision-makers such as offering more quality and cost information. There are also more health and wellness programs being offered to consumers including many that provide incentives to promote healthy lifestyles. Consumer engagement is especially important for those choosing to participate in consumer driven health plans with savings options and savings accounts (e.g., Health Savings Accounts (HSAs), Health Reimbursement Accounts (HRAs) and Flexible Spending Accounts (FSAs)). Individuals enrolled in consumer directed health plans are more likely to take advantage of programs offered by healthcare organizations than those enrolled in traditional health plans. 40

Average Expenditures as Percent of Before-tax Income, 2005 As a percentage of before-tax-income, the lowest income households spend five times more on healthcare than the highest income households but, in absolute dollar terms, spend less than half the amount of the highest income households. Percentage of Consumer Expenditures by Type, Lowest and Highest Quintiles, 1984 and 2005 As a percentage of total expenditures, consumers are spending more on healthcare. Average Expenditure as Percentage of Before-tax Income 18% 15% 12% 9% 6% 3% First Quintile $1,448, 15.0% Lowest Income Households All $2,664, 4.5% Second Quintile $2,329, 9.1% Third Quintile $2,567, 6.0% 0% $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 Average Expenditure Highest Income Households Fourth Quintile $3,012, 4.4% Highest Quintile $3,962, 2.7% 100% 80% 60% 40% 20% 0% 16% 5% 4% 16% 18% 35% Housing Transportation Food Entertainment Apparel and Services Miscellaneous/Other 14% 4% 5% 16% 14% 39% 24% 6% 6% 13% 19% 29% 26% 4% 6% 11% 17% 31% 6% 8% 3% 5% 1984 2005 1984 2005 Lowest Quintile Highest Quintile Expenditures by Quintile Quintile 1984 2005 Percent Change Lowest 6% 8% 2% Second 7% 8% 1% Third 6% 7% 1% Fourth 4% 6% 2% Highest 3% 5% 2% Note: Quintiles per the Consumer Expenditures Survey Source: U.S. Department of Labor, Bureau of Labor Statistics (2007) Consumer Expenditures Survey. Note: Quintiles per the Consumer Expenditures Survey Source: U.S. Department of Labor, Bureau of Labor Statistics (2007) Consumer Expenditures Survey 41