By Duncan Currie
The American health-care debate is a blizzard of numbers, but few get tossed around as frequently as “46 million.” According to the Census Bureau’s Current Population Survey (CPS), that’s roughly how many people (the more precise figure was 45.7 million) lacked health insurance at a given moment in 2007 — nearly one-sixth of the entire U.S. population. The latest CPS data show that 46.3 million were uninsured at a given moment in 2008.
Yet while it carries superficial appeal as a political talking point, the “46 million” statistic tells us nothing about the demographics of America’s uninsured. Economist Keith Hennessey, director of the National Economic Council under Pres. George W. Bush, has examined the 2007 data and sliced the 45.7 million uninsured into several distinct clusters, basing his estimates on an earlier government analysis, conducted in 2005. Hennessey reckons that 6.4 million were enrolled in Medicaid or the State Children’s Health Insurance Program — now known just as the Children’s Health Insurance Program (CHIP) — but misreported their status (a phenomenon known as the “Medicaid undercount”); 4.3 million were eligible for Medicaid or CHIP but not enrolled; 9.3 million were noncitizens; 10.1 million belonged to families earning more than 300 percent of the federal poverty level (FPL); and 5 million were childless adults aged 18 to 34. If we eliminate those individuals from the original 45.7 million, we are left with about 10.6 million.
After adjusting for the Medicaid undercount, Urban Institute researchers John Holahan, Allison Cook, and Lisa Dubay determined that in 2004, fully one-quarter of the nonelderly uninsured were eligible for Medicaid or CHIP, and another 19 percent belonged to families earning 300 percent or more of the FPL. Nearly three-quarters (74 percent) of uninsured children were eligible for Medicaid or CHIP (as were 28 percent of uninsured parents), and another 15 percent had family incomes equal to 300 percent or more of the FPL. This means that only 11 percent of uninsured children were both ineligible for government coverage and living in families with incomes below 300 percent of the FPL. These children — the 11 percent — were disproportionately Hispanic (42 percent), and the vast majority (77 percent) belonged to families earning between 200 and 299 percent of the FPL.
To be sure, estimates of how many Americans are “voluntarily” or “involuntarily” uninsured will fluctuate depending on methods and assumptions. The Urban Institute study — conducted for the Kaiser Commission on Medicaid and the Uninsured (KCMU) — designated 300 percent of the FPL as the affordability threshold for insurance coverage. Economists June and Dave O’Neill of Baruch College believe a more appropriate threshold is 250 percent. The O’Neills calculate that in 2006, roughly 43 percent of all uninsured individuals between the ages of 18 and 64 had family incomes greater than this level — and thus were “voluntarily uninsured,” because they appeared to have “enough disposable income to purchase health insurance.”
Whether we use 250 percent or 300 percent as the affordability line, those uninsured by necessity, rather than by choice, constitute a significantly smaller group than 46 million. Their numbers shrink even more when we remove noncitizens. A KCMU/Urban Institute analysis notes that in 2008, 20 percent of the nonelderly uninsured were not American citizens, and nearly half (46 percent) of all nonelderly noncitizens lacked health insurance.
President Obama seems aware that noncitizens represent a hefty chunk of the uninsured: In his September 9 speech to Congress, the president declared, “There are now more than 30 million American citizens who cannot get coverage” (emphasis added). According to White House budget chief Peter
As these data confirm, the uninsured are hardly a monolithic bloc. For that matter, they are a highly fluid population: A 2003 Congressional Budget
We must also distinguish between having health insurance and having access to health care itself. Based on data from the 2005 Medical Expenditure Panel Survey, the O’Neills reckon that when it comes to selected medical services received by Americans aged 18 to 64 — including routine checkups, blood-pressure checks, flu shots, Pap smears, PSA tests, and mammograms — “the uninsured receive about 50 to 60 percent of the amount of services received by those who are insured.”
Which brings us to the much-ballyhooed “free rider” dilemma. There is no question that uncompensated health care received by the uninsured has contributed to escalating costs throughout the system; but the magnitude of that contribution remains unclear. A recent KCMU study conducted by Urban Institute researchers Jack Hadley, John Holahan, Teresa Coughlin, and Dawn Miller estimated that in 2008, uncompensated care represented nearly two-thirds of the dollar amount of all uninsured care. But the same study also found that uncompensated care accounted for only 2.2 percent of America’s total health-care spending. “Between 1986 and 2005,” it noted, “the share of [hospital] expenses going to uncompensated care remained remarkably steady, with a mean of 6 percent and a range from 6.4 percent in 1986 to 5.4 percent in 2002.”
