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News of the Day ... In Perspective

3/18/2007

Uninsured subsidizing the insured

Many politicians and left-leaning advocacy groups such as Families USA blame the uninsured for higher insurance premiums. “Free riders” impose “hidden taxes,” they say. And once everyone is insured, fewer people will use expensive options such as emergency rooms for their primary care—or so the argument goes.

Bullying the uninsured to make them buy insurance will not solve the problem, writes John Graham, director of health care studies at the Pacific Research Institute (Chicago Tribune 3/5/07).

Some facts:

  • The uninsured consume far less care. In 2000, just half of the uninsured population had any medical expenses at all, while 80 percent of the insured incurred some medical costs.

  • Most visitors to the emergency room are insured: only 80,000 (4.2 percent) of the 1.9 million California children who visited ERs in 2003 lacked insurance.

  • The uninsured pay about $60 billion in additional income taxes by forgoing the tax breaks for health insurance. This swamps the $29 billion in uncompensated services that the uninsured are said to consume.

  • Insured persons used about twice as much medical service as uninsured persons. Sen Tom Coburn (R-OK), an obstetrician, estimates that one-third of medical care is wasted because few have incentives to use it wisely.

  • The concentration of health expenses is comparable in insured and uninsured: Just 5 percent of each group incurs half of the group’s expenses.

Graham concludes that mandatory insurance will simply move the currently uninsured to a higher spending baseline.

The real “hidden tax” is levied by the insured on their fellow insured, Graham writes. Overinsurance is the real cause of out-of-control costs.

Bolstering this conclusion is the result of a recent study that showed a 10 percent decrease in first-time emergency room visits, and a 25 percent decrease in repeat visits, mostly for non-severe conditions, in patients with a high-deductible health plan. Hospitalizations were also both less frequent and shorter among patients with high deductibles (Medical News Today 3/14/07).

The study analyzed ER visits by 8,724 individuals in the year before and after their employer mandated a switch from a traditional HMO plan to a high-deductible plan, compared with 59,557 contemporaneous controls who remained in the traditional plan (Wharam JF, JAMA 2007;297:1093-1102).

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