Five Percent Spending Increase Could Insure all Americans

About $86 billion will be spent this year on health care for the uninsured, and $123 billion—or 5.1 percent of the projected national health care spending for 2008—would be needed annually to provide universal health insurance in the United States, according to a study published online August 18 in Health Affairs.

The study, by Jack Hadley, Ph.D., a professor in the Department of Health Administration and Policy at George Mason University, and colleagues, pointed out that the 5 percent needed to cover the uninsured is “smaller than the average annual increase in total health spending of 7.6 percent per year since 2000.”

In 2008 the uninsured will spend an estimated $30 billion on their own health care, while “others”—mostly federal and state governments—will pay for $56 billion worth of their health costs.

Hadley and colleagues concluded that government programs—including Medicare, Medicaid, and state and local programs—pay about 75 percent, or $42.9 billion, of the $56 billion that uninsured people are unable to pay for their health care services. The other costs are paid by private donations and by physicians and hospitals, which donate time or forgo profit to care for low-income, uninsured residents.

The researchers defined such uncompensated care as the difference between the amount the uninsured person paid and how much providers would have received if the patients had been privately insured.

The researchers used federal health care data to derive the estimate that the nation's uninsured could be covered at an annual cost of about $123 billion, or 5.1 percent of the projected national health care spending for 2008. That estimate shows relatively little change from estimates of the cost of covering the uninsured as a percentage of overall health care spending made by researchers in 2001, who estimated the costs that year at 5.6 percent of total national health spending.

Not Cause of Higher Premiums

Among the findings that differed from those of previous research was the recent study's conclusion that the cost of paying for uninsureds' medical care is not being borne by higher insurance rates for those with insurance. The study estimated that the care provided to the uninsured raises private insurance premiums by 1.7 percent, at most.

“Given the magnitude of government payments, we estimate that cost shifting to private insurance finances a relatively small amount of uncompensated care,” Hadley and colleagues noted.

A 2005 study funded by Families USA estimated that two-thirds of the cost of health care provided to the uninsured is paid through higher insurance premiums.

The cost of the “unfunded” care provided to people without insurance is largely borne by federal, state, and local governments largely through higher taxes. Such government-funded health care was cited in a U.S. Census Bureau report released at the end of August as the reason that the number of uninsured fell in 2007 by 1.3 million to 45.7 million, even as the rate of private insurance dropped.

Cost Savings Could Accrue

The $123 billion estimated annual cost of covering the uninsured—far higher than the $86 billion now spent on health care for the uninsured—is driven by the fact that insured people tend to use more health care services than the uninsured, the authors said. Much of the current massive spending on care for the uninsured is for expensive crisis care.

The researchers suggested that the large cost of covering the uninsured may result in greater savings over the long term, however, due to the improved health of those who would gain insurance. Previous research has shown that the uninsured delay seeking care for treatable conditions that often require more costly care when they progress to an advanced state. Other potential savings could accrue to government health programs such as Medicare. Earlier research estimated that Medicare costs would be lower for new beneficiaries who were previously covered at least in later middle age, compared with new beneficiaries who were uninsured. The money-saving benefit of long-standing insurance coverage is easily underestimated, wrote the authors.

“These sources of financing are less visible and more difficult to measure than the funding for existing programs, but they are no less real and should be taken into account in the policy debate over expanding coverage,” Hadley's group said.

Health care advocates who support universal coverage said that high estimated costs should not deter elected leaders from expanding coverage to all the uninsured. The cost will only rise the longer federal officials wait, because health care inflation will continue to drive up all health care costs, as they have consistently done in recent years.

“Uninsured patients often don't get the preventive care they need, leading to more difficult and more costly conditions to treat,” wrote Nancy Nielsen, M.D., president of the AMA, which has launched a multimillion dollar campaign to encourage elected leaders to find ways to cover the uninsured. “A good first step to address health care costs is to cover all Americans, ensuring they have better access to health care.”

“Covering the Uninsured in 2008: Current Costs, Sources of Payment, and Incremental Costs” is posted at<http://content.healthaffairs.org/cgi/content/full/27/5/w399>.▪