Policy-makers must decide: Cover uninsured or pay a higher price

There is a money available to subsidize health insurance for the uninsured, but it needs to come from money spent on uncompensated treatment, says a report presented by a coalition of groups looking to improve insurance coverage.

The coalition studies also reconfirmed the conventional wisdom that lack of health insurance leads inevitably to higher health care costs for the government and the rest of the population.

A study prepared for the Kaiser Commission on Medicaid and the Uninsured based in Washington, DC, and published by Health Affairs says that uninsured Americans received about $35 billion in uncompensated health care treatment in 2001, with federal, state, and local governments covering up to 85% of that total.

Urban Institute researchers Jack Hadley and John Holahan write that because about $31 million in government money already is being spent to support care to the uninsured each year, it "should be possible to transfer a large share of these funds to a new program to subsidize the cost of providing insurance coverage for the uninsured. Our analysis demonstrates that a fair amount of money is already in the system and that a substantial portion of the cost of covering the uninsured is potentially available from existing government programs."

The two researchers say the beneficiaries of expanded insurance coverage would be:

  • newly insured people, who currently receive much less care than the insured and would have their coverage follow them through the system rather than having it buried in subsidies to a limited number of health care providers;
  • hospitals, which deliver two-thirds of uncompensated care;
  • private practice physicians, who account for more than half of the private subsidies that underwrite the cost of uncompensated care;
  • state and local governments, which face increased financial pressure from uncompensated care during recessions, when tax revenues shrink and the number of uninsured people rises because of unemployment;
  •  the federal government, which would be able to both better target its payments for the uninsured and rationalize its Medicare and Medicaid payments to providers.

When asked by State Health Watch whether he has received support from policy-makers for his recommendations, Mr. Holahan says,

"There hasn’t been any contact, no one thanking us for pointing out where some dollars are. But that’s not surprising because the current environment is not one in which lots of money could be used to expand services," he says.

Mr. Holahan says he believes the value of his work lies in the indications it gives for a year or so from now when there may be more interest in addressing the plight of the uninsured. "We’ve pointed to ways that money could be reallocated," he says, "although the political fight to go after these dollars could be quite tough."

One in three not covered

The Princeton, NJ-based Robert Wood Johnson Foundation’s fact sheets (http://covertheuninsuredweek.org/) showed 41.2 million Americans lack health insurance coverage, up 1.4 million from 2000.

Of that total:

  • 47% are white.
  • 30% are Hispanic.
  • 16% are black.
  • 7% list other racial identifications.

A report from Families USA shows 74.7 million people younger than age 65 — nearly one person in three — were without health insurance for all or part of 2000 and 2001. Nearly two-thirds were uninsured for six months or more.

Other statistics from the report showed:

  • About 25% of all uninsured people younger than 65 were uninsured for the full 24 months of the analysis period.
  • 18.7% were insured for 13 months to 23 months.
  • 9.8% were uninsured for nine months to 12 months.
  • 12.5% were uninsured for six months to eight months.
  • 24.9% were insured for three to five months.
  • Only 10% of all uninsured people were without insurance for two months or less.

The Institute of Medicine, in its contribution to the report, said more than 80% of uninsured people younger than 65 are members of working families. Their jobs do not provide insurance coverage and buying individual coverage frequently is too costly. As shown in the graph below, two-thirds of uninsured families earn less than 200% of the federal poverty level (roughly $35,000 for a family of four). Only 59% of persons with household incomes less than 150% of the federal poverty level are able to cover the entire family. In contrast, 90% of families with incomes above 200% of the federal poverty level have all family members insured.

Distribution of the Uninsured
in the U.S. by Age Group

Source: Robert Wood Johnson Foundation, Princeton, NJ.


Distribution of the Uninsured
in the U.S. by Poverty Level

Source: Robert Wood Johnson Foundation, Princeton, NJ.

The Robert Wood Johnson fact sheets say widespread lack of health care coverage affects not only the uninsured and their families, but also the communities in which they live and the greater society.

"Both research and anecdote indicate that the lack of health insurance keeps people from getting care when they are sick," the report says. "Lack of coverage also keeps people from getting routine preventive health services that can avert or detect serious illnesses early."

The problems of the uninsured take a financial toll on everyone, according to the Robert Wood Johnson Foundation. Because the uninsured tend to wait longer to seek treatment, they often are sicker when they finally receive care. And when they do go for care, they frequently go to the nearest hospital emergency department, an expensive and inefficient way to receive care.

The Families USA report says the uninsured often go without screenings and preventive care, often delay or forgo needed medical care, are often subject to avoidable hospital stays, are sicker and die earlier than those who have health insurance, and require more costly care than those who are insured.

I’m covered. Why should I care?’

Arthur Kellerman, MD, chairman of the department of emergency medicine at Emory University School of Medicine in Atlanta, who led the Institute of Medicine committee that studied the uninsured, says many people with health coverage ask why they should care about the uninsured. "Your insurance is about as secure as your job, and maybe today people are less sanguine about that than they were two or three years ago," he says.

