Who Does and Would Pay for the Uninsured?

A not-for-profit group that has been a vigorous proponent of health care reform has released a report, Hidden Health Tax, on the costs of the uninsured and who ultimately bears that cost.  Families USA engaged Milliman, Inc., a well-known and credible actuarial firm, to perform the analysis behind the report.  (FAMILIESUSA Report) The analysis indicates that the uninsured paid for a little more than a third of the care they received and third-party sources, such as government programs, paid for about another fourth.  The rest was uncompensated care, about $43 billion worth in 2008.  Families USA assume that these uncompensated care costs are shifted by providers onto private insurance payers.  This shift is said to add about $368 annually to individual premiums and about $1,017 to family coverage costs.

In addition to the cost shift, the report sets out again the consequences of being uninsured–these people are less likely to seek and receive care and when they do get care, they end up with bills that they often cannot pay, endangering their overall financial situation.  Workers who don’t have insurance and don’t get care may be less healthy, which reduces their productivity.  Workers may feel trapped in a job they would prefer to leave because they don’t want to risk a loss of insurance.  Finally, the report surmises that the costs shifted onto private health insurance make it less affordable, leading to even fewer people having health insurance, creating a downward cycle of higher costs and fewer insureds.

There are major potential flaws in this reasoning.  One is that even if there were no uninsureds, the current premiums would go down only if providers reduced their charges now that they would not have uncompensated care and insurers reduced their premiums in light of lower charges from providers.  Both of those assumptions might be questioned and it is really unlikely that the full value of formerly uncompensated care would be reflected in provider charge and insurer premium reductions.  A second is that, as the report itself notes, people with insurance seek and receive more care.  That additional care costs something and would add to overall total health costs, which would be reflected in private insurance premiums.  Finally, the cost to provide coverage for these formerly uninsured persons has to be paid somehow.  That somehow always ultimately comes back to the mass of citizens.  Either we have a real tax or a hidden one.  If employers pay the premiums for the employed uninsured, that cost gets passed on in the goods and services they sell and/or in smaller wage increases to employees.  The report creates the somewhat misleading impression that providing universal coverage will create savings for American individuals and families, but the truth is that, in the absence of other changes, overall costs will be higher and American citizens will bear that higher cost.