Uninsured spend $30 billion out of pocket for health care

Americans who lack health insurance for any part of 2008 will spend $30 billion out of pocket for health services and receive $56 billion in uncompensated care while uninsured. Government programs pay for about three-quarters, or roughly $43 billion, of the uncompensated care bill, researchers report in today's Web Exclusive edition of Health Affairs. The researchers define uncompensated care as care received but not paid for fully by the uninsured or by a health insurer.

Although covering the uninsured will undoubtedly cost the federal government more, some of the costs could be offset by redirecting the nearly $43 billion that governments currently spend to subsidize the uninsured's uncompensated care, say researchers Jack Hadley of George Mason University and John Holahan, Teresa Coughlin, and Dawn Miller of the Urban Institute. This spending includes roughly $18 billion in special payments to hospitals by Medicare and Medicaid; $15 billion in tax appropriations and indigent care programs by state and local governments; and almost $10 billion in spending by the Veterans Health Administration, the Indian Health Service, community health centers, and similar direct care programs. However, the authors note that redistributing these dollars is unlikely unless universal coverage is achieved.

"From society's perspective, covering the uninsured is still a good investment. Failure to act in the near term will only make it more expensive to cover the uninsured in the future, while adding to the amount of lost productivity from not insuring all Americans," said Hadley, a professor and senior health services researcher at George Mason University and the study's lead author.

Compared to people who have full-year private health care coverage, people who are uninsured for a full year receive less than half as much care as the insured but pay a larger share out of pocket, the authors report. Someone who is uninsured all year pays 35 percent ($583) out of pocket toward their average annual medical costs of $1,686 per person. In contrast, annual medical costs of the privately insured average $3,915, with $681, or 17 percent, paid out of pocket.

"The uninsured receive a lot less care than the insured, and they pay a greater percentage of it out of pocket. Contrary to popular myth, they are not all free riders," Hadley said.

If all of the people who will be uninsured for all or part of 2008 were to gain health coverage, their access to medical care would improve considerably, and they would seek and receive more care, according to the researchers. The researchers estimated that the uninsured would increase their medical spending, putting them nearly on par with the privately insured. Total medical spending for the uninsured would increase by $122.6 billion -- an amount equal to about 5 percent of current national health spending.

The researchers emphasize that the increased spending represents the cost of the additional medical care the uninsured would receive, rather than either the cost of a specific reform proposal or the cost to the government. The increase in spending on the uninsured is larger than earlier estimates from 2001 because of the growth in the number of uninsured people, a very high rate of medical care cost inflation, and changes in the characteristics of the uninsured. In 2008, more of the uninsured lacked coverage for a full year and were older adults in fair or poor health than was the case in 2001.

To estimate the uninsured's current medical care use and financing, the researchers examined adjusted data from more than 102,000 people in the 2002-2004 Medical Expenditure Panel Surveys (MEPS). Separately, they examined information from health care provider surveys and budget and program data from Medicare, Medicaid, and other government programs that serve the uninsured. The authors also included spending and coverage estimates for those who are insured for part of the year.

The study was commissioned by the Henry J. Kaiser Family Foundation.

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