"Also, your access to health care is as secure as the health care system in your community, and this report brings to focus that particularly in rural and urban areas where there are high numbers of uninsured, the health care system is under stress, under strain, and is not as capable as we want to think it is to provide the kind of care that we want to count on when the chips are down. That is an issue that I think should be troubling and of concern to everybody in the country, whether or not they themselves have health insurance," Mr. Kellerman adds.

Jeanne Lambrew, a professor in George Washington University’s Department of Health Policy in Washington, DC, says the number of uninsured is growing, and adds it may increase by 30% over the next decade. Erosion of employer coverage may worsen, even in an economic recovery, she says, and fewer people may be covered by Medicaid and other governmental programs.

To put the total uninsured figure of 41 million into perspective, Ms. Lambrew says that it is more than Canada’s population, more than all the people on the U.S. West Coast, more than all elderly Americans and all African-Americans, five times more than the number of Americans with cancer, and 40 times more than the number of Americans with HIV/AIDS.

Most uninsured are employed

Contrary to conventional wisdom, most of the uninsured are employed (59% full time and 16% part time). While most have low income, the fastest growth is among those with higher incomes. The uninsured are disproportionately Hispanic, and are concentrated in the U.S. South and West.

Ms. Lambrew says 18,000 uninsured adults die each year because they don’t receive proper medical care and the risk of death for uninsured people with cancer is 50% higher than for the insured.

The uninsured paid, on average, $1,200 for health care in 1999, a significant proportion of income for some. Health care costs are a major source of debt for the uninsured, with medical bills accounting for 40% of personal bankruptcy and a major source of credit card debt. Some 40% of the uninsured report having difficulty paying for basic living costs such as food, housing, and heat in 2001, compared with 12% of those with insurance, Ms. Lambrew says.

There is a societal impact, according to her research, because uninsured workers are more likely to miss work, less likely to use preventive services, less likely to exercise regularly, and less likely to receive appropriate care for chronic illnesses. Uninsured children are 25% more likely to miss school; three times more likely to not get needed medications, glasses, or mental health care; and less likely to play sports.

Why people don’t buy insurance

The National Institute for Health Care Management (NIHCM) in Washington, DC, a foundation largely supported by Blue Cross and Blue Shield plans, says reasons that people do not purchase health insurance vary.

One study showed that many perceive premiums to be more costly than they, in fact, are and that nearly 25% would buy insurance if they knew the real price. Some of the nonpoor opt out of health insurance because they don’t see a need for it, either for cultural reasons or because they don’t see its value.

That report’s authors say expanding coverage among this group likely will involve private sector initiatives and programs that sometimes may be constructed in collaboration with or supported by government.

The NIHCM surveyed health plans for successes and lessons learned and reports that, generally, health plans that successfully reached the uninsured were affordable and attractive. And they marketed those products aggressively. In addition, they effectively managed situations in which people were transitioning out of one form of coverage into another, or to a new job.

Studies have found that most people who are price resistant don’t want to pay more than $100 or $150 per month for individual insurance and not more than $250 to $300 a month for family coverage. Such pricing requires trade-offs, NIHCM says, and keeping health insurance affordable is no small task in a time of escalating health costs. Most of the successful initiatives identified in the NIHCM report used innovative product design, flexible and reduced benefits, enhanced cost sharing, and/or reduced profit margins to keep premiums as low as possible. A few of the successful plans depended on cross-subsidies within a health plan’s scope of business.

Multiple marketing strategies

Also critical to success was marketing, particularly in the small group market. Small group initiatives attracting more than 10,000 members used direct mail; multiple brokers; the Internet; toll-free telephone numbers; and TV, print, and radio ads. Health plan administrators said that among all these strategies, brokers were critical for securing new members.

Recommendations based on lessons learned from the NIHCM report were:

  • Use a multifaceted marketing approach to reach a well-delineated population.
  • Allocate sufficient resources to support aggressive marketing three months before product launch and one to two years after the program’s introduction.
  • Conduct research before creating products to determine the right mix of cost and coverage.
  • Design benefits around price categories.
  • Consider alternative methods to lower premiums such as rate stability, reduced profit margins, and enhanced cost-sharing mechanisms.
  • Define the target population to support a multifaceted marketing approach — remembering that moderate income populations (more than 200% of poverty level) may yield higher enrollment.
  • Use the same provider network as for other commercial products since a limited provider panel may diminish the product’s value.
  • Analyze whether creating a pilot rather than launching a full-scale product may become a barrier in reaching the uninsured due to limited health plan commitment.
  • Partner with state programs for cross-referrals from public programs and to target people likely to be between sources of coverage.
  • Allow "aged-out" dependents to remain on a parent’s policy
  • Make enrollment procedures easier by providing materials in multiple languages and limiting the length of the application form.

[For information, go to these web sites: http://covertheuninsuredweek.org; www.familiesusa.org; www.iom.edu; www.kff.org; and www.nihcm.org. Contact Mr. Hadley and Mr. Holahan at (202) 261-5666.]