Issue Brief

January 2001

The Uninsured - Why does it Matter?    

By recent estimates there are 42.1 million people in America who do not have health insurance. While that number is down from last year (44 million), it is still very large and represents a significant segment of the population -- one in every seven Americans. Public policy makers and health care leaders have been trying to solve this problem for years and still it persists. Who are the uninsured? Why are there so many? Do they get health care anyway? If so, why should the rest of us worry about it?

I.  Who are the Uninsured?
Two years ago in early November there was an article in the Minneapolis StarTribune that could best be described as a "morning after" article. It was an interview with a major party candidate for governor who had lost. In a particularly revealing comment, he told the interviewer how on the morning after election day, his wife looked at him across the breakfast table and said "...do you realize that come January first we will have no health insurance? You better get a job fast...." What was striking to me about that simple comment was how clearly it describes the American condition today. The vast majority of us are just one job away from being uninsured. Whether rich or poor, powerful or weak, high status or low, most Americans get health insurance through their employment. Unfortunately, the converse of that is not true, and not all working people have health insurance.

The good news is that Census Bureau data released just two months ago shows that for the first time since 1987, the number of Americans without health insurance has declined. The main reason for that is the combination of a good economy and low unemployment. According to the Employee Benefit Research Institute (EBRI), employment-based health insurance increased substantially last year. The likelihood that an adult worker was uninsured declined from 18.1 percent in 1998 to 17.5 percent in 1999. And this improvement in the coverage of working people spilled over into the non-working population as more spouses and children were covered by workers benefits.

Even more striking is the fact that this increase occurred at a time when the cost of health insurance is rising, yet employers did not pass the increased costs of health insurance on to their employees. In fact, there is some evidence that there was a slight reduction in the portion of the premium that workers were required to pay between 1996 and 2000. A recent EBRI survey showed that American workers place an extremely high value on health insurance coverage with sixty-five percent of the respondents saying employment-based health benefits are the single most important work place benefit.

Clearly, our strong economy with its tight labor market gives employers a powerful incentive to provide health insurance. Not only is it popular with workers, but most small employers report that offering health benefits also keeps workers healthy thereby reducing absenteeism and increasing productivity.

The bad news is that even in the face of these strong economic times, we still have more than 40 million people without health insurance. And things may soon get worse because the cost of employer provided health insurance is expected to rise 11% next year. A recently completed survey conducted by William M. Mercer Inc., a New York-based consulting firm, found that two out of five employers plan to increase their employees' health insurance payments. That is twice the rate at which employers shifted insurance cost increases to employees last year.  It is clear from this that employment-based insurance alone cannot cover all Americans. And, government programs are not filling all the gaps.

II.  Why does it matter
There is widespread agreement among the people who study this problem that, even though there is a safety net for health care in most parts of the country, the uninsured receive less health care, lower quality health care, and ultimately experience poorer health outcomes and more expensive health problems. In fact, a recent study in the Journal of the American Medical Association described as “alarmingly large” the number of uninsured adults who do not receive necessary medical care.

The Kaiser Commission on Medicaid and the Uninsured reports that:

1. nearly 40% of the uninsured have no regular source of health care and frequently delay or forego needed health care,
2. at least 30% of uninsured adults failed to fill prescriptions or skipped recommended medical tests or treatments in the past year,
3. the uninsured are hospitalized at least 50% more often than the insured for avoidable conditions such as pneumonia and uncontrolled diabetes, and;
4. because they don't receive regular preventive care, are more likely to be diagnosed in the late stages of cancer and more likely to die from it.

Further, although there has been a great deal of emphasis on providing care to children, the Kaiser Commission reports that uninsured children are 70% more likely than insured children not to receive care for common childhood conditions like ear infections. Even the chances of receiving medical attention for injuries are about 30% lower for uninsured children than for those who have insurance. In fact, the Committee on Children, Health Insurance, and Access to Care established by the Institute of Medicine and the National Research Council of the National Academies found that . . . “insurance coverage is the major determinant of whether children have access to health care.”

The human misery and pain experienced by the uninsured is profound. Having more than 40 million people without health insurance has a negative effect on many institutions including health care providers, businesses, and local communities, but the most serious impact is on the uninsured themselves. For a revealing look at how not having health insurance affects the daily lives of several individuals see, "In Their Own Words: The Uninsured Talk About Living Without Health Insurance". This report, released by the Kaiser Commission on Medicaid and the Uninsured, is on the web at www.kff.org.

III  What does the government do?
It has always been the case that our private system of employer-sponsored health insurance could not cover all people. Older retired people and younger people unable to work do not fit into the system. And many small employers do not have the resources to offer health insurance to their employees at a price they can afford. Recognizing this reality, thirty-five years ago Congress created the Medicare and Medicaid programs to help reach millions of Americans who were not covered by employer-sponsored health insurance.

