THE PUBLIC POLICY: The Wealthy Uninsured
Hogberg, David
THE PUBLIC POLICY DAVID HOGBERG The Wealthy Uninsured F WE WISH TO REDUCE THE NUMBER OF PEOPLE without health insurance, the solution lies in reducing government involvement in health care. That...
...The rise was not due to stingy government budgets...
...To make matters worse, few politicians are discussing these problems, since that would require telling the well-to-do that government laws enabling them to engage in shortsighted behavior on the cheap should be eliminated...
...Employer-provided coverage declines only during years of recession and recovery when people are laid off and employers seek ways to cut costs, as has happened since 2001 and as happened in the early 1990s...
...Although the decline has leveled off some since 2000, that may be due to more people buying insurance directly as they lost employer-based insurance during the recession...
...The fact that the number of uninsured rose while incomes were rising and that the greatest increase in lack of insurance was among higher-income families suggests that something else is making insurance less attractive...
...That sentence probably makes sense only to folks on the right...
...Nevertheless, the Medical Expenditure Panel Survey (MEPS) does make that distinction, and using data from the MEPS website it is possible to see trends in insurance status and its relationship to income from 1996 to 200—data that 46 THE AMERICAN SPECTATOR March 2005 supports the trend uncovered by Goodman, Musgrave, and Herrick...
...In the chapter titled "Designing An Ideal Health Care System," the authors note the "rise in the number of uninsured occurred throughout the 1990s, a time in which per capita income and wealth, however measured, were rising...
...So insurance should be positively correlated with income and wealth accumulation...
...Once the economy is in full recovery mode, the decline will likely continue...
...Not surprisingly, the statistics paint a very unflattering health-care picture for these states...
...In the early 1990s, eleven states—Idaho, Iowa, Kentucky, Maine, New Hampshire, New Jersey, New York, Ohio, Utah, Vermont, and Washington—imposed both of these regulations in one form or another on their direct purchase health-insurance markets...
...Most of the decline is due to one area of the health-care market, that of "direct purchase...
...One of the CPS's biggest problems is that it doesn't distinguish between those who are uninsured for a short time and those who are chronically uninsured (defined as being uninsured for at least a year...
...In short, the rise in the uninsured is not the result of cutbacks in government health-care budgets...
...Yet, once the 1990s economy kicked into full gear, employer-provided health DAVID HOGBERG care had swelled by 22 million individuals by 1999...
...by 1999 they had shrunk to 21 percent...
...Politicians are too worried about the health and longevity of their political careers to tell the truth about health care...
...Incomes rose almost every year in that decade and, as left-wing economists are so fond of pointing out, they rose dramatically for those in the upper-income brackets...
...In the context of the 1990s, however, this makes little sense...
...In short, the MEPS survey suggests that the trend revealed in the CPS numbers is accurate, even if the numbers in the CPS are too large...
...In 1996, 59 percent of the individuals without health insurance for a year were in a household classified by MEPS as either poor, near poor, or low income...
...Interestingly, Goodman, Musgrave, and Herrick rely on data from the Current Population Survey (CPS), a survey that almost certainly overstates the number of uninsured...
...Because government regulations make it rational to do so...
...As Goodman, Musgrave, and Herrick state: Economic theory teaches that as people earn higher incomes, they should be more willing to purchase insurance to protect their income against claims arising from expensive medical bills...
...Guaranteed issue means that an individual can purchase health insurance at anytime he wants—an insurance company cannot deny him a policy...
...Everyone in that region is charged the same price—the average—for health insurance...
...So why do the well-to-do seem to be acting against their self-interest...
...A more detailed analysis of the CPS data lends even more support to the contention that the well-to-do are the fastest-growing segment of the uninsured...
...Yet the numbers from 1994-1999 are still very telling: a decline of more than 5 million individuals making direct purchases of health care...
...it refutes every argument that a government-run health-care system is preferable to the one that exists in the United States...
...in a given region...
...And now let me hit you with a sentence that will make sense to very few regardless of their politics: The fastest growing segment of the uninsured are the relatively well-to-do...
...State regulations play a substantial part, with "guaranteed issue" and "community rating" being the two biggest culprits...
...In 1990 these states accounted for 29 percent of the U.S...
...Many states expanded Medicaid eligibility in the 1990s, and the number of Medicaid enrollees rose by 3.6 million from 1990 to 1999...
...Thus, there should be little problem in using the CPS numbers to examine the trend in more detail...
...Since buying insurance directly is usually more expensive than obtaining it through an employer, we should expect that those in the upper-income brackets would be its primary purchasers...
...Nor was the rise in the uninsured accounted for by employer-provided health care...
...Thus, the decline in the direct-purchase market fits very well with the data showing that the ranks of the well-to-do account for more and more of the uninsured...
...With the exception of 1993, Medicare enrollees also rose during this entire period...
...Individuals in middle-income and high-income households constituted 27.3 percent and 13.6 percent of the uninsured, respectively...
...Community rating is a process by which the health-insurance premiums individuals pay are an average of all premiums (for sick and healthy, young and old, etc...
...When both of these regulations are in force, they create two perverse incentives: First, they make it financially sensible for someone to avoid buying coverage when he is healthy, and they make it financially sensible for someone to wait until he falls ill to buy coverage...
...The book is one of the best about health care in a long while...
...March 2005 THE AMERICAN SPECTATOR 47...
...I first became aware of this phenomenon from a few short paragraphs in an outstanding new book titled Lives At Risk: Single-Payer National Health Insurance Around the World by John C. Goodman, Gerald L. Musgrave, and Devon M. Herrick (Rowman & Littlefield...
...The number of Medicaid enrollees did decline some in the late 1990s, but that was probably due to more people getting jobs that provided health care...
...Yet while their proportion of the population was shrinking, they accounted for 26 percent of the nation's increase in the uninsured...
...The CPS data shows that during the 1990s, the number of uninsured rose by just under 8 million...
...And this rise was most pronounced among those whose income levels are middle-to-upper class: "between 1993 and 1999, the number of uninsured increased by 57 percent in households earning between $50,000 to $75,000 and by 114 percent among households earning $75,000 or more...
...David Hogberg is a senior research analyst at the Capital Research Center in Washington, D.C...
...Between 1993 and 1999, the number of uninsured increased by 57 percent in households earning between $50,000 to $75,000 and by 114 percent among households earning $75,000 or more...
...By 2001 individuals in poor, near poor, and low-income households were 54.2 percent of the uninsured, while those in the middle-income households had increased to 28.5 percent and those in high-income households increased to 17.3 percent...
...The numbers for the direct-purchase market are even more damning: from 1994-1999, those eleven states accounted for 40 percent of the decline in the direct-purchase market...
...population...
...Unfortunately, the CPS only began collecting data on the direct-purchase market in 1994, so a full picture of the 1990s is not possible...
...Similarly, as people become wealthier the value of insuring against wealth depletion (say, by a catastrophic illness) rises...
Vol. 38 • March 2005 • No. 2
