Q. How long are they uninsured?
A. The widely cited CPS statistic is considered closer to an estimate of those who were uninsured at the point in time surveyed, rather than of the total number of people uninsured for the entire year. The Survey of Income and Program Participation (SIPP), also handled by the Census Bureau, suggests that roughly half of those counted as “uninsured” remain without health insurance for the entire year. MEPS figures for 2005 range from 65.8 million individuals uninsured at some point during the entire year, to 35.8 million uninsured all year. NHIS estimates that 30.6 million had been uninsured for more than a year at the time of their interview in early 2007.
Q. My head is spinning. Which sets of numbers are right?
A. All of them tell us part, but not all, of a complex story. What we generally know is that the percentage of non-elderly Americans without insurance coverage at any one time has increased slightly in the past 15 years. However, it has remained within a narrow range, moving up and down from roughly 14 to 16 percent of the overall population.
The share of the uninsured without coverage for more than a year may have increased a bit in recent years as well, but it still generally represents about half of all those uninsured at any time during a year. U.S. Department of Health and Human Services researchers found that about half of those uninsured for at least one month during a two-year period turned out to be uninsured for over a year. Using much older but richer data from the late 1990s, the Congressional Budget Office has estimated that about 16 percent of those uninsured at any time during a year remained uninsured for more than 24 months. The lengths of spells without insurance are important, because different solutions are needed to address the different problems they present. In any case, the broader issue of slowly declining rates of insurance coverage in the United States remains more like a chronic condition (needing better diagnosis and more than one kind of treatment) than a crisis (needing emergency surgery).
Q. Let’s get inside those rough numbers. Who tends to be uninsured?
A. They tend to be younger, with those most likely to be uninsured between ages 19 and 24. Almost all adults age 65 and above are covered primarily by Medicare, and many of them have supplemental private insurance. Men are a little bit more likely to be uninsured. Married individuals and persons with more than a high school education are much more likely to be insured. Most of the uninsured (88 percent) are in good to excellent health. The likelihood of being insured rises with income and full-time work status, although nearly half (47 percent) of the uninsured are full-time workers. Hispanics are considerably more likely than those in any other ethnic category to be uninsured (over 30 percent). More than a quarter of the uninsured are foreign-born. By Census Bureau estimates, about 10 million uninsured are not citizens and half of them are illegal immigrants.
Q. Don’t almost all workers obtain insurance coverage through their jobs?
Those most likely to be uninsured are between ages 19 and 24.
A.Employer-sponsored insurance (ESI) covers almost 60 percent of all Americans. But the rate of work-related coverage has been falling gradually in recent years. Although 95 percent of all firms employing 50 workers or more offer insurance, only 45 percent of the smallest firms (with three to nine workers) do so. The recent drop in ESI coverage was due partly to a decline in health benefit offers by small employers, but also to fewer workers being “eligible” for coverage or electing to participate in employers’ plans.
Q. Don’t almost all low-income individuals gain medical coverage through Medicaid and other public programs?
A. Medicaid covers about 58 million beneficiaries, but that includes low-income elderly “dual eligibles” also covered under Medicare and the low-income disabled of all ages. As a joint federal-state program, Medicaid’s income eligibility levels for coverage vary from state to state, as do those of the State Children’s Health Insurance Program (SCHIP). Also, millions of potential beneficiaries do not enroll in public program coverage. Reasons include ineffective and limited outreach efforts and dissatisfaction with what coverage provides. Delaying enrollment is encouraged by the option to gain retroactive Medicaid coverage that may be available for three months prior to application if the individual would have been eligible during the retroactive period.
Q. So millions of uninsured persons counted in federal surveys just lack Medicaid coverage?
A. Hold on. Some of them actually have it but don’t report it accurately. The so-called “Medicaid undercount” is derived from findings that Medicaid coverage levels based on survey data are consistently lower than the count of Medicaid enrollees obtained from the program’s administrative records. On the high side, a recent study concluded that the CPS overestimates the uninsured population by as much as 9 million people for this reason alone! However, the latest research suggests that the undercount’s effect is smaller, because it’s more likely to involve Medicaid enrollees erroneously reporting that they have some other type of health insurance rather than none at all.
