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Can the uninsured afford health insurance?
We propose several definitions of affordability and examine the implications of alternative definitions for estimates of the proportion of uninsured who are unable to afford coverage. We find that, depending on the definition, health insurance was affordable to between one-quarter and three-quarters of the uninsured in the United States in 2000.
That is Kate Bundorf and Mark Pauly, here is the paper. The pointer is from the new AEI magazine, The American, which so far has been consistently interesting.
Posted by Tyler Cowen on March 20, 2007 at 06:13 AM in Medicine | Permalink
Comments
That is pretty damning of the status quo, no?
Posted by: theCoach at Mar 20, 2007 9:11:09 AM
This study illustrates what many of us have known for a long time - that a substantial number of the uninsured (up to 75%, according to this study) lack insurance as a result of a voluntary, entirely rational economic decision. Consider an MBA in his/her late twenties working as a consultant (i.e., no benefits) and making about $60,000 per year. This person could easily purchase health insurance in the form of an individual policy. In fact, this would be a policy most insurance companies would love to write, because the chances that the insured would have much in the way of claims would be small. Health insurance costs vary greatly throughout the country, but assume such a policy would cost about $500 per month, or $6,000 per year. Our young MBA, being wise in the ways of capital allocation, knows that the $6,000 can be used for a lease payment on a small SUV or for a health insurance policy. The SUV will be driven just about every day, but the health insurance policy will probably not be used much at all. Our young friend knows that routine health care can be easily paid for out of pocket. At that age, serious illness is very unlikely, but if it should occur, he/she could probably qualify for Medicaid, especially if substantial assets are lacking. So the decision to forgo health insurance is an entirely rational one.
Posted by: Ned at Mar 20, 2007 10:02:48 AM
Catastrophic insurance should be affordable in any meaningful sense, for almost everyone, as long
as it's *really* insurance. That is, hedging against major, infrequent, locally unpredictable, medical
expenses. The problem is that that, to my knowledge, it isn't offered, for various reasons.
Where can someone buy (not through an employer) a policy that *only* covers catastrophic conditions and
has a $5,000 or $10,000 deductible?
This is why I have to roll my eyes at those who say that "medical care is expensive because here in the US
we get great, top-of-the-line, boutique care!" That wouldn't explain why people can't afford, or can't
purchase if they *can* afford, even the lower-grade stuff for catastrophic events.
Posted by: Person at Mar 20, 2007 1:31:33 PM
So what does it matter?
Let me tell you the results of my study that somewhere between 85 and 98 percent of Europeans never were threatened with concentration camps in the 1940s....who cares?
I balance this whole study against reading in the New York times about the Women who makes 60k/year and the only insurance she can get is 25k/year.
Posted by: Robb Lutton at Mar 20, 2007 3:30:05 PM
A more interesting question is if health care is affordable for people without insurance. The problem with the status quo is that people get locked out of the system if they don't have coverage. If you walk into a doctor's office with a wad of cash in your hand, you end up paying two to three times the price for the service as someone with insurance.
I think if people talked less about providing insurance for people and more about healt care itself, we would realize that insurance companies are the primary cause for our current health care crisis.
Posted by: Kevin Delaney at Mar 20, 2007 3:37:35 PM
"Where can someone buy (not through an employer) a policy that *only* covers catastrophic conditions and
has a $5,000 or $10,000 deductible?"
Come on folks, this is the Internet, try Google! You can get quotes here:
www.insurance.com
For example, Blue Cross Blue Shield of Florida offers a catastrophic health insurance plan in most counties that is called "Essential." It has deductible of $250 and an out-of-pocket limit of $2,500 after you've exceeded your deductible. The lifetime maximum is $1 million. The plan covers hospital, surgical, and X-ray expenses, but not other services, like doctor's visits, maternity care, prescription drugs, and mental health visits. An online quote showed that the monthly premium for a 21-year old, nonsmoking female to be $29.
Posted by: Mr. Econotarian at Mar 20, 2007 4:13:57 PM
"Between 1/4 and 3/4s"? That's a little imprecise, don't you think? It's like saying somewhere between nobody and everybody.
Posted by: Marginal Max at Mar 21, 2007 3:11:00 PM
Pretty funny how people are seeing in this summary what their personal biases dictate.
To me, it sounds like health care is unaffordable, or on the cusp of being so, for a vast majority of uninsured Americans.
And one might question whether it's optimal to lock people into paying barely affordable monthly health care bills when the penalty for dropping coverage is so great.
It's like being obligated to meet monthly payments on a life insurance policy that costs >10% of your income. And if you miss a payment, you have a significant chance of losing it all.
Posted by: theo at Mar 21, 2007 3:46:46 PM
The average person can afford the average policy, but can the average uninsured afford the average policy for the uninsured? They probably aren't 21 year old females. Most likely they can't afford it, or can afford it only until they need it when a lack of income would lead to loss of coverage.
Posted by: Lord at Mar 21, 2007 10:32:41 PM
As long as we are talking about subsidizing health insurance for all, why aren't we also suggesting that it be linked to healthy behaviors? I realize it's hard to monitor eating bad food, but what about providing it to those who are at risk for Cardio Vascular diseases if they participate in a CV exercise program?
Then the cost of providing the insurance would be more than offset by reduced healthcare costs, which will be paid for by the taxpayer anyway.
Posted by: Mark at Mar 22, 2007 2:47:25 PM
The Japanese have the best life expectancy, they pay half of the US cost as a percent of GDP, they have a totally free market for medical care and it is through private insurance. A conundrum? No. First, it is illegal for a care giver to discriminate in price. Unlike the US where Medicare/Medicaid shift billions onto young workers, there is honesty in costs in Japan. Then, Japanese care is delivered in large part by entrepreneurial MDs in small clinic settings. Next, medical care is compulsory. All are insured. Employers pay at least 50% of the cost. There are three risk pools - the 1,800 largest employers, small employers and the unemployed/retired. Tax subsidies and moderate employer contributions help fund the third pool. What's so hard about that?
Posted by: Bob Ostrander at Mar 22, 2007 3:18:05 PM
Health care in the United States has just become out of control. Everyone seems to be making a riot of why people can't afford and why you get treated differently if not and so on. In most other countries they have a health care system that is ran by the government rather than by employers. This way all of the citizens can easy get and obtain health insurance, but maybe this is possible because most other countries are much healthier than Americans??
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