The Unbridgeable Gap between Left and Right on Health Reform

Though thoroughly smothered under 2900 pages of well meaning but poorly focused, expert-driven “good works”, the core of the Affordable Care Act was providing 30 million people subsidized health insurance coverage. As the country continues to decide how it feels about this monumental legislation, a major ideological divide persists over whether the aggressive coverage expansion in health reform was really needed or not.

Far from “selling itself,” as a overconfident White House aide suggested it would back on March 23, 2010,  health reform remains strikingly unpopular. Only 37% of the public thinks the country will be better off as a result of health reform, and only 28% think their families will be better off, according to the May Kaiser Family Foundation tracking poll.  There is a stark partisan divide over health reform.  While 72% of Democrats have a favorable opinion of health reform, a substantial minority believes the bill could have done more (covered more people, provided a public option or path to single payer).  Alternatively, 74% of Republicans have an unfavorable opinion of health reform; the same percentage favors repeal.  Independents tend to break toward the Republican view of the bill (49% unfavorable vs. 35% favorable).  Those opposed feel more intensely about health reform than those in favor.

The Ryan House Budget for 2012 zeroes out all new spending for health reform (while keeping ACA’s Medicare cuts, devoting them to deficit reduction!).  The conservative narrative is that the problem of the uninsured was liberal mythology, not meriting major new spending.  In the blogosphere, an analysis surfaced suggesting that the real uninsured problem is only about 4 million people. This apparently originated in a Heritage Foundation blog posting from late August, 2009.  Other conservative analysts charitably suggest there may be as many as ten to twelve million uninsured worthy of federal help.   To take care of this smaller number, you do not need a major coverage expansion, but merely to apply the familiar market oriented remedies: selling insurance across state lines, high deductible health plans, malpractice reform, high risk pools, etc.

How do you get from 51 million (the 2009 Census Bureau estimate derived from the Current Population Survey) to four million (the Heritage blog actually started at 46 million, the estimated Census number of uninsured for 2007)?   Well, begin by subtracting those who are not uninsured for a full year.  According to the Heritage blog, that gets you down to 36 million.  Then subtract another 6 million children who are uninsured but eligible for Medicaid, and whose parents have not signed them up.  That gets you down to thirty million.  Then you subtract twelve million “illegal aliens” who are uninsured (down to eighteen), and the substantial number of “free riders” who come from “wealthy” households above $50 thousand in income and, voila, you’re down to four million “poor, sick uninsured for a lengthy period.”  This facile exercise in people subtraction is riddled both with errors and questionable judgments.

It is true that the 51 million uninsured estimated for 2009, which derives from the Current Population Survey of the Census Bureau, over-counts the actual number of uninsured due to significant under-reporting of Medicaid enrollment. Subtract that out and you have about 46 million people who reported that at one point in time they were uninsured during 2009.

There is great fluidity in health insurance coverage, just as there is in employment status and also in income eligibility for public programs like Medicaid.  Separate analysis using data from the Agency for Healthcare Research and Quality using the Census’ MEPS survey data suggested that in 2008 almost 41 million were uninsured for an entire year.  In a two-year analysis using the same data series, a little more than thirty million people were uninsured for two complete years (2007-2008).

Why those who have short-term coverage issues should be less worthy of help than the “hard core” long term uninsured is unexplained by the Heritage blogger.   Diabetics, or people with high blood pressure, or with depression who interrupt their medication because they cannot afford it even for a matter of months end up costing the entire society money in acute care for avoidable illness.

There is reasonable certainty that about a quarter of the uninsured are eligible for public programs (e.g. Medicaid or SCHIP) and are not enrolled.  This number, 11-12 million, is scaring Governors and Medicaid program directors all over the country.  Policy wonks ungallantly call them “the woodwork people”- that is, folks who will come out of the woodwork, like termites, in 2014 when the individual mandate requires them to have insurance coverage.  Unlike those to be newly covered by the ACA Medicaid expansion, the cost of the woodwork people will be paid for at the existing match (which averages 43% from state general funds).   States struggling with their present 53 million Medicaid enrollees will have to find a big chunk of new money.

The aforementioned MEPS survey found almost 6 million uninsured children in 2008 but not 100% of these are eligible for Medicaid or SCHIP, because many of them live in households above SCHIP’s income threshold.  Many families are daunted by the public program enrollment process, either because of mistrust of the government or deliberate bureaucratic barriers.  States in fiscal trouble have a powerful economic motive to make it complex or difficult for people to enroll.

