Universal Health Care Fuzzy Math

June 30, 2009

Getting to the Bottom of the Real Number of Uninsured

By John Newcomer:

Congress will soon be  wrestling with the proverbial Gordian Knot —  how to provide health insurance for every American.  Those in favor of universal health care claim that 46 million Americans do not have health insurance.  That would be a staggering number if it were true.  Thankfully, the number of uninsured Americans  is not that large and the problem not as immense as both sides are saying.

Before you can fix a problem, it is important to get the facts not the rhetoric and get a grip on what exactly you are trying to fix.  So, let’s give it a go.

The 46 million uninsured Americans number comes from a report issued by the Council of Economic Advisors (CEA).  It was released by the White House on June 2nd.  However, the CEA used data from the U.S. Census Bureau to reach that conclusion.

The Foreign Factor

Small problem.  The U.S. Census Bureau was counting everyone, not just Americans.  As a result, almost 10 million foreigners are included in the figure.  Mind you, these are not necessarily illegal foreigners, just foreigners who are in our country for business or vacation.  With the economy the way it is, I am pretty sure the voting public would not be in favor of spending tax dollars to make sure visiting foreigners have health insurance.

Confusion by Medicaid Enrollees

Second small problem.  Seven million Medicaid enrollees reported they did not have health insurance when, in fact, they did and were covered under Medicaid.   That’s 7 million people with insurance under-reported in the Census numbers.

The reason is apparently confusion.  In cases where Medicaid enrollees did not access medical services in the recent past, they tended to report themselves as uninsured.

Census Bureau Questions Its Own Numbers

It should be noted the Census Bureau itself even questioned the validity of it’s statistics.  In appendix “C” to the survey the Bureau states:

“Health insurance coverage is likely to be under-reported on the Current Population Survey… under-reporting  of health insurance appears to be a larger problem than in other national surveys.  A reason may be that many people may not be aware that a health insurance program covers them if they have not used the system recently.”

If you take out foreigners (10 million) and individuals that misreport Medicaid coverage (7 million), the total uninsured is really 29 million.  Not a good number, but certainly better than 46 million.

Who Are the Uninsured and Why are They Uninsured?

If there is any good news about the rest of the uninsured, it is that they are generally between the age of 20 and 35.  This is an age group that is by and large healthy.

As this chart represents once children leave the family nest, close to 35% are uninsured (no more coverage as a dependent). After age 35, the uninsured slowly start to get health insurance, and at 65, are insured through Medicare.

It may be that this age group is just making a rational, perhaps short-sighted, purchasing decision.  At 25, should I buy health insurance or an Iphone? I am healthy and probably won’t need to see a doctor, but I really do need to text my friends.

So, all the drama and critical retrospectives we attribute to the number of uninsured is somewhat exaggerated to say the least.  Let’s understand the real numbers as we embark on fixing our broken system.

Reducing the Cost of Health Care

And another critical note to keep in mind:  Universal health insurance and reducing the spiraling cost of health care are two different issues, not one. It is important not to get confused on this issue.

Yes, universal health insurance will somewhat help to reduce the overall cost of health care, but maybe not as much as we think.  To get rising health care costs under control, the government needs to look at way to curtail unneeded tests and aggressive health care that does not improve the overall health of the nation.

Perhaps we should attack the current fee-for-service payment structure, where doctors and hospitals are paid for every service regardless of need or outcome. Policymakers need to focus reform on current overspending.

Plans worth exploring include those like the Mayo Clinic and the Veterans Administration Hospitals, where all doctors are paid a salary instead of fee for service compensation.  Yes, the Mayo Clinic is in the lowest 15% of Medicare spending at $6,688 per year per enrollee.  Compare that to McAllen, Texas where the cost per Medicare enrollee is $14,946 per year.

If you are sick, would you rather be treated at the Mayo Clinic or a regional hospital in McAllen?  You can even look at the VA hospitals where the average cost per patient is roughly $5,000 per year.  Both the VA and the Mayo clinic have moved away from the fee-for-service structure.

The system is broken and needs fixing,  but we need to use the correct numbers and put a wrench to what is already leaking, first.  It doesn’t make a whole lot of sense to pour more water into the leaky tub. That very well could just make things worse.

Do you think drug companies influence doctors on which prescriptions to write, by giving them perks like free samples and consulting fees?

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