Hidden Costs, Value Lost Uninsurance in America (2003) / Chapter Skim
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2. Costs, Benefits, and Value: Context, Concepts, and Approach
2. Costs, Benefits, and Value: Context, Concepts, and Approach
Pages 20-37
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From page 20... ...
Its findings in previous reports both establish the context for and serve as points of departure for the analysis of costs and benefits presented here. The following are several of the important insights gained from the Committee's earlier work: · Health insurance is more than a mechanism for spreading financial risks; it also promotes appropriate use ofpreventive and routine health care services that otherwise may be underutilized (IOM, 2002a,b)
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From page 21... ...
considers the features of health insurance that account for its value as an economic and social good and thus illuminate the costs incurred when all members of society do not have it. The Societal Perspective In this report the Committee explicitly takes a broad societal perspective in assessing the performance of the private and public economic resources devoted to health care, health insurance, and alternative uses for these resources.
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From page 22... ...
The outcomes, which ultimately result from individual health insurance status and coverage rates within communities, cascade from the individual and family to the community level. Figure 2.1 illustrates the conceptual framework, and the right side of the diagram includes the three main consequences of uninsurance examined in this report: · The economic costs (worse health, developmental, and functional outcomes for children and adults)
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From page 24... ...
Additionally, private and public coverage afford enrollees some degree of peace of mind in the knowledge that care that might be needed at some future time will be accessible and affordable. The following discussion compares and contrasts the features and aspects of value of private health insurance and public coverage through social insurance and social welfare programs.
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From page 25... ...
Premiums for private health insurance must reflect average spending by enrollees, so in most years, people get back less than the full premium payment, but those with major illness benefit from coverage of expenses that may be well in excess of their annual income. One feature of insurance that affects the operation and costs of health coverage is moral hazard, a term coined by the insurance industry to describe increases in the use of insured goods or services because covered individuals are not directly or fully financially liable when they use services.
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From page 26... ...
health care, it is available to us then (Glied and Remler, 2002~. In addition to costs of care following acute crises to apparently healthy people, such as a heart attack or a car crash, other health care costs are predictably larger for some people, such as those with one or more chronic conditions.
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From page 27... ...
Public Coverage Health benefits are provided publicly through both social insurance and social welfare programs. Social insurance programs typically operate through public taxation and public spending.
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From page 28... ...
also became an entitlement for uninsured, Medicaid-enrolled, and other lower-income and underinsured children as part of Title 19 of the Social Security Act, a notable broadening of the Medicaid statute Johnson et al., 2000; Rosenbaum, 2000~. The motivation for and commitment to providing public support for children's health coverage include both the recognition by federal and state legislators that children are a particularly vulnerable population who would suffer great harm over their lifetime without adequate health care and that the health and optimal development of children is an investment in the nation's human capital, just as is public investment in their primary and secondary education.
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From page 29... ...
The remainder of the section describes the classifications. Cost-of-illness studies, which estimate the total value of resources expended as a result of the incidence or prevalence of a particular health condition, typically distinguish direct medical costs incurred from other costs, such as losses of productivity and premature death.
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From page 30... ...
External Costs (to society) Health Care Service Costs · Out-of-pocket expenditures for health care services · Expenditures for uncompensated care (primarily transfer costs)
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From page 31... ...
the resources that would be needed to provide the currently uninsured population with the amount and kind of health care that those with either public or private coverage now use. It is important to keep in mind that imputing a monetary value to the reduced health and life expectancy that accompanies being uninsured is a different kind of analytic exercise from the calculation of actual expenditures incurred (or projected to be incurred)
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From page 32... ...
Analogous to education in the human capital model, an investment in health care in the health capital model adds to one's stock of health, increasing time spent in a healthier state than otherwise. Both human capital and health capital are analytic constructs based on the concept of personal utility in welfare economics.
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From page 33... ...
Estimating the value of a healthy life using human capital methods has two major problems. First, people value healthy life years for more reasons than their ability to earn income (Cutler and Richardson, 1997, 1999~.
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From page 34... ...
Although people are willing to pay substantial amounts for small reductions in risk, by buying smoke detectors or bicycle helmets (even if not required to by law) , because of limits on their income they would not be able to "scale up" these amounts for slightly better health and safety in a statistical sense to the value equivalent that represents the value of their entire remaining life.
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From page 35... ...
The particular perspective adopted determines how the information is interpreted and should be used. The Committee's Approach to Valuing Health Capital The version of health capital analysis employed here takes a comprehensive and egalitarian approach to constructing the value of life years in a particular health state by extending the value of life years beyond their potential for income production and by nominally assigning each person the same value for every year of life in perfect health.
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From page 36... ...
The Committee believes that its estimation of the health capital forgone takes a justifiedly narrow and conservative approach to quantifying societal costs and probably underestimates the value lost through uninsurance. The potential for economy-wide and employer-specific costs are discussed qualitatively, but are not quantified in monetary terms.
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From page 37... ...
The Committee presents these projections in order to compare the value of statistical healthy life years that would be gained by uninsured individuals if they were to acquire lifelong health insurance coverage in terms of the costs of additional services that would allow them to achieve better health. Finally, this report and the estimates and analyses it contains are initial efforts at developing an integrated and coherent framework for evaluating a variety of economic costs attributable to the lack of health insurance across the U.S.
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