1Why Health Insurance Matters
The Institute of Medicine (IOM) Committee on the Consequences of Uninsurance launches an extended examination of evidence that addresses the importance of health insurance coverage with the publication of this report. Coverage Matters is the first in a series of six reports that will be issued over the next two years documenting the reality and consequences of having an estimated 40 million people in the United States without health insurance coverage. These reports will examine the implications of lacking health insurance for those without it, for their families, for communities in which a substantial number of people are uninsured, and for this country as a whole.
The Committee will look at whether, where, and how the health and financial burdens of having a large uninsured population are felt, taking a broad perspective and a multidisciplinary approach to these questions. To a great extent, the costs and consequences of uninsured and unstably insured populations are hidden and difficult to measure. Financial costs incurred by those without coverage may be covered by payments for the health care of those with insurance or paid by charities and taxpayers, and the health effects may be absorbed by families in the form of diminished physical and psychological well-being, productivity, and income.
The goal of this series of studies is to refocus policy attention on a longstanding problem. Following the longest economic expansion in American history, in 1999, an estimated one out of every six Americans—32 million adults under the age of 65 and more than 10 million children—remains uninsured (Mills, 2000). A better understanding of the consequences of existing policies and health care financing arrangements should reinvigorate discussions of the issue of coverage and better equip us to design and evaluate policy initiatives and proposed reforms intended to address this problem.
The Committee’s charge is to communicate to the public and policy makers analytical findings about the meaning of a large uninsured population for individuals, families, and their communities, as well as for society as a whole. Its reports should contribute to the public debate about insurance reforms and health care financing by assessing the theoretical and empirical research in health services, medicine, epidemiology, and economics that bears on the effects of lacking health insurance. It is not within the scope of this project to develop or advocate for a specific set of reforms or policies.
The goal of this first report is to provide background for the findings and conclusions that the Committee will present in subsequent reports about the consequences of uninsurance by including common definitions and an overview of the dynamics of health insurance coverage. This report addresses the extent to which Americans are without coverage, identifies social, economic, and policy factors that contribute to the existence and persistence of an uninsured population in the United States, and reports the probability for members of various population groups of being uninsured. In addition, it introduces a conceptual framework that models how health insurance affects access to health care services and, through such access, affects health and economic well-being. This framework will guide the analysis in succeeding reports in the series and will be modified to address each report’s set of topics.
OBJECTIVES OF HEALTH INSURANCE COVERAGE
Despite extensive reporting of survey findings and health care research results, the general public remains confused and misinformed about Americans without health insurance and the implications of lacking coverage. This section presents basic information about health insurance and who lacks it in the context of several pervasive popular myths. Without question, the complexity of American health care financing mechanisms and the wealth of sources of information add to the public’s confusion and skepticism about health insurance statistics and their interpretation. This report and those that will follow aim to distill and present in readily understandable terms the extensive research that bears on questions of health insurance coverage and its importance.
Myth: Uninsured people get health care when they really need it. Fifty-seven percent of Americans polled in 1999 believed that those without health insurance are “able to get the care they need from doctors and hospitals” (Blendon et al., 1999, p.207). In 1993, when national attention was focused on the problems of the uninsured and on pending health care legislation, just 43 percent of those polled held this belief (Blendon et al., 1999).
Reality: The uninsured are much more likely to forgo needed care (Schoen and DesRoches, 2000). They also receive fewer preventive services and are less likely to have regular care for chronic conditions such as hypertension and diabetes. Chronic diseases can lead to expensive and disabling complications if they are not well managed (Lurie et al., 1984; Lurie et al., 1986; Ayanian et al., 2000). One national survey asked more than 3,400 adults about 15 highly serious or morbid conditions. Of those reporting any such symptoms (16 percent of those surveyed), and with adjustment for demographic and economic characteristics, health status, and a regular source of care,1 an uninsured person was far less likely than someone with insurance to receive care for the reported condition (odds ratio =0.43) (Baker et al., 2000). Additional evidence is presented later in this chapter in the discussion of insurance and access to health care.
