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

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.