Hospitals are actually the biggest “promoters” of public coverage both for adults and children, for the excellent reason that it reduces their bad debts.  But you have to be sick enough or patient enough to use the hospital to get their attention. To suggest that public coverage is simply “there” and that parents are dilatory in not using it does not tell the whole story, given the program’s “welfare” lineage and bureaucratic inertia.   There is clearly a problem here, but a different one than the Heritage Foundation blog analysis suggests.

A greater and less defensible leap is assuming that the entire “illegal alien” population is uninsured and since they shouldn’t be here in the first place, we shouldn’t worry about them.  According to the Pew Hispanic Center, in 2008, there were about 11.9 million people in the US illegally. Almost 40% of the illegal adults actually have some form of insurance, whether provided by employers or, via false documentation, through public programs. In 2006, the National Institute for Healthcare Management estimated that there were only about 5.6 million uninsured undocumenteds in the US in 2006. The Congressional Budget Office arrived at an identical figure for the current uninsured undocumented in a March 2011 report.

The number of undocumented folk in the US has probably fallen significantly in the past three years due to the collapse of housing construction and the shrinkage of tourism in the Sun Belt- two major employers of undocumented workers. In some states like Texas and California, the undocumented may yet constitute as many as one-third of the uninsured.  But the Heritage estimate of “12 million illegal uninsured” likely at least doubles the real number, as well as ignoring the on-the-ground reality – the public health threat posed by a large number of uncovered and highly mobile undocumented workers and their families.  Congressman Ryan’s proposed 2012 budget not only zeroes out money for the coverage expansion, but also cuts the safety net expansion provided community health centers, which serve the undocumented population without complaint.

The “high income” uninsured, who the conservative blogosphere assumes to be free riders, constitute a surprisingly large percentage of the long term uninsured.   Of the more than thirty million uninsured who were continuously without coverage for the entirety of the first two years of the recession (2007-2008), somewhat more than 45% had household incomes over 200% of poverty ($42 thousand a year for a family of four) , and more than 40% earned over 400% of poverty ($84 thousand a year for a family of four).  These are not small numbers.  But the idea that there are massive amounts of unallocated free cash sloshing around in their household budgets that is available to pay health premiums is laughable.

By the time of the 2007-8 recession, American consumers had accumulated a staggering $14 trillion in consumer debt.  When they ran out of cash, many consumers defaulted,  creating a landslide of uncollectible accounts that caused our financial crisis. According to the Federal Reserve, only about a trillion of this unsustainable consumer debt burden has been liquidated, mostly by being written off or paid off.  Thirteen trillion dollars in consumer debt remains a huge drag on the economy and a massive claim on future consumer income.  (As late as 2004, the total consumer debt was only $8 trillion).

If consumers had free cash, they’d be spending it, and we would not have 9.1% unemployment.   The idea that there are huge undiscovered cash reserves that would enable cash strapped consumers to take on a $14 thousand a year health insurance expense is delusional.  Unless we were willing to write off the remaining $13 trillion in debt and insist that people spend any resultant free cash purchasing health insurance, the idea that tens of millions of “wealthy” Americans are “voluntarily” foregoing insurance coverage does not reflect the on-the-ground reality. There may be free riders here, but not fifteen million of them.

What’s the bottom line?  While the headline number of 51 million uninsured probably overstates the magnitude of the real problem, there are presently tens of millions of Americans who cannot afford to purchase health coverage without help.  It isn’t just a problem of the “sick and poor”, either.  It’s the middle class, anxious and hurting, that is delaying seeking care because they either cannot afford health premiums or cannot afford the cost sharing their employer provided policies require.

The 4 million Heritage blogger’s number, faithfully reblogged by countless health reform critics, is a convenient rhetorical pretext for rolling back the Affordable Care Act’s coverage expansion, but not a credible estimate of the actual needs. One can legitimately quarrel with the large fraction of the expansion paid for by Medicaid, a broken program whose present covered population states cannot afford.  One can quarrel as well with the unspoken premise that health coverage is a “human right.” It might have been a more efficient use of scarce societal dollars simply to expand the safety net directly.

But simply abandoning the thirty million people promised coverage by the ACA to the vagaries of the “marketplace” (and a very expensive care system) is not only bad politics (a Tea Party gift to a struggling President Obama), but also bad social and public health policy.

Jeff Goldsmith is president of Health Futures Inc, which specializes in corporate strategic planning and forecasting future health care trends. He is also the author of “The Long Baby Boom: An Optimistic Vision for a Graying Generation.”