Myth: People without health insurance are young and healthy and choose to go without coverage. Almost half (43 percent) of those surveyed in 2000 believed that people without health insurance are more likely to have health problems than people with insurance. About as many (47 percent) thought the likelihood of health problems is about the same for insured and uninsured people (NewsHour-Kaiser, 2000). Voters and policy makers in focus group discussions characterize those without insurance as young people who have the opportunity to be covered and feel they do not need it (Porter Novelli, 2001).
Reality: Compared to those with at least some private coverage, the uninsured are less likely to report being in excellent or very good health (Agency for Healthcare Research and Quality, 2001). In contrast, people reporting excellent or very good health are more likely to be insured. Among those under age 65 who are in fair or poor health, nearly one in five lacks health insurance (Rhoades and Chu, 2000). Of young adults (ages 19–34 years) in poor health, 16 percent are uninsured and 27 percent of those reporting fair health status are uninsured (Figure 1.1) (Agency for Healthcare Research and Quality, 2001).
FIGURE 1.1
Probability of being uninsured for young adults, ages 19 to 34 years, by self-reported health status, 1999. SOURCE: Center for Cost and Financing Studies, Agency for Healthcare Research and Quality, based on MEPS data.
Young adults between 19 and 34 are far more likely to lack health insurance than any other age group. This is chiefly because they are less often eligible for employment-based insurance due to the nature of their job or their short tenure in it. They are also more likely than older adults to be in excellent or very good health and consequently may forgo the cost of workplace coverage if it is offered. Turning down a ‘workplace offer is not, however, a significant factor in explaining their lack of coverage. Younger workers accept workplace offers of coverage more often than not, and only 4 percent of all workers between 18 and 44 years of age, roughly 3 million, are uninsured after turning down workplace insurance (Custer and Ketsche, 2000b). Another 11 million uninsured workers between the ages of 18 and 44 (15 percent) hold jobs that do not include an offer of coverage.
The perception that people without insurance have better-than-average health follows from confusing the relatively young age profile of the uninsured with the better health, on average, of younger persons. This obscures the link between health status and health insurance. For those without access to workplace health insurance, poor health is a potential barrier to purchasing nongroup coverage because such coverage may be highly priced, exclude preexisting conditions, or be simply unavailable. Older women (55–64 years) in the work force are especially at risk of being uninsured for this reason: 23 percent of those in good, fair, or poor health have no coverage compared to 10 percent of those in excellent or very good health (Monheit et al., 2001).
Myth: The number of uninsured Americans is not particularly large and has not changed in recent years. Seven out of ten respondents in a nationally representative survey thought that fewer Americans lacked health insurance than actually do (Fronstin, 1998). Roughly half (47 percent) believed that the number of people without health insurance decreased or remained constant over the latter half of the last decade (Blendon et al., 1999).
Reality: During 1999, an estimated 42 million people in the United States lacked health insurance coverage (Mills, 2000). This number represents about 15 percent of a total population of 274 million persons. According to Census Bureau statistics, the number of Americans under age 65 without health insurance grew from 39 million (17 percent of the population under age 65) in 1994 to 44 million (18 percent) in 1998, before falling to 42 million (17 percent) in 1999 (Fronstin, 2000d). This drop of almost 2 million in the number of people ‘without insurance (a reduction of about 4 percent) is certainly a positive change. With a softer economy in 2000 the latest reported gains in insurance coverage may not continue (Fronstin, 2001). The decline in the number of uninsured will not continue if the economy remains slow and health care costs continue to outpace inflation. Due to the lag in measurement and reporting, however, the Census Bureau estimate of health insurance coverage for 2000 may show a further decline in the uninsured rate. This is because the data were collected for a period of strong economic performance.
Of the estimated 42 million people who were uninsured, all but about 420,000 (about 1 percent) were under 65 years of age, the age at which most Americans become eligible for Medicare;2 32 million were adults between ages 18 and 65, about 19 percent of all adults in this age group; and 10 million were children under 18 years of age, about 13.9 percent of all children (Mills, 2000). Throughout this report, the discussion focuses on these uninsured working-age adults and children.