The biggest problem in America’s health-care system is not the aggregate number of uninsured — which is a murky, misleading figure — but rather skyrocketing costs. The Kaiser Family Foundation reports that premiums for employer-provided health insurance soared by 119 percent between 1999 and 2008, while wage earnings increased by only 34 percent, and overall inflation was 29 percent. Many small businesses simply cannot afford to pay for health coverage for their workers: In 2008, 99 percent of large firms (those with more than 200 workers) offered health benefits, compared with only 62 percent of small firms (those with three to 199 workers), according to a Kaiser/Health Research & Educational Trust survey. Some 68 percent of higher-wage firms provided health benefits, compared with only 40 percent of lower-wage firms.
There is a broad consensus that the federal tax subsidy for employer-provided health insurance (now amounting to well over $200 billion annually) has distorted the health-care market, driven up costs, and suppressed workers’ wages. Writing in the Washington Post, Harvard economist Martin Feldstein has proposed replacing the employer tax exclusion with vouchers that would enable each American family to purchase a private insurance policy covering “all allowable health costs in excess of 15 percent of the family’s income.” To further soften the blow of out-of-pocket health-care spending and also address doctors’ concerns over payment of bills, Feldstein recommends combining the insurance voucher with a health-care “credit card” that would permit families to charge medical expenses that fell within the 15 percent deductible.
The Feldstein plan would be a truly sweeping overhaul of how the federal tax code treats health insurance. A less dramatic reform would be to establish tax credits or tax deductions for individuals who purchase their own health insurance. In his 2007 State of the
Jeffrey Anderson, a former speechwriter at the Department of Health and Human Services, urges several other simple reforms, such as extending the length of time a person is eligible for COBRA, curbing medical-malpractice lawsuits, boosting federal funding of state-run insurance pools, and creating a national marketplace for health insurance by allowing consumers to purchase policies across state lines. A 2008 University of Minnesota study calculated that such a national marketplace would lead to roughly 2.9 million newly insured at a minimum, with the possibility of nearly 17 million newly insured. The cost to taxpayers, meanwhile, would be zero.
Letting Americans buy their health-insurance policies from out-of-state insurers would allow them to escape onerous state mandates that force people to pay for insurance benefits they neither need nor want. In its latest nationwide survey, the Council for Affordable Health Insurance (CAHI) identifies a total of 2,133 state mandates, for benefits ranging from “hair prostheses” (wigs) to heart transplants, and for providers including athletic trainers and naturopaths. These mandates inflate the cost of basic health-insurance coverage by anywhere “from a little less than 20 percent to perhaps 50 percent, depending on the number of mandates, the benefit design, and the cost of the initial premium,” according to the CAHI.
Even if health-insurance costs fell significantly, private coverage might remain prohibitively expensive for many Medicaid recipients. However, because of Medicaid’s low physician-payment rates, doctors often refuse to accept new patients enrolled in the program. In a 2008 survey by the Center for Studying Health System Change, 86.6 percent of physicians reported accepting all (57.3 percent) or most (29.3 percent) new privately insured patients, but only 52.6 percent reported accepting all (40.2 percent) or most (12.4 percent) new Medicaid patients. More than one-quarter (28.2 percent) of doctors said they were not accepting any new Medicaid patients. Former CBO director Douglas Holtz-Eakin, who served as chief economic
As for people with preexisting conditions, one way to help them in the short run would be, as Anderson advocates, to increase federal subsidies to the high-risk insurance pools currently operating in 34 states. Over the long run, the best solution would be to create a dynamic, competitive market for individual insurance. Economist John Cochrane of the University of Chicago’s Booth School of Business believes this would fuel the rise of “health-status insurance” policies, which would allow people to purchase insurance against developing an illness or chronic condition sometime in the future. In a robustly competitive market, argues Cochrane, private insurers would “compete for the business of every customer, even the sickest.”
The emergence of such a market would not guarantee universal health-insurance coverage — but neither would the Baucus bill, according to the CBO. Health-care reforms that reduced costs, increased value, enhanced insurance portability, improved transparency, and promoted competition would also substantially boost coverage. Lawmakers must remember that an expansion of insurance coverage could either mitigate or exacerbate America’s underlying health-care problems, depending on how it is achieved. Implementing price controls and costly mandates would only make those problems worse.
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