Commentary

It’s Not the Uninsured, Stupid

Today marks the beginning of “Cover the Uninsured Week.” Funded by a conglomeration of unions, corporations, and foundations, the goal of this campaign is to provide health insurance to all of the estimated 47 million Americans who lack it.

After several years, the campaign seems to be making progress. Presidential candidates from former Gov. Mitt Romney (R-Mass.) to Sen. Hillary Clinton (D-N.Y.) have endorsed the goal of universal coverage. In a true sign of the apocalypse, Wal-Mart (Big Business) has joined hands with the Service Employees International Union (Big Labor) to push for universal coverage.

I may lose my health policy decoder ring for asking this, but should we really be focusing specifically on covering the uninsured? What do we think covering the uninsured would accomplish?

Would it improve health? Perhaps. But according to health economists Helen Levy of the University of Michigan’s Economic Research Initiative on the Uninsured and David Meltzer of the University of Chicago there is “no evidence” that expanding coverage is a cost-effective way to do so. That is, there are other approaches that could purchase more health for the money spent. Nor would expanding coverage appear to increase overall longevity. Health economist James Smith of Rand notes that health insurance “is vastly overrated in the policy debate.”

Would it improve the quality of care? Evidently not by much. Steven Asch and colleagues found that “health insurance status was largely unrelated to the quality of care.” If you show up at a hospital or clinic in the U.S., you generally get the same quality care whether or not you have insurance.

Maybe expanding coverage would reduce health disparities across races and socio-economic groups? Harvard economist Christopher Murray and colleagues conclude that “expanding insurance coverage alone would still leave huge disparities in young and middle-aged adults.”

At least expanding coverage would stop free-riders from taking advantage of others, right? Apparently not. Jack Hadley and John Holahan of the Urban Institute estimate that nearly one-third of uncompensated care goes to people who have health insurance but don’t pay their bills. (In total, uncompensated care accounts for just four percent of health spending on the non-elderly. That’s less than half of some estimates of fraud and one-sixth some estimates of wasted spending.)

Everyone wants to make health care better and more affordable. But if simply expanding coverage won’t get us there, where should policymakers focus their efforts?

They could start with the fact that federal laws have created a health care system where patients are too often spending someone else’s money when they purchase medical care. On average, third-parties pay for 86 cents out of every dollar of medical care American patients receive. That’s about the same share as under Canada’s socialized health care system.

As a result, U.S. patients demand too much medical care and pay too little attention to whether that care is cost-effective. Is it any wonder health insurance premiums are skyrocketing, our uninsured rate is too high, and quality is less than it should be?

There’s a lesson here for those who want to cover the uninsured: focus on the incentives facing the 250 million Americans who have health insurance, not on the estimated 47 million who don’t. If the federal government stopped encouraging people with health insurance to be less careful consumers, then coverage would be more affordable, the number of people without coverage would shrink, and the quality of care would improve.

That’s why the most important reforms would allow workers to control the health care dollars that their employers currently control. If workers are allowed to own those dollars, 180 million Americans would start making more cost-conscious decisions about their health insurance and their medical care. President Bush’s proposal to give all taxpayers a standard deduction for health insurance is one such reform. Another would allow workers to take all their health benefits as a cash contribution into a health savings account.

Health care looks to be a key issue in the 2008 presidential election. The quality of that debate would be greatly improved if every time some candidate uttered the words “cover the uninsured,” someone would remind him or her, it’s not the uninsured, stupid.

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