Myths about the uninsured: You didn’t know these?

As part of the recent hearing held by the U.S. House of Representatives Ways and Means Committee’s Subcommittee on Health on the problems of the uninsured, Len Nichols, vice president of Center for Studying Health System Change in Washington, DC, described 10 myths he said are widely held about the uninsured and then explained why economists say each of the myths is misleading.

1. It is known how many people are uninsured. While 44 million uninsured is the latest "official" number from the most recent Current Population Survey, the truth could be and is on either side of that number. Mr. Nichols says the important consideration is the time frame. The longer the period of time, the smaller the number of people who always are without health insurance, and the larger the number of people who are without insurance for some of the relevant time period. "Perhaps," he said, "the most important thing to establish from a policy perspective is not the precise number, as long as we are confident that the number of uninsured for an entire year is in the tens of millions, and researchers are confident of this. The most important analytic measurement may be the time trend is the percentage of nonelderly Americans who are uninsured, which has recently been quite adverse."

2. The uninsured are all alike. Mr. Nichols said the uninsured tend to be somewhat lower-income, and in somewhat poorer health, but "because there are so many of them and because they do span various dimensions of American life, there are many who are young and healthy, but there are many who are not; there are many who are reasonably well off, including a sizable fraction above the median income. And then, as is also important to note, there is a sizable fraction below the poverty line who are also sick and in a very bad way." Policy-makers, he added, need to understand this diversity and be careful and clever in making limited funds go as far as they can toward expanding coverage.

3. Coverage is coverage is coverage. Insurance differs, according to Mr. Nichols, in terms of the kinds of financial protection it offers, in the potential for improvement in health it offers, and in the humanity of the treatment people receive when they contact the health care system. Also, the kind of insurance people get depends very strongly on where they get it, through a Fortune 500 company, for example, or in the individual market.

4. Health insurance would improve the health of all the uninsured. Mr. Nichols said this is one of the more complicated, emotional disputes in health policy analysis. He suggested a high standard of proof that causation is not likely to be appropriately inferred unless there has been an adequate natural experiment or a true experiment in which a representative sample of people are assigned to have or not have insurance for the duration of the experiment. While this standard of proof rarely has been met in the research literature, he pointed out that when it has been met, the bulk of the evidence suggests that health insurance does have positive effects on the health of certain populations — the poor, the elderly, the truly sick, and children. But what has not been proven by this standard is that universal coverage would improve the health of all the uninsured. There also is an ongoing question, he said, of whether universal coverage would eliminate poor health status among vulnerable populations, and he suggested, based on data, that insurance can help the populations and reduce gaps, but eliminating the disparities gap will require multiple policy changes.

5. Individuals without insurance choose to be so. Mr. Nichols said this proposition is true in some general sense because no law prohibits people from buying insurance and most people could buy individual policies. But, he said, if we think of realistic or reasonable choices for low-income people or those at high levels of risk, if they don’t have insurance now, obtaining insurance voluntarily without further subsidies probably is not a realistic option.

6. U.S. employers spend $400 billion a year for workers’ health care. This proposition, Mr. Nichols said, demonstrates that economists think differently than other people. Based on theoretical knowledge and some careful empirical work, he added, most economists contend that most employers do not pay for health insurance. Rather, economists theorize that, ultimately, most workers end up paying for health insurance in the form of lower wages. "Sooner or later, the bulk of workers will end up paying for the health insurance that policy makers give them with the best of intentions," he explained. "They’ll end up paying for it themselves through reduced wages and fewer jobs unless they receive a subsidy. Of course, if they receive a generous subsidy or their employer does, that subsidy will ultimately go to workers."

7. The decision to remain uninsured has no effect on anyone else. Mr. Nichols said he chose this myth to highlight the reality that the willingness of some workers to take jobs without health insurance, even if they are a minority of the work force, has important consequences for everyone else. For example, it means that employers have a decision about whether to offer health insurance, and will make that decision based largely on the preferences, expectations, and productivity of the dominant type of workers they need to produce their products and services, as well as on their own unique costs of delivering health insurance to their work force.

8. Workers used to be afraid to switch jobs because of health insurance, and the Health Insurance Portability and Accountability Act (HIPAA) fixed that. Economists call "job lock" the phenomenon of workers remaining with less productive jobs than they could get because they fear losing health insurance if they were to switch. HIPAA, adopted in 1996, was designed to make the portability of health insurance more real and reduce job lock. Mr. Nichols cited some studies that found some pre-HIPAA job lock, though the welfare cost from the job lock is impossible to quantify. He said economists can’t tell if additional policy intervention is justified.

9. Economists don’t know anything about why people are uninsured. Mr. Nichols noted that while it may seem that economists always argue among themselves, there are three things that most economists say about the lack of insurance coverage:

  • The single most important reason people are uninsured in this country is that they are not willing to pay what it costs to insure themselves.
  • The prices people are required to pay for health insurance vary widely across different circumstances and insurance markets.
  • Even though price matters a lot, most people and firms have fairly realistic demands for health care and health insurance.

10. The combined research evidence supports doing nothing to address the problems of the uninsured today. While economists and health policy analysts can’t say with scientific certainty that any specific subsidies or policies should be implemented to reduce the number of uninsured, Mr. Nichols pointed out they are able to articulate the trade-offs involved, but only elected officials entrusted with the power of the people can decide if the opportunity cost is worth it, that is, which competing priorities will and should get less attention and fewer resources.

"Perhaps the best evidence of the value of health insurance is not in statistics or econometrics," Mr. Nichols said, "but rather lies in the fact that all the health policy analysts I know — and I know quite a few around the country — actively seek out and keep health insurance at all times, even when self-employed, and they even buy it for their recalcitrant adult children when the latter emerge from college feeling immortal but also stunned at the retail price of nice apartments in our great cities these days."

The choice, he added, comes down to whether our society is willing to pay to protect the working poor from the risks that others pay to avoid for themselves, and to protect us all from living with their free-rider risk.

"We economists cannot tell you with certainty the best particular way to expand health insurance coverage," Mr. Nichols concluded in his testimony, "but I can say the case for some kind of significant coverage expansion seems strong to many health economists and health policy researchers today. The prudent strategy in the event that you do move in that direction would be to monitor the outcomes quite closely and be prepared to alter details of the program or change course altogether if credible evidence warrants it."

Contact Mr. Nichols at lnichols@hschange.org.