These estimates of the number of persons uninsured are generated from the annual March Supplement to the Current Population Survey (CPS), conducted by the Census Bureau. Unless otherwise noted, national estimates of people without health insurance and proportions of the population with different kinds of coverage are based on the CPS, the most widely used source of estimates of insurance coverage and uninsurance rates. Seven different governmentally and privately sponsored surveys can, however, be used to make nationally representative estimates of the number of people without health insurance. These surveys and the estimates they yield are described briefly in Table B.1 in Appendix B. These surveys differ in size and sampling methods, the questions that are asked about insurance coverage, and the time period over which insurance coverage or uninsurance is measured (Lewis et al., 1998, Fronstin, 2000a). Each survey produces a different estimate of the number of Americans without insurance. The estimates range from 32 million (e.g., Medical Expenditure Panel Survey, 1996, uninsured throughout the year) to 42 million (CPS, 1999, uninsured throughout the year).3
The CPS has been criticized for producing estimates of persons uninsured throughout the year that are too high and probably reflect periods without insurance of less than a full year as well as underreporting of Medicaid coverage (Swartz, 1986; Lewis et al., 1998; Fronstin, 2000a). The Census Bureau has recently revised its survey questionnaire to include an additional question verifying that the respondent means to report lack of coverage over the entire previous year (see Appendix B for further explanation). Still, the CPS is especially useful because it produces annual estimates relatively quickly, reporting the previous year’s insurance coverage estimates each September, and because it is the basis for a consistent set of estimates for more than 20 years, allowing for analysis of trends in coverage over time. For these reasons, as well as the extensive use of the CPS in other studies of insurance coverage that are presented in this report, we rely on CPS estimates, with limitations noted. The Committee finds the variation among estimates of the number of persons uninsured produced by the different surveys less critical to its analysis than the order of magnitude of the range of estimates that these surveys yield.
The estimate of the number of uninsured people expands when a population’s insurance status is tracked for several years. Over a three-year period beginning early in 1993, 72 million people, 29 percent of the U.S. population, were without coverage for at least one month. Within a single year (1994), 53 million people experienced at least a month without coverage (Bennefield, 1998a).
Myth: Most people who lack health insurance are in nonworking families. An April 2000 national telephone survey by the NewsHour with Jim Lehrer-Kaiser Family Foundation found that 57 percent of the adults polled believed that most people without health insurance were unemployed or from families with unemployed adults (News Hour—Kaiser, 2000). Other surveys report comparable findings (Blendon et al., 1999; Wirthlin Worldwide, 2001).
Reality: More than 80 percent of uninsured children and adults under the age of 65 live in working families. Six out of every ten uninsured adults are themselves employed. Although working does improve the likelihood that one and one’s family members will have insurance, it is not a guarantee. Even members of families with two full-time wage earners have almost a one-in-ten chance of being uninsured (9.1 percent uninsured rate) (Hoffman and Pohl, 2000). See Chapter 3, especially Figures 3.1 and 3.2, for further details.
Myth: New immigrants account for a substantial proportion of people without health insurance. One analysis has attributed a significant portion of the recent growth in the size of the U.S. uninsured population to immigrants who arrived in the country between 1994 and 1998 (Camarota and Edwards, 2000).
Reality: Recent immigrants (those who came to the United States within the past four years) do have a high rate of being uninsured (46 percent), but they and their children account for just 6 percent of those without insurance nationally (Holahan et al., 2001). In fact, there has been a net decrease in the number of recently arrived immigrants since 1994 (Holahan et al., 2001). Overall, noncitizens account for fewer than one in five uninsured persons (Mills, 2000).
Myths and Policy Making
Popular confusion about the facts of health insurance coverage and its importance can hamper effective policy making, as can policy makers’ uncertainty about the interpretation of coverage trends and consequences. This report and those that will follow aim to provide reliable information, useful to both the public and policy leaders—legislators, employers, program managers—as they meet the ongoing challenges of financing health care.