The Uninsured: Few Americans Truly Lack Access to Health Coverage

April 29, 2005 | Author: Devon Herrick

The Census Bureau reports in the most recent data available (2003) that about 45 million Americans lack health coverage.  An estimated 10 to 14 million of these uninsured Americans qualify for Medicaid or S-CHIP coverage but choose not to enroll.  One-third of them, representing nearly 15 million people, live in households with annual incomes of $50,000 or above and half of those earn more than $75,000. 

 

These data suggest that about 60 percent of the uninsured already have access to public coverage or have enough income to afford private coverage.  When these individuals are subtracted from the total, the actual number of uninsured who truly lack access to coverage may be as low as 18 million people, or about six percent of the U.S. population.

 

But why do people who qualify for Medicaid not bother to enroll?  Probably because they can always enroll after they become sick.  In addition, safety net providers inadvertently create powerful incentives for many to remain uninsured. Federal law prohibits hospitals from turning away patients in need of emergency care. 

 

Providers are often afraid to refuse treatment for even acute conditions when patients walk into the hospital emergency room.  Nationally, public and private organizations spend an average of more than $1,000 annually for each uninsured individual for free medical care and unreimbursed physician services.

 

Another perplexing question is why 15 million Americans with annual incomes greater than $50,000, who arguably can afford coverage, do not purchase health insurance?  A common assumption is that most uninsured Americans simply cannot afford the cost of coverage. But this is simply not always the case.  

 

As with any good or service, the purchase of health insurance has a lot to do with preferences and priorities.  Most health insurance is prepayment for routine care that the insured population expects to use during the year. However, many people may not wish to divert scarce cash from their budget to pay in advance for physicians' office visits — especially if they may not need them.  Most of the uninsured realize they can obtain care if needed.  Regular physician visits can be paid out-of-pocket.

 

Good health is common in young people, which may help explain why so many of them feel they don't need health insurance.  Census figures also show that 42 percent of the uninsured (18.8 million) are between the ages of 18 and 34.  Households headed by individuals under age 35 spend 50 percent more on entertainment every year than on out-of-pocket health care expenses. 

 

For that matter, these households spend 85 percent more on dining out.  In fact, households headed by people between the age of 18 and 34 spend about three times more on alcohol, tobacco, dining out and entertainment than for out-of-pocket spending on health care.  If this group has unmet health needs, they would likely shift more of this discretionary spending toward health care.

 

Another reason some people decide to purchase (or forgo) health coverage has to do with whether they receive a tax subsidy.  High income workers with employer-sponsored coverage receive a generous tax subsidy that often amounts to a 45 percent discount.  Low-income workers receive little (if any) subsidy since they typically owe nothing in taxes. 

 

Workers who must buy their own policy also receive no subsidy.  This means that middle-income workers who buy their own policies need from $15,000 to $18,000 in pre-tax income to purchase a family policy costing $9,950. 

 

It's unlikely any program could ever compel all individuals to obtain coverage. However, part of the solution is to give uninsured, working Americans the option of obtaining private insurance that better suits their needs. This might be in the form of a refundable tax credit that allows low-income people the same tax subsidy that the wealthy currently enjoy.  

 

Another good idea that may help some people is providing a tax deduction for individuals purchasing high-deductible health insurance policies.  When coupled with Health Savings Accounts (HSAs), people could accumulate money tax-free for medical needs.  Funds not needed for medical care could be used for other purposes or rolled over for future health care needs.

 

Under such a program, the number of people who say "health insurance isn't a good value for the money" would decline substantially — as would the number of those who choose to forgo health insurance.