Commentary

How to Cover Them

Today the Census Bureau will release its new estimate of the number of Americans without health insurance, as it does every August. Last year’s estimate was 45 million. This year’s figure will be higher. Or maybe lower. Or maybe the same.

Whatever the case, we can take comfort in knowing that it will be an over-estimate. The Census Bureau counts as “uninsured” millions of people who are either eligible for government coverage, who will regain coverage even if we do nothing, or who can purchase coverage if they want it.

Regardless, it’s a bit of a disgrace that many millions of Americans lack health insurance.

Compounding that misfortune, we will spend the rest of this week listening to health care wonks who misinterpret the new estimate and use it to promote reforms that would make our health care problems worse.

For example, you might hear some version of this story: “The number of uninsured is unchanged, but only because the growth in government coverage picked up the slack for private health insurance, which declined.”

Pure bovine scatology. Experts know that government health insurance causes private insurance to decline.

An economist at the Massachusetts Institute of Technology, Jonathan Gruber, estimates that out of every 10 people added to the government rolls, six of them just substituted government coverage for private coverage.

We’re also doomed to listen to countless wonks who would do anything to reduce the number of the uninsured to zero, even expanding government programs to cover middle-class kids. But would expanding coverage that way accomplish what they hope?

Would it improve health? Maybe, but economists Helen Levy of the University of Michigan’s Economic Research Initiative of the Uninsured and David Meltzer of the University of Chicago find “no evidence” that it is a cost-effective way to do so. Other strategies could produce greater health improvements for the money.

Nor would it increase how long we live. An economist of the Rand Corporation, James Smith, notes that health insurance “is vastly overrated in the policy debate” over life expectancy.

Would it improve the quality of care? Not really. Researcher Steven Asch finds that “health insurance status was largely unrelated to the quality of care.”

An economist at Harvard, Christopher Murray, argues that expanding coverage wouldn’t much reduce health disparities either: “expanding insurance coverage alone would still leave huge disparities in young and middle-aged adults.”

Nor would it stop free-riders from taking advantage of others. Economists Jack Hadley and John Holahan of the Urban Institute estimate that nearly one-third of uncompensated care is due to insured people who don’t pay their bills.

It may seem counterintuitive, but simply expanding coverage isn’t the Holy Grail that most people believe it to be.

Rather than blindly expand government programs, the best way to help the uninsured would be to make private coverage and care more affordable. And the best way to start would be to let Americans own the money that purchases their coverage and care.

Ill-advised government policies have given us a health care sector where everyone is spending other people’s money. On average, third parties pay for 86 cents out of every dollar of medical care American patients receive. That’s the same share as in Canada’s socialized system. In other words, American patients have as little incentive to be cost-conscious as patients in countries where health care is ostensibly free.

In essence, we also purchase our health insurance with other people’s money. The average health plan costs a family $11,480. That’s the family’s money, but an employer controls it.

Americans demand too much coverage and too much care, and pay too little attention to the cost or cost-effectiveness. Is it any wonder health insurance premiums are skyrocketing, and our uninsured rate is so high?

The lesson for those who want to cover the uninsured is: focus on the 250 million Americans who have health insurance, not on the estimated 47 million who don’t.

If we let consumers own that $11,480, millions of patients would start shopping for better prices and higher quality, which would push prices downward and make coverage more affordable for the uninsured.

Over time, President Bush’s proposal to give all taxpayers a standard deduction for health insurance, which Rudy Giuliani has also endorsed, would give families ownership of that money. I proposed another reform that would let them put that $11,480 into a health savings account immediately.

Letting Americans own their health care dollars is the right thing to do, and would have the added benefit of expanding coverage to the uninsured. The nonpartisan Congressional Budget Office estimates that Mr. Bush’s proposal would reduce uninsured by 7 million Americans.

At their upcoming health care debates, the 2008 presidential candidates will point to the Census Bureau’s new estimate as evidence that we need to cover the uninsured. It would improve the quality of those debates if every time a candidate says, “We need to cover the uninsured,” someone would reply, “It’s not the uninsured, stupid.”

Michael Cannon is director of health policy studies at the Cato Institute and co-author of the forthcoming second edition of Healthy Competition: What’s Holding Back Health Care and How to Free It.