THE HIDDEN COST OF INADEQUATE HEALTH COVERAGE

The fuss over ObamaCare produces confusion and obscures some important realities that deserve our attention.  Much of the political debate creates a polarizing force like a centrifuge, splitting the pros and the cons into opposing camps that line up behind positional opinions about whether healthcare is a right or not.  For those opposed to the taxpayer shouldering the financial burden of providing healthcare to those without insurance coverage, the less the taxpayers must fork out to subsidize the uninsured the better.  All the while, there is an implied assumption on the part of the entitlement crowd that just providing insurance coverage for the uninsured is the end game.  In my opinion, we are all laboring under serious misunderstandings of the reality of the healthcare system and the way the costs are absorbed by society.  

I was looking for some solid research about the cost of the uninsured, and I came across a powerful and highly useful study from way back in 2003 when the early debate about universal coverage was just beginning.  The approach they took to analyzing the problem still has significant value today, and what it says helps shed light on the misunderstandings referenced above.  In a preface to the third chapter of the book Hidden Cost, Value Lost*, there is this revealing assertion from their research:  

The health care services received by uninsured individuals that they do not pay for themselves are picked up or “absorbed” by a number of parties, including:

• practitioners and institutions, both public and private, that serve the uninsured at no charge or reduced charges;
• the federal government, localities, and states that support the operation of hospitals and clinics, both through direct appropriations and implicit subsidies like the Medicare and Medicaid disproportionate share hospital payments; and
• philanthropic donations.

While uninsured individuals examined in this research consumed less than half the amount of healthcare compared to those with full insurance coverage, they did not simply stop receiving healthcare services altogether.  Instead, when their health conditions worsened to a point where they ultimately sought care, they showed up at emergency rooms, urgent care centers, and community clinics to be treated.  As everyone knows, ERs are extremely expensive places to receive care.  Further, due to worsened health status because they were not treated earlier, these individuals ended up with a higher rate of hospitalization with conditions that were otherwise avoidable had they been treated in a physician's office before things advanced.

Since these uninsured people had lower incomes than those with insurance coverage, the out-of-pocket costs for healthcare represented much higher levels of their total incomes.  Thus, much of the cost of healthcare was non-collectable, and the unpaid fees were passed on to healthcare providers, local governments, and charities.  In the end, specific to hospitals and community clinics, the federal government ended up paying subsidies in various different forms (e.g., disproportionate share payments, continuing medical education payments, etc.).  Either directly through federal, state, and local governments, or indirectly through charitable donations, these costs factored their ways into the tax-payer's wallets. There is "no free lunch" when low-income individuals go without health insurance.  

The next part of the study goes on to reveal the additional costs that are hidden by the economy.  When people get sick, people miss work until they can get back on their feet again.  That is one of the primary reasons larger employers provide health insurance: "presenteeism."   Absence from work reduces productivity, and insurance coverage helps minimize the amount of missed time from the job by ensuring that workers can get treatment quickly and return to productive work as soon as possible.  Therefore, there is a drag on the U.S. economy when workers are unable to seek healthcare services in a timely manner, to recover, and to return to productive work.   

The authors of this book came to the following startling conclusion in Chapter 4: Other Costs Associated with Uninsurance

The Committee’s best estimate of the aggregate, annualized economic cost of the diminished health and shorter life spans of Americans who lack health insurance is between $65 and $130 billion for each year of health insurance forgone. These are the benefits that could be realized if extension of coverage reduced the morbidity and mortality of uninsured Americans to the levels for individuals who are comparable on measured characteristics and who have private health insurance. These estimated benefits could be either greater or smaller if unmeasured personal characteristics were responsible for part of the measured difference in morbidity and mortality between those with and those without coverage. This estimate does not include spillover losses to society as a whole of the poorer health of the uninsured population. It accounts for the value only to those experiencing poorer health and subsumes the losses to productivity that accrue to uninsured individuals themselves.

We could pile on to this limited quantification, as it mentions regarding the "spillover losses to society as a whole of the poorer health of the uninsured population.”  But letting this limited estimate suffice for the sake of this argument, the $65 to $130 billion annual cost in 2003, rescaled for inflation and the lower number of uninsured due to ObamaCare today, still represents an enormous cost for us to ponder.  

The punchline to this line of thought should be obvious at this point:  can we afford to NOT provide health coverage for these uninsured citizens?  Between the uncompensated care costs we now absorb anyway plus the economic costs involved with lost productivity, we must reckon with the alternative in a new light.  Regardless of whether you believe that healthcare is a right or a privilege, we need to look beyond that polarizing division to the true costs involved and the implications of our decision:  to cover or not to cover?  If you think that Healthcare Savings Accounts (HSAs) are the magic answer, you need to understand that the low-income individuals we are talking about do not have enough income to set aside anything in a tax-free account that would be big enough to pay for their healthcare services in the first place.  What is required is decent health insurance that removes the financial barriers to access healthcare when it can do the most good, which is early on and easily accessible.  Only then can we put people back to work quickly and productively.  Once we do that, they can be fully functioning and contributing members of the American society. 

*Hidden Cost, Value Lost, Institute of Medicine. 2003. Hidden Costs, Value Lost: Uninsurance in America. Washington, DC: The National Academies Press. https://doi.org/10.17226/10719; The fifth of a series of six books on the consequences of uninsurance in the United States, illustrates some of the economic and social losses to the country of maintaining so many people without health insurance. The book explores the potential economic and societal benefits that could be realized if everyone had health insurance on a continuous basis, as people over age 65 currently do with Medicare.

https://risehealth.org/the-hidden-cost-of-inadequate-health-coverage