Hidden Costs, Value Lost Uninsurance in America (2003) / Chapter Skim
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4. Other Costs Associated with Uninsurance
4. Other Costs Associated with Uninsurance
Pages 62-94
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From page 63... ...
The Committee has developed quantified estimates only for two kinds of internal or private opportunity losses: the worse health attributable to lacking coverage and the financial "exposure" faced by uninsured individuals that would be eliminated by health insurance. The Committee reserves one important, noneconomic opportunity loss for consideration in Chapter 6.
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From page 64... ...
The third section reviews findings from Health Insurance Is a Family Matter on children's health and developmental outcomes as they depend on receipt of adequate services facilitated by insurance coverage. The fourth section looks at the implications of uninsurance for public program spending, including those that represent economic transfers as well as those that entail real resource costs.
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From page 65... ...
Most of the benefits that can be expected to accrue to uninsured individuals themselves if they were to gain health insurance, including increased productivity and labor force participation, and improved developmental outcomes among children (with whom the formation of human capital begins) , are represented in the single estimate of gains in health capital.
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From page 66... ...
However, these two studies' results are reinforced by multiple crosssectional studies of disease and condition-specific mortality rates as a function of health status that are also part of the literature review, and the Committee believes this assumption is reasonable. Estimating Health Capital In her analysis, Vigdor uses alternative assumptions that bound the range of likely values of health capital.
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From page 67... ...
If unmeasured personal characteristics account for some of the mortality differential, this would lower the estimate of health capital attributable to health insurance. On the other hand, several disease- and condition-specific outcomes studies, including studies of breast and prostate cancer and HIV infection report higher mortality differentials (Ayanian et al., 1993; Lee-Feldstein et al., 2000; Roetzbeim et al., 2000a,b; Goldman et al., 2001~.
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From page 68... ...
In contrast, the health capital gain per year of additional insurance for a newborn boy (discounted to present value at 3 percent per year) ranges from $1,200 to $2,800, and for a newborn girl the gain is between approximately $750 and $2,300.2 It is important 2These values are presented in Tables B.9 and B.10 in Appendix B
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From page 69... ...
Aggregating over the population of uninsured individuals (40 million individuals x $1,645 or $3,280) , the annualized value of health capital lost through uninsurance is in the range of $65-$130 billion.
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From page 70... ...
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From page 71... ...
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From page 72... ...
The Subcommittee on the Societal Costs of Uninsured Populations followed the methodology of Buchanan and colleagues to construct an estimate of the value of the risk borne by the uninsured.3 The insurance value of coverage was estimated by applying a constant relative risk aversion parameter (0.00024) to the reduction in the variance of out-of-pocket spending obtained through insurance coverage.4 While risk reduction is one consideration in valuing health benefits, it turns out to have a small value for those without health insurance because of the kinds of outof-pocket costs the uninsured actually pay.
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From page 73... ...
The impermanence of health insurance coverage not only exacts costs in terms of disruptions in care and exposure to financial risks, it distorts personal choices about employment (including those about retirement and changing jobs) , affects whether children participate in school sports (both schools and parents may prohibit uninsured children from playing)
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From page 74... ...
The Committee concluded in Health Insurance Is a Family Matter that children who do not have health insurance have less access to health care and use appropriate, recommended medical and dental care less than do children who have coverage. As a result, uninsured children often receive care late in the development of a health problem or do not receive any attention for problems that could be resolved or ameliorated with prompt attention (IOM, 2002b)
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From page 75... ...
Coarctation of the aorta, a relatively common congenital cardiovascular malformation that can be treated with surgery or medical management, is one condition for which outcomes have been found to differ starkly for insured and uninsured infants. One study reported that infants with this condition who did not have health insurance coverage were more likely to die, in part but not solely due to a failure to identify the condition timely (33 percent compared with 3.8 percent of children with any kind of health insurance)
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From page 76... ...
Recent studies of the impact of improved health on Medicare expenditures have found that healthier people have similar discounted costs over their remaining lifetime to sicker people because the savings from reduced expenditures with good health in the years before death and from postponing the high costs associated with death are large enough to pay for medical care in the additional years (Singer and Manton, 1998~. Likewise, the Committee has not included in its estimates of increased health capital changes beyond age 65.
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From page 77... ...
who enter the Medicare program (Obrador et al., 1999; Kausz et al., 2000) , uninsured persons gaining Medicare coverage at age 65 use health care services more intensively and incur program costs higher than they would have had they been continuously insured prior to age 65.
