Matthew Holt

Connecting the dots–Uninsured people are poor!

A bunch of random articles all hit at once on Wednesday morning. And they win the John Madden award for stating the bleedingly obvious. This is kind of  a companion piece to my rant about Friday’s NY Times article on the health industry and its political allies and adversaries sitting down to come to consensus.

Inquiry featured a worthy study. It tried to suggest that high costs “crowd out” health insurance spending.

The analysis, “What Do People Buy When They Don’t Buy Health Insurance and What Does that Say about Why They Are Uninsured?” suggests that prices and personal preferences – as well as income – may help explain why some people do not buy insurance. The findings also raise the possibility that the uninsured make difficult trade-offs, and thus lack health coverage, in part, because they face higher prices for basic needs such as food and shelter.

The study used 2004, 2005, and 2006 data from the Consumer Expenditure Survey, an annual, nationally representative survey of 17,000 households. Results showed uninsured households to be much poorer, with an average spending outlay of about $28,800 — nearly half the $55,480 outlay of insured households. Compared to the insured, both low- and high-spending uninsured households spend a significantly larger portion of their budgets on housing, food at home, utilities, clothing and tobacco; high-spending uninsured people also spend more on alcohol and transportation. Besides health insurance, the uninsured spend a much smaller share of their budgets on other goods — particularly pensions and retirement accounts.

So–DUH!–poor people are likely to spend relatively more of their limited cash on immediate needs and not on health insurance.

Not to be outdone Health Affairs published an Urban institute study which found that if you cut Medicaid benefits then bad things happen to the poor and those who service their health care needs. To wit:

the cutbacks were followed by a major increase in the numbers of uninsured people, greater uncompensated care burden on hospitals, and revenue shortfalls that forced community health centers to obtain larger state grants and charge patients more.

And The New York Times discovered that uninsured young adults who get sick are really financially screwed too.

“For a lot of people, it’s a choice between being able to survive in
New York and getting health insurance,” said Hogan Gorman, an actress
who was hit by a car five years ago and chronicled her misadventures in
“Hot Cripple,” a one-woman show that was a hit at last summer’s Fringe
Festival. “There was no way that I could pay my rent, buy insurance and
eat.”

And even for those whom the state protects with a modicum of regulation (such as the insurance provisions of HIPAA that all of you bar Nate have forgotten about), get screwed too. HIPAA says that if you have had continuous coverage you can still get health insurance through a high-risk pool.

Having been personally offered this in the past I can assure that it is not the kind of insurance anyone would want (I recall being offered a $4K –  5K deductible plan for $500-ish a month. But even beyond that St Lisa Girion, (continuing to whack California’s insurers in the LA Times), showed that even at the incredibly high rates the state allows insurers to charge those who are out of other options, two California plans (Wellpoint and a yet again unrepentant Blue Shield) have been charging way more than they were supposed to.

And why is that?

Blue Shield, a nonprofit based in San Francisco, said that even with
the higher rates it lost about $7 million on its HIPAA coverage last
year and expects to lose up to $20 million on such policies this year. “It’s been a pretty consistent money loser,” Epstein said.

For those not getting it, Lisa explains:

For consumers, HIPAA coverage is expensive even under the state-issued
rate structure. People without pre-existing conditions can obtain
cheaper health insurance on the open market. Those who buy HIPAA
coverage tend to have continuing medical conditions that most insurers
would otherwise refuse to cover.

So take a breath. What does this tell us?

First, health insurance cannot be sold as a voluntary consumer good to poor people. Second, if it can, it can’t be sold to sick poor people. Third, even if it is, then the insurer of last resort can’t maintain the service, even after price gouging.

Do you need any more evidence that a patchwork system of mixed-public and private systems can’t work to cover everybody?

You may not, but as the NY Times reports and as I comment in my other piece today, lots of other apparently well meaning health care lobbyists do.

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10 replies »

  1. There’s no point in wasting time to correct the David MDs and Nates of the world. Mankiw’s “analysis” has been well refuted on the grounds of logic and real research many times over. To wit just one example http://tiny.pl/bx3p
    But instead here’s my suggestion. Let’s strip Mankiw, Mark Pauly, et al of their Ivy league tenured positions, give them a mild pre-existing condition and stick them into the individual market. Their opinions would change damn quick.

  2. I am a young adult I have a masters and bachelors degrees. I haven’t had health insurance since I was 23 in college. I have always worked several part time jobs and part time jobs in the arts that don’t offer health insurance. Id rather use that 500 dollars a month to make my student loan payments or save up to buy a house, buy better food and pay for my yoga classes then put it toward healthcare which I may only use twice a year. I am now 32. How do I get by without health insurance? I dont smoke, dont drink alchohol I ride my bike everywhere. I eat a balanced diet. Heres a hint to lowering healthcare cost Americans GET OUT OF YOUR CARS AND START WALKING FOR A CHANGE! QUIT EATING JUNK FOOD, SUGAR, AND STOP DRINKING SODAS. YOUR SEDINTARY LIFESTYLES ARE DRIVING UP HEALTHCARE COSTS FOR PEOPLE THAT ACTUALLY TRY TO TAKE CARE OF THEMSELVES. AND TO ALL THE YUPPIES WHO ARE COMPLAINING BECAUSE THEY LOST THEIR JOBS AND NO LONGER HAVE HEALTH INSURANCE GET USED TO IT. START USING PREVENTATIVE MEASURES SUCH AS DIET AND EXERCISE TO MAINTAIN YOUR HEALTH.
    NOT ALL OF US POOR PEOPLE ARE UNEDUCATED AND OBESE! ALOT OF US POOR PEOPLE ARE YOUNG PEOPLE ARTISTS AND MUSICIANS.

