Trying to Cover the Unenthusiastic Uninsured

President Obama is attempting to build support for a health care reform effort whose goals would be to restrain medical costs and cover tens of millions of uninsured Americans. The two goals are related, since government often winds up paying subsidies to health providers like hospitals and clinics who care for the uninsured.

But any government plan would have to confront and overcome a troubling characteristic of the uninsured that rarely gets discussed in reform debates: Many of them, perhaps nearly half of the 47 million Americans without coverage, earn enough to afford insurance, or qualify for existing government health programs, but still remain without coverage.

Why do they lack coverage, then? One reason is that some of them have simply decided to spend their money elsewhere. Among this group are people called ‘invincibles’ in industry slang, that is, well-employed, healthy twenty and thirty-something adults who think medical insurance—even just co-pays for employer-provided plans--is a waste of money.

Meanwhile others, mostly low-income uninsured, have remained ignorant of expanding government programs designed to help them—often despite extensive outreach programs by government agencies and health advocates. Others apparently can’t be bothered going through the bureaucracy to enroll in these subsidized programs. Instead, they just do what they’ve always done if they or their kids get sick--head to the local emergency room knowing they’ll get treatment that someone will pay for.

Designing a health care effort that offers newfangled options for all of these folks won’t mean much unless we actually get them to participate. And to do that we need some honest assessment of why people in this huge group aren’t insured already.

You won’t get much of that in a lot of the coverage of America’s health care woes. Most stories and commentary make passing reference to the 47 million or so uninsured and then move on to other issues. Reporting that does delve deeper typically focuses on working Americans who want insurance but can’t afford it. Their stories are often compelling, but they are not by any means the whole story.

A study two years ago by Urban Institute scholars found that 19 percent of the uninsured in America, or roughly nine million people, were in households earning more than three times the poverty level, which the study broadly defined as income high enough to afford unsubsidized insurance. About two-thirds of this group was childless adults who only needed insurance for themselves.

Another six million of the uninsured earned between 200 percent and 300 percent of the federal poverty level. While that’s not officially considered enough to afford health insurance, it is often enough to pay for health care itself, except under the worst circumstances. One study of California residents done several years ago found that half of those without insurance who were earning 200 percent or more of the federal poverty level had received care in the past year, for which they had paid out of their pocket.

Then there is the other end of the spectrum. Another 25 percent of the uninsured, or some 11 million people, are eligible for government subsidized programs but not enrolled. In particular, three-quarters of the eight million uninsured children in America are already entitled to public health care insurance but haven’t been registered in plans by their parents or guardians.

There are a number of reasons why people who fall into these groups may not have insurance. As I noted above, one group consists of ‘invincibles’ who are paying for health care when they need it out-of-pocket because they are in generally good health and don’t believe any life-threatening or costly medical condition is likely to happen to them. The numbers tell the story: Some 45 percent of uninsured adults without children who earn more than three times the poverty level are in their 20s and 30s, and 93 percent of this group report their health as good or excellent.

While most of us might consider going without insurance risky, local laws incentivize healthy people to do so. States like New York and New Jersey have ‘guaranteed issue’ laws that require an insurer to sign up anyone who requests coverage regardless of his condition. That encourages some people, especially younger people without children, to forgo insurance until they get sick—driving up everyone else’s costs in the process by depriving insurers of premiums from healthy individuals. In New York and New Jersey, for instance, the average age of an insured adult person is 44 and 37 years old respectively, while in nearby Pennsylvania, which doesn’t have a guaranteed issue law, the average age is 31 years old.

An even more confounding issue is the large number of people eligible for government programs that don’t enroll, don’t visit doctors regularly, and then show up at hospitals for expensive care. Health care advocates like to argue the problem in such cases is a lack of government outreach, but as states have expanded their subsidized programs, many have vastly increased their advertising and marketing and tried to discourage people from using emergency rooms for ordinary ailments. One measure of the effectiveness of such marketing efforts is that many lower and middle income working families have migrated from employer insurance coverage to these public plans because of the publicity surrounding them as lower-cost options. Yet at the same time, a core group of the poor have failed to enlist. The problem seems to go deeper than mere marketing, in other words.

These issues present government reformers with all sorts of thorny problems. Take the case of people at higher incomes without insurance. To make reform work, the government will have to require them to buy coverage, necessitating some type of national monitoring program and penalties for those who don’t comply (Massachusetts, which now mandates coverage, has already hiked fines once to get better cooperation from the uninsured). And once government decrees everyone must have health insurance, the feds must also decide who can afford it and then subsidize everyone else. One proposed plan, the Affordable Health Choices Act of Sen. Edward Kennedy, for instance, would help finance premiums for uninsured people in families making up to 500 percent above the federal poverty level, or more than $100,000 in annual income for a family of four.

Of course, when government requires insurance it must decide what to do with people who earn enough to buy it but still can’t afford it, including those who have gotten themselves into trouble with bad investments, unwise borrowing, too much consuming, and the like. Should government subsidize coverage of such people or allow them to go uncovered? Who will decide? And what will be the consequences? The nonpartisan Congressional Budget Office, for instance, has estimated that under the Kennedy plan about 15 million fewer people will be covered by employer-sponsored plans by 2019 because many will migrate from these plans to government-subsidized health insurance instead.

Then there is the question of low-income families. To make reform work the Obama administration is counting on expanding government run programs so that, for instance, adults earning up to 200 percent of the federal poverty level would be eligible for government-paid insurance. Some of these individuals, however, are the same people who haven’t bothered to enroll their children in existing federal-state health insurance for dependents of the working poor. Why do we think they’ll do any better for themselves?

There is an assumption in much of the coverage and commentary about health care reform that virtually all of the uninsured are desperate for coverage and counting on the federal government to come through for them. Don’t bet on it.