News Release
EMBARGOED for release
Wednesday, March 31, 2004, 12:01 a.m. EST
 

Contacts:
Jon Gardner (March 31)
301-347-3930
jgardner@projecthope.org


Rob Cunningham (March 26-29)
301-347-3910
rcunningham@projecthope.org

 


New Health Affairs Papers Compare The Costs
Of Universal Coverage With The Social Costs Of Uninsurance

Pros And Cons Of Different Universal Coverage Plans Debated:
Can The Federal Government Achieve It; Should It Be Left To The States?


BETHESDA, MD — Universal health insurance coverage may cost society less than the economic losses related to uninsurance. But achieving universal coverage is politically challenging because it is likely to entail a redistribution of benefits, and the best way to proceed may be to allow states to experiment with new programs.

These are the findings of a series of papers published today on the Health Affairs Web site that explore the issues surrounding the release of the final report of the Institute of Medicine (IOM) Committee on the Consequences of Uninsurance. As discussed in these papers, the IOM committee concluded that the economic loss related to 44 million Americans’ lack of health insurance coverage is $65-$130 billion a year, more than the estimated $34-$69 billion it could cost to provide the uninsured with the kind and amount of health care enjoyed by those with coverage.

They also suggest four scenarios for expanding coverage: an incremental plan extending current state programs and offering tax incentives to buy insurance; an employer mandate with expanded public programs for those not covered through work; individual mandates with tax subsidies; and a government single-payer plan.

In the first paper, Wilhelmine Miller, an IOM senior program manager, and colleagues detail how uninsurance results in hidden social costs, such as higher disease and death rates for uninsured people, use of family assets to pay for health care, loss of income when a breadwinner is in ill health, and productivity losses for employers with sick workers.

But because those costs are hidden, they are rarely considered by either private-sector decisionmakers or policymakers when deciding whether to try to expand health insurance coverage, according to Miller and colleagues.

“The costs and benefits of health insurance are so fragmented and variable that even within the class of employers or that of workers, the net benefit of coverage that occurs in the aggregate may not be realized by the subgroup,” Miller says.

On the government side, she says, “Policymakers at all levels of government are understandably concerned with reconciling program spending with revenues collected. Federal policymakers in particular, however, should supplement their customary budgetary view to take in the full picture of the societal costs and benefits of alternative national coverage scenarios.”

Miller’s coauthors were Elizabeth Vigdor, an assistant professor of public policy studies at Duke University, and Willard Manning, a professor at the University of Chicago.

In an accompanying commentary, Joseph Newhouse, a Harvard University professor, and Robert Reischauer, president of the Urban Institute, say that the IOM committee’s incremental scenario is the most likely to be enacted but the least likely to accomplish universal coverage. They outline the barriers that would be faced by the three remaining IOM prototypes for achieving universal coverage: benefits and geographic cost disparities.

Under any of those three approaches, for example, if the uninsured were given an average insurance policy, the costs of providing this coverage would be an additional cost that the IOM did not factor into its assessments. That is because those now with below-average coverage would also have to have their benefits improved to that of an average insurance policy. And if the uninsured were give a less-than-average policy, the health gains the IOM committee estimates would be diluted.

The geographic variation in health costs mean that a subsidy or tax credit of a given amount would buy less incremental coverage in high-cost areas than in low- or average-cost areas. Although subsidies could, in principle, be made larger in high-cost areas, the politics of doing so are difficult, as illustrated by the geographic variation in payments in the Medicaid and Medicare programs.

“Any universal insurance plan will increase the amount of redistribution from the healthy to the sick, from higher-income to lower-income households, across workers at different firms and possibly within a firm according to their current health benefits, and between owners of different businesses,” Newhouse and Reischauer write. “The U.S. political system tends to resist increased redistribution, particularly when it creates identifiable losers, precisely the reason an incremental approach is attractive.”

In a third paper, Henry Aaron, a senior fellow in health economics at the Brookings Institution, and Stuart Butler, vice president for domestic and economic policy studies at the Heritage Foundation, argue in favor of giving the states wide leeway to experiment on approaches to achieve universal coverage, with the federal government offering financial support and a legal framework.

The Miller paper can be read at http://content.healthaffairs.org/cgi/content/abstract/hlthaff.w4.157.
The Newhouse/Reischauer paper can be read at http://content.healthaffairs.org/cgi/content/abstract/hlthaff.w4.179.
The Aaron/Butler paper can be read at http://content.healthaffairs.org/cgi/content/abstract/hlthaff.w4.168.

Health Affairs, published by Project HOPE, is a bimonthly multidisciplinary journal devoted to publishing the leading edge in health policy thought and research.


©2004 Project HOPE–The People-to-People Health Foundation, Inc.