Medicare was designed to meet the needs of the older population and has been remarkably successful and popular. It has resulted in almost universal coverage of people over 65, which is why most studies and discussions about the uninsured devote all their attention to the population under that age.

Medicaid was created to insure younger people receiving general welfare. In the late 1980's the program was expanded to cover more of the poor and near-poor children but it was still rooted in the welfare system. It was never a major source of support for low-income working people.

One of the reasons for the increased number of uninsured people in the late 90's was the dramatic change in the welfare system. The enactment of welfare reform in 1996 generated a great deal of confusion and unintentionally affected the Medicaid enrollment process. As people moved from welfare to work, many of them lost their Medicaid coverage even though they still qualified. When they left the welfare system they automatically fell out of the Medicaid program and many didn't know they could get back into it.

In 1997, Congress made an effort to remedy the health coverage problems they had created in their welfare reform package. A new program to provide health insurance coverage for low-income children called the Children's Health Insurance Program (CHIP) was passed. This program gives grants to states to expand the coverage of children and all 50 states have responded by adopting a plan.

Several states, including Minnesota, already had programs to expand health insurance coverage for children so they have not benefited as much as some other states from the federal program. According to the Minnesota Department of Health, 95.7% of Minnesota children under the age of 18 were covered with health insurance in 1995 and the state's goal is to achieve 100% coverage by the year 2004. It is laudable that states such as Minnesota are channeling their own resources into solving this problem. But it also seems unfair that these taxpayers are asked to stretch themselves to cover what is essentially a national problem at home, while at the same time they are asked to subsidize federal efforts to care for the uninsured elsewhere.

In addition to the commitments the federal government makes to public insurance programs such as Medicare, Medicaid and CHIP, it also provides strong health insurance for its own employees (both civilian and military), subsidizes the private insurance system through the tax code, and provides comprehensive health care systems for veterans and Indians through the Department of Veterans Affairs Health System and the Indian Health Service.

After all these efforts and assuming ambitious plans in the states to cover all children succeed, we still have more than 30 million uninsured adults between 18 and 65. According to most analysts more than half of these people live in households with at least one worker. And, many people who currently have insurance could become uninsured if they lose or change jobs or their insurance becomes too costly. Clearly, the combination of employer-sponsored insurance and government insurance isn't doing the job.

IV.  Conclusion
Now there is evidence that the problem is getting worse as hospitals from Boston to San Francisco regularly turn down ambulances because their emergency rooms are overcrowded. According to the New York Times, ambulance diversions are becoming common across the country.

Until now, providers have managed to care for everyone. When the uninsured didn't have a doctor or clinic, they could get treated in an emergency room. If emergency rooms continue to be overloaded all patients will suffer but the uninsured, who frequently experience serious problems that could have been solved with appropriate primary care, will suffer most.  I believe health care should be a basic right of all Americans. Since access to health care requires insurance, either public or private, it seems to me we should find a way to give everyone the opportunity to get health insurance. If they choose not to avail themselves of it that is their responsibility, but we should come up with some way to provide the opportunity. So far we have been unable to do this.

As a country we are spending significant sums of money on health care, by recent estimates close to 14 percent of our GDP. I don't know if that is the appropriate amount, but I am convinced there are many inefficiencies in our health care spending. If we could rearrange the way we use some of these resources, I believe we could design a system that provides all Americans with the opportunity to have basic health insurance.

Clearly, we need to learn more to find out why this problem is so intractable. On that front, the School of Public Health at the University of Minnesota has a new $4 million research center in its Division of Health Services Research and Policy. This center, named the State Health Access Data Assistance Center (ShaDAC), is funded by a three-year grant from the Robert Wood Johnson Foundation. It will use expertise developed in Minnesota to help states collect data that can be used to understand and solve problems of access. According to the University, this represents the country's first systematic effort to support state-level measurement and evaluation of health care access.

The Institute of Medicine (IOM) has also recently started work on a three-year initiative on the uninsured entitled "The Consequences of Uninsurance." The IOM says it project has two overarching objectives. The first is to assess and consolidate evidence as to the health, economic, and social consequences of uninsurance on all involved. The second is to raise awareness and improve understanding by both the general public (especially opinion leaders) and specific stakeholders about the magnitude of the problem.

I hope the work done at the U of M and IOM will provide the information and impetus needed to help us solve this problem. If you would like more information on these endeavors you may find it on the web at www.hsr.umn.edu/shadac for the U of M work and at www.iom.edu for the IOM study.