Counting the (True) Cost of Covering the Uninsured
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Counting the (True) Cost of Covering the Uninsured | insurance, uninsured, Jack Hadley, George Mason University

Jack Hadley, George Mason University Professor
If you look at either of the two major political parties today, you'll find a slate of policies designed to move the country toward universal health insurance coverage. While both groups debate fiercely over which is the best approach, one sobering fact remains true: roughly one of six Americans has no health insurance. And the rising cost of treating the uninsured has raised a cry of alarm from hard-pressed providers of all stripes.

But what exactly would it cost to cover the uninsured if they got all of the care they needed? And who pays for their care today?

A group of researchers set out to find the answers to those questions. And their conclusions might surprise you.

Overall, 77 million Americans will go through this year with either no insurance or coverage for only part of the year, according to Jack Hadley, a professor at George Mason University, who set out with researchers at the Urban Institute to crunch the numbers in a study commissioned by the Henry J. Kaiser Family Foundation.

Hadley's group started with a baseline established by the 102,000 people interviewed for the 2002–2004 Medical Expenditure Panel Surveys. Altogether, the uninsured will consume about $86 billion in care this year, paying a little more than a third of that — about $30 billion — out of their own pockets. The 77 million Americans who had no insurance for all or part of the year left healthcare providers with $56 billion in unpaid bills. Most of that bad debt — $42.9 billion — was absorbed by a medley of government programs led by Medicaid and Medicare.

Physicians took a $7.8 billion hit by either donating their time or giving up profits. And hospitals shouldered $6.3 billion of the load.

But if you break it down by physician, said Hadley, it wouldn't add up to a significant bite. "I think the impact on any physician is probably quite small," he said. Hadley and his colleagues also challenged an underlying belief that the medical costs of the uninsured are actually subsidized by inflated private insurance premiums. They concluded that only a tiny amount of the total cost for the uninsured was actually paid for by cost-shifting to the insured.

"Private insurance premiums are at most 1.7 percent higher because of the shifting of the costs of the uninsured to private insurers in the form of higher charges," said the authors. And contrary to popular belief, according to the study, which was published in Health Affairs, hospitals have not raised their rates to counter the effects of uncompensated care. That figure has remained right around 6 percent of hospital costs each year, even as the number of the uninsured has risen. "This finding is not popular with those who spin the political theory that the privately insured should support subsidized universal insurance coverage, because 'they are already paying' for most of the costs of uncompensated care anyway," noted Thomas Miller, a resident fellow of the conservative American Enterprise Institute.

But with added coverage comes regular care, said Hadley, and the bill for this group of Americans would skyrocket to $208 billion if they had the insurance to pay for it.

Each of the uninsured would consume about $3,800 a year in care if they had the same access to providers as the insured. The full difference in cost — $122 billion — represents a massive increase over estimates for covering the uninsured just seven years ago.

Back in 2001, said the authors, the highest cost estimates amounted to only about $69 billion. But in the meantime, per capita healthcare costs have zoomed up 52.8 percent — more than twice the consumer price index. And there are far more uninsured Americans. Back in 2001, an estimated 39.7 million people were uninsured, a number that swelled to 47 million in 2006 and will likely hit 50 million this year.

That cost difference involves "identifying disease that would otherwise go untreated and treating it," said Hadley. "In terms of 'is it necessary?' … at this point, there have been many studies that demonstrate that the uninsured have poorer outcomes, from mortality, disability and more, along with the physical and emotional costs as well as the economic costs in terms of lost labor and productivity."

A number of the new political proposals include public insurance subsidies for the uninsured, but the study notes that almost three out of every four people without insurance make more than 125 percent of the federal poverty level, which likely means that they'll still be paying for at least part of their care even after any new bill would take effect.

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George Mason University, insurance, Jack Hadley, uninsured

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