  3. Well, I read the Mankiw study and while it is trying to debunk common misconceptions, it creates brand new ones. Here are the points that raised questions for me:
    1) The study quotes a 10 million figure for non citizens as being uninsured. I cannot validate that number, but does that number include legal aliens? These residents work and pay taxes in this country legally, surely they will be covered by any national reform. So how many of those non citizens are legal residents?
    2) According to that study 18 million of the uninsured have a household income above the $50,000 median. The problem I have here is that the size of the household is not defined. Are we talking about 2 person households, or 6 persons, or more? The difference is significant.
    Let’s assume a 4 person household with that median income of $50,000:
    After taxes and mortgage or rent, there’s about $30,000 left, in a best case scenario. From that the household has to pay utilities, car payments, gas, etc. We are now left with about $24,000, which amounts to $2000 per month for food, clothing, school supplies, school fees, toys, books, braces, incidental repairs, etc., and health insurance. For a family of four, health insurance will be a few hundred dollars per month, which leaves about $1,500 per month for everything else.
    Now, I’m not sure when was the last time the author of the study visited a supermarket, but there is NO way, for a family of four to survive on that with dignity. Oh wait, they should also eat healthy, so they don’t become obese and burden the system. Eating healthy costs far more than fast food and other unhealthy fare.
    So I guess, you can turn statistics into anything you want, by slight omissions and glossing over the little details…..

  4. I think it is dumb that this information surprises people – poor people don’t have health insurance….because they can’t afford it – DUH!
    My husband’s company “offers” health insurance – hah! His premium would be 165.00/month – seems almost reasonable – but the deductible is 5000.00 per year. To add me and the kids would bring the total to 850.00 per month – with a total family deductible of 10,000.00 per year – yeah sure….I didn’t buy it NOT because I am lazy and cheap or lacking in personal responsibility….I didn’t buy it because it is rip-off garbage AND it is the only thing offered to me. A “search” for private insurance turns up similar number for cost! I am not lazy, cheap or lacking in personal responsibilty but I cannot afford the available “option”.

  5. I have a problem with Nate who seems to think uninsured are cheap or lazy.Does he have a job with insurance companies?I hope you NEVER lose your job or get ill and lose your insurance.Then will you be lazy or cheap?Private insurance companies are ripping off all of us.
    WELLPOINT owns BCBS and others but profit for 2007
    4.6BILLION!!

  6. I have a problem that more people aren’t beaten over the head with a rolled up copy of Mankiw’s study or any of the other numerous studies proving we don’t have an uninsured problem we have a lack of personal liability/responsibilty problem.
    These “reform” propogandist want to scrap our system based on 40 million people being to lazy to sign up or to cheap to purchase insurance.

  7. I forgot to add from a different post:
    http://www.nytimes.com/2007/11/04/business/04view.html
    As Harvard Economist Greg Mankiw points out in the above article there are really only a few million uninsured US citizens. 1. 10 million of uninsured are not US citizens. Millions more are eligible for Medicaid but have not applied presumably because they are healthy and need not apply.
    He continues:
    “The 47 million also includes many who could buy insurance but haven’t. The Census Bureau reports that 18 million of the uninsured have annual household income of more than $50,000, which puts them in the top half of the income distribution. About a quarter of the uninsured have been offered employer-provided insurance but declined coverage.”
    Mankiw also states that much of the health differences between American and other countries (e.g. Canada and Japan) are differences in lifestyle (e.g. obesity).
    If anyone has a problem with Mankiw’s statement I’d appreciate a refutation with sources. Thanks….

  8. From the same article that Matthew quoted:
    Mr. Aaron was one of several young adults who said living without insurance meant trying to take better care of themselves.
    “I’ve stopped eating fast food,” said Santiago Betancour, who is 19 and lives in Rosedale, Queens. “I’m eating rice, vegetables and fruits. And when I get sick, I exercise to sweat it off.”
    And this is the point: health care is first and foremost dependent on healthy lifestyle choices.
    The country should emulate New York City’s lead (thanks to Mayor Bloomberg) and help people quit their smoking habit by raising taxes so that cigarettes cost $10/pack and have the tax revenues go into health care. That way smokers are at least paying for part of the additional health care costs they incur instead of having non-smokers subsidize it (recall anti-smoking warnings have been on cigarette packs for 45 years).
    See, if you’re able to afford $10/pack/day or 2 packs a day at $20/day that comes to $3600 or $7200 per year which if you quit smoking you might just be able to afford health insurance premiums. You will find that throughout the country many people who are unable to afford health insurance premiums are somehow able to afford expensive cigarettes.
    Also NY State is having an 18% Obesity tax on sugar coke (but not diet) and Massachusetts should emulate this great idea as well putting the tax revenues into health care.
    Moreover, pollution causes health care costs so pollution emitting power plants and automobiles, etc. should be charged a health service fee that goes directly into the health care system.
    You see, once society insists that those who choose to incur additional health care costs either due to lifestyle choices or polluting our air actually pay for it instead of having taxpayers and private firms (through additional health care premium costs) then the costs of health care for the rest of us will go down and besides will help smokers to quit tobacco and polluters to put in anti-pollution equipment.
    The health care system will be impossible to fix until we address these sorts of issues.
    Our health care system is unsustainable as long as people who choose to live a healthy lifestyle and choose not to pollute the environment subsidize those who do. By encouraging people to pay the full costs of their lifestyle choices which includes the additional health care resources used by their lifestyle choice then they will find the lifestyle choice too expensive to maintain and will seek a healthier lifestyle.
    People in their 20’s when their insurance doesn’t have to subsidize people with unhealthy lifestyles and polluters should have much more affordable insurance premiums.

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