Does Insuring People Before Age 65 Save Money

One of the theories behind the benefits of expanded access is that insured persons will be in better health as cost barriers to receipt of needed care are lessened, and that receipt of more care will ultimately mean they have lower health spending.  This proposition is dubious for a number of reasons.  A study reported in the Annals of Internal Medicine makes the case that insuring previously uninsured adults, while having a substantial price tag associated with it, will lower costs for the Medicare program.  (Annals Abstract) (Annals Editorial)

The research is based on a comparison of Medicare claims for previously insured and uninsured persons identified in the National Institute on Aging’s Health and Retirement Survey.  One of the problems with the research may start with the potential unreliability of self-reported survey data on insurance status and with a selection bias in who agrees to participate in this survey.  In any event, the researchers found that previously uninsured persons had higher costs under Medicare than did the insured cohort.  The difference was primarily due to higher inpatient and home health care costs and largely attributable to cardiovascular disease, diabetes and joint replacement.   Interestingly, the median expense was the same; it was among the higher spending deciles in each cohort that the spending was greater for patients entering Medicare who had not had insurance coverage.

The authors assume that if these uninsured persons had insurance, they would have received better care or at least earlier care and Medicare would have saved money.  They acknowledge, however, that the system as a whole would be spending more, substantially more, if insurance is provided to this group; and they also acknowledge that they did not take into account the possibility of greater longevity and hence more Medicare spending if these persons had been insured before entering Medicare.

The most troubling aspect of this line of research is that nothing demonstrates that giving more people insurance will by itself lower national health spending.  On the contrary, every analysis suggests it will increase spending greatly.  So if health care spending is a national crisis, how is expanding coverage, in the absence of very significant cost controls, going to do anything to help solve that crisis?  Expansion of coverage may be good because it will improve people’s access to health care and their health status, but it will substantially exacerbate our cost problem.