Economic burden of the uninsured often overlooked
Economic burden of the uninsured often overlooked
As bad as the individual consequences of not having health insurance are, the uninsured cause a larger negative impact on the U.S. economy as a whole that is often overlooked.
New America Foundation Health Policy Program senior program associate Elizabeth Carpenter and program associate Sarah Axeen say the "economic cost imposed on the nation by the uninsured is as much as, and perhaps greater than, the public cost of covering them."
Ms. Carpenter and Ms. Axeen base their assertion on work they have done to update a 2000 Institute of Medicine (IoM) estimate that the annualized economic cost of the diminished health and shorter life span of Americans who lack health insurance is between $65 billion and $130 billion for each year of health insurance forgone.
The two researchers updated the IoM's numbers to reflect growth in the economy and increases in the number of uninsured and then estimated that the poor health and shorter life span of the uninsured cost the U.S. economy between $102 billion and $204 billion in 2006. And they say that estimate does not include so-called spillover costs. Thus, when medical bills go unpaid, providers attempt to recoup lost revenues by raising rates for their services. In response, insurers raise premiums. This cycle of cost-shifting ultimately links the uninsured to rising health care costs and premium rates for the insured.
In its original analysis, the IoM considered the economic losses of uninsured individuals because of premature mortality and unnecessarily prolonged illness. Since 2000, Ms. Carpenter and Ms. Axeen say, the cost estimates have increased because a number of driving factors have changed.
First, the number of uninsured has gone up. In 2000, there were an estimated 40 million uninsured. The U.S. Census Bureau now estimates that some 47 million people lacked health insurance in 2006. And second, the value of economic output has increased. In 2006, gross domestic product was $13.2 trillion, up from $9.8 trillion in 2000, or a nearly 35% increase.
"The economic cost of the uninsured increases as the value of lost output and the number of uninsured rises," the researchers wrote. "Based on these changes, we conclude that a more current estimate of the economic cost of the uninsured is between $102 billion and $204 billion. This estimate is for 2006 and pertains only to the productivity of uninsured individuals. It does not reflect the spillover costs to society."
In arriving at its estimates, the IoM made three distinct calculations. It started with a baseline estimate that on average the uninsured are 25% more likely than the insured to die prematurely. The researchers say that based on this well-documented assumption, the IoM then recalculated the uninsured's life expectancy. That new, insurance-adjusted, life expectancy became the baseline calculation for the IoM's economic cost estimate. To be as accurate as possible, the IoM then made two additional calculations to determine the bounds of its economic cost estimate.
The first, or lower-bound estimate, further lowered the life expectancy figures for the uninsured based on nationwide disease prevalence and the effect of particular diseases on quality of life. In determining the lower-bound estimate, the IoM assumed there was no difference in disease prevalence based on insurance status.
The second, upper-bound estimate, further lowered life expectancy figures for the uninsured based on the differences in disease prevalence between the insured and uninsured. The IoM assumed the uninsured have higher disease prevalence on average than the insured population.
Finally, the IoM assigned a dollar value to a year of perfect health, which it then discounted based on the different life expectancy calculations. It multiplied those discounted values ($1,645=lower-bound estimate and $3,280=upper-bound estimate) by the number of uninsured individuals to come up with its cost estimates.
To update the IoM calculations, Ms. Carpenter and Ms. Axeen indexed the yearly cost estimates to GDP growth to account for economic growth from 2000 to 2006 and multiplied those newly indexed cost estimates by the Census Bureau's determination of the number of uninsured.
Ms. Carpenter tells State Health Watch that their calculations demonstrate that providing health insurance coverage for everyone is "an economic imperative and a sound fiscal investment."
She says the New American Foundation does not support a specific plan for achieving widespread health insurance coverage, but agrees there needs to be a shared responsibility for financing and coverage in a partnership between public and private entities. "We're open to many options and any discussion," she says, while noting it also is important to control health care costs to increase the value per dollar spent.
Download the issue brief from www.newamerica.net. Contact Ms. Carpenter at (202) 261-6585.As bad as the individual consequences of not having health insurance are, the uninsured cause a larger negative impact on the U.S. economy as a whole that is often overlooked.
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