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From page 78... ...
The authors also present an alternative but compatible hypothesis to explain increasing rates of reported disability: changing incentives for disability insurance claims. The Committee has not attempted to calculate what proportion of disability income support payments might be avoided with universal health insurance coverage of the population under age 65.
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From page 79... ...
Ironically, contact with the criminal justice system increases the chances that someone with a severe mental illness will receive specialty mental health care services (McAlpine and Mechanic, 2000~. A position statement of the Bazelon Center for Mental Health Law on criminalization of people with mental illnesses argues as follows: Perversely, the drift of people with mental illnesses into criminal justice has benefited public mental health systems by shifting their financial burden for "hard to serve" groups to the budgets of state corrections departments.
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From page 80... ...
Although the Committee has for the most part adopted the societal perspective in this report, the motivations of and incentives facing employers and employees are important for understanding labor market outcomes involving health insurance and for evaluating alternative policy reforms for the financing and organization of health insurance coverage. The first section considers workforce participation and the productive capacity of the workforce overall as it is related to health and functional status.
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From page 82... ...
among countries, the authors concluded that relative longevity has a positive and substantial effect on aggregate output and economic growth, with a one-year improvement in life expectancy contributing to a 4-percent increase in aggregate national output. Although this study tells us nothing about impacts of health insurance coverage per se, it suggests that not only direct but also spillover productivity effects can be investigated.
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From page 83... ...
Would these benefits accrue to other employers that currently do not offer health insurance if they were to provide health benefits? Box 4.5 describes recent trends in employment-sponsored health insurance.
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From page 85... ...
Having health insurance as part of the offered wage may help employers to attract employees more easily. However, employment situations that provide health insurance benefits may attract workers in relatively worse health or those with sick dependents, which can increase an employer's group premium rate.
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From page 86... ...
If longterm health gains can be realized from having health insurance, the benefits would only accrue to the employer if employees were retained for a number of years. Employers that experience relatively high turnover in their workforce would likely continue to do so even if they offered health insurance coverage (Buchmueller, 2000~.
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From page 87... ...
That is, ill workers have fewer days absent if they receive medical attention, which requires taking time off from work, and they are more likely to receive medical attention if they have health insurance. Health insurance coverage and sick leave benefits together, however, increase both the number of workers taking sick days and the number of sick days taken (Gilleskie, 1998~.
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From page 88... ...
Although this field of inquiry is promising, it has little to contribute at this time to informing an employer's decision to offer workers health insurance benefits. The benefits of having healthier workers may include reductions in other labor costs, especially long-term and short-term disability insurance rates and workers compensation costs.
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From page 89... ...
In this section, the Committee summarizes its findings, presented in A Shared Destiny: Community Effects of Uninsurance, regarding two aspects of health care services that are adversely affected by uninsurance: the availability and quality of personal health care services within communities and the ability of public health agencies to perform their core mission of protecting population health. Access to and Quality of Health Care As discussed in Chapter 3, health care practitioners and institutions provide substantial amounts of uncompensated care to uninsured patients.
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From page 90... ...
A Shared Destiny assesses available evidence about what happens, and lays out the Committee's hypotheses about what reasonably can be expected to happen within communities when one factor, the local rate of uninsurance, is relatively high or rising. This section reviews the findings from that report and suggests how health insurance coverage for the whole population could improve the availability and quality of health care within communities.
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From page 91... ...
Universal health insurance coverage could be expected to reinforce the health services
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From page 92... ...
. Health departments in communities with higher uninsured rates, however, are also likely to face higher demands to provide personal health services to uninsured persons, in their role as providers of last resort.
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From page 93... ...
The diversion of resources from communicable disease control to the provision of personal health care services to uninsured and other medically indigent residents has been cited by health department officials as likely to result in increased numbers of persons with tuberculosis (Getter, 2000~. The diversion of resources from public and population health activities to personal health care for uninsured persons is particularly dangerous because this frequently occurs without explicit public knowledge or endorsement, but rather as the result of ad hoc resource management decisions within state and local health departments (Fairbrother et al., 2000; IOM, 2003b)
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From page 94... ...
94 HIDDEN COSTS, VALUE LOST: UNINSURANCE IN AMERICA The following chapter presents estimates of the resources that would be needed to increase the health services utilization of uninsured children and adults to the levels used by their insured counterparts. These estimates of resource demands will be used in the concluding chapter, along with the estimates of the value of forgone healthy life years presented in this chapter, to consider the costeffectiveness of providing health insurance to those currently uninsured.
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