Q. Do many higher income people choose to be uninsured, even though they could afford to buy coverage?
A. Surveys suggest that one of the more significant sources for recent annual increases in the number of uninsured Americans involves persons in relatively higher income households. According to the CPS, more than 17.6 million uninsured live in households earning more than $50,000 a year, and household income is above $75,000 for more than 9 million uninsured. However, those numbers overstate the actual income available to those uninsured individuals, because household units are defined more broadly than are insurance purchasing units. As the composition of “households” changes, their income isn’t the same as family income available for spending on health insurance. The rising cost of coverage remains the primary barrier to insurance coverage for the uninsured, and in some cases, its value just may not be “worth it” for those in higher income families. But a more narrow and consistent measure of the higher income uninsured is closer to 2 million, involving people with regular incomes over $50,000 who lack insurance for spells of more than a year.
Q. Isn’t affordability of coverage the main problem, particularly for high-risk individuals?
A. The main reason cited by individuals for why they lack insurance is that it costs too much, but it’s not the only factor. Adults with weak or uncertain preferences for health insurance are less likely than others to obtain job offers with insurance, to enroll in offered coverage, and to be insured. On the other hand, individuals with higher health risks are more likely to seek and obtain health insurance coverage, particularly in the large employer group market. Higher premiums for higher risks are not a significant contributor to the large uninsured population.
Q. Don’t the uninsured obtain healthcare anyway?
A. Yes, but not as much, not as quickly, and not as effectively. People lacking health insurance pay out of pocket, receive uncompensated care, rely on other forms of private and public insurance (such as worker’s compensation), and wait until they have access to health insurance. Overall, the full-year uninsured receive about 50 to 55 percent of the dollar amount of medical care per person of those who have coverage for the entire year. People uninsured for only part of the year average more than 80 percent of the healthcare spending by the full-year insured.
Q. How much uncompensated care is received by the uninsured? Don’t the privately insured just pay higher premiums to make up the difference?
Eighty-eight percent of the uninsured are in good to excellent health.
A. Best estimates indicate that about one-third of the cost of health services received by the uninsured is “uncompensated care”—less than 3 percent of all U.S. healthcare spending. Most of those costs are covered by various taxpayer-funded payments (particularly disproportionate share payments to hospitals likely to treat more uninsured and low-income patients). There isn’t much left in the residual costs of uncompensated care to “shift” to private insurance premium payers. To the extent such cost shifting can occur not just in theory but in practice, it’s due much more to public programs like Medicaid and Medicare that have the legal power to pay much lower “below-market” rates of reimbursement to hospitals and doctors. Expanding low-paying Medicaid coverage might actually make any possible cost shifting to private premium payers worse, not better.
Q. Can’t the uninsured just get needed care at ERs?
A. Federal law requires hospital emergency departments to screen and stabilize anyone arriving there with a serious medical condition, regardless of the person’s ability to pay. It’s sometimes said that no one goes to the emergency room anymore; it’s too crowded. But the rise in emergency department visits over the last decade came from disproportionate increases in use by non-poor persons and not the uninsured. The visit rates by Medicaid patients are twice those of the uninsured.
Q. Enough about problems. What are some solutions?
A. Here are a few basics: Universal mandates to purchase coverage won’t work as long as people can’t afford it, taxpayers won’t subsidize it any more than they already do, and politicians won’t enforce unpopular rules to buy it anyway. It’s increasingly hard for subsidies to catch up with healthcare costs that continue to grow faster than the overall economy. Insurance premiums over time just reflect the underlying costs of healthcare as it is delivered and demanded. The real solutions will come from keeping people healthier to begin with and treating their medical conditions more effectively and efficiently. Changing public policies that keep the entry price of insurance coverage too high for too many Americans would provide a starting point for more progress. Reversing decades of overregulation, mistargeted tax subsidies, and lack of transparency in the healthcare sector would not solve all problems, but it sure would help reduce them.
Thomas P. Miller is a resident fellow at the American Enterprise Institute.
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