Study: Pain of uninsurance rising in middle-, higher-income Americans

The number of uninsured Americans rose by 6 million between 2000 and 2004, primarily because of a drop in employer coverage. While about two-thirds of the increase was among people below 200% of poverty, the remaining one-third was among those above 200% of poverty, meaning the lack of health insurance clearly is beginning to affect middle- and higher-income Americans, according to a study by the Urban Institute’s John Holahan and Allison Cook reported in a Health Affairs web exclusive.

Mr. Holahan and Ms. Cook said much of the increase in uninsurance occurred among young adults, whites, and the native-born. About 50% of the uninsurance growth was among those ages 19 to 34, about 55% among whites, and about 73% among native-born citizens.

“Thus, rising uninsurance is clearly not a problem affecting primarily racial and ethnic minorities and noncitizens,” they wrote. “Further, more than half of the increase in the uninsured occurred in the South, where uninsurance rates were already the highest in the country.”

The researchers said the decline in employer coverage is likely to continue. Increases in health care costs and thus health insurance premiums are likely to continue to grow faster than workers’ earnings. The decline in employer coverage will be further exacerbated if the shift from working in large and midsize firms to small firms and self-employment and from high- to low-coverage industries continues.

“The problems of the uninsured can be addressed in many different ways,” according to Mr. Holahan and Ms. Cook, “such as tax credits or public program expansions, but doing so is likely to prove very difficult. Federal budget deficits are large, which will limit the federal government’s ability to act for the foreseeable future, and all indications are that the government will pursue spending cuts to address the huge cost of hurricane recovery in the coming years. States also face serious budget problems in part because increases in health care spending outpace the growth in state revenues, a trend that is likely to continue. As a result, it is difficult to envision a reversal of the trends we have described in this paper.”

Is federal spending keeping pace?

During a Kaiser Commission on Medicaid and the Uninsured briefing on the Health Affairs report, the Urban Institute’s Jack Hadley offered an analysis addressing whether federal spending on the health care safety net has kept pace with growth in the number of uninsured. The are three reasons, he said, why that question is important — 1) federal spending is the dominant source of health care safety net funding; 2) knowing how much is spent on the health care safety net has implications for the debate over expanding health insurance; and 3) to determine whether uncompensated care makes up for lack of insurance. The short answer to the final question, according to Mr. Hadley, is that uncompensated care is a substantial share of the care received by the uninsured, but does not make up completely for the lack of insurance.

“We estimate that about half of the care received by the uninsured, through one way or another, comes in the form of uncompensated care,” he said, “but in spite of that substantial subsidy, an uninsured person still receives about half as much medical care as an insured person.”

He said the gap in care received translates into using fewer preventive services and receiving fewer screening services. As a consequence, when the uninsured do enter the health care system, they tend to be in poorer health or at a more advanced disease state, but still receive fewer therapeutic services, even for serious health conditions.

“Unfortunately,” Mr. Hadley declared, “what that translates into ultimately is poorer public health outcomes, both in terms of mortality and morbidity and, as a consequence, lower annual earning, for children poorer performance in school, and so forth.”

According to Mr. Hadley’s analysis, federal safety net spending comes mostly from Medicaid and Medicare, disproportionate share payments, Medicaid upper payment limit payments, and direct medical education payments. Those items together account for about 70% of total federal safety net spending. The next two largest sources of federal money for the safety net are the Veterans Affairs and the Indian Health Service. And the next two income sources are community health centers and the Ryan White Care Act, which is devoted to people with HIV/AIDS. The final two income sources are the Maternal and Child Health Bureau and the National Health Service Corps.

Between 2001 and 2004, the analysis showed, disproportionate share payments increased from $5 billion to $7.4 billion. However, most of that growth was due to a technical change in implementing the legislative formula, increasing payments to small hospitals, and not necessarily resulting in increased care of the uninsured.

Overall, he said, Medicare and the direct care programs increased between 2001 and 2004, and those increases offset decreases in Medicaid, with the result that total federal spending on the safety net increased from $19.8 billion in 2001 to $22.8 billion in 2004, a 15.4% increase in total federal spending. Over the same period, however, there was some 14% inflation in health care costs, so the 15% increase in federal spending doesn’t translate into a 15% increase in real resources received or real care received.

“When we make the adjustment for inflation, what we see is that it shrinks to 1.3% in constant 2004 dollars,” Mr. Hadley explained. “When we put this alongside the trend in the number of uninsured between 2001 and 2004, the total uninsured population increases by about 11.2%.” In terms of constant dollars, he said, federal safety net spending per uninsured person fell by almost 9%.

Mr. Hadley said he expects the number of uninsured to continue to increase, mainly because of the rising cost of private insurance and employer cutbacks, and little or no expansion in state Medicaid programs.

George Washington University Department of Health Policy chair Sara Rosenbaum called attention to Mr. Holahan’s briefing chart superimposing the decline in per capita payment against growth in the number of uninsured. And she said the funding available for safety net patients with very significant health problems is far less-than-average Medicaid spending on an adult without a disability.

“Right now,” she said, “when a health center gets federal funding, the financial allotment is figured at $250 to $275 per person. … There is simply not a chance of being able to provide anything that cannot be found in the four walls of a health center clinical site. It is an extraordinary problem to be able to find sources of charitable care for people who need dialysis.”

Ms. Rosenbaum said while many such patients become eligible for Medicare, there is no way to secure care for cancer and other services.

The briefing also discussed examples of care problems in the Washington, DC, area to make the point that behind all the numbers and statistics are real people who have real health care needs that are not being met because of the growth in the number of uninsured and inadequate funding of safety net services.

(The Health Affairs web report is available at Kaiser Commission briefing papers and slideshows are available in the HealthCast area of