Macro Economics
Health Insurance in USA

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March 24, 2009

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Recently on a thread supposedly about US Treasuries DavidMn brought up issues regarding health care and health insurance in the US. After some back and forth commentary, he suggested that was an inappropriate thread in which to discuss a matter that he brought to that thread. I concur.

So, now we can have a thread that is addressing the state of US health insurance coverage and using Census findings from 2006 and some news stories on that Census data.

My position is that 45 million people in America without health insurance is unconscionable. The Census data showed that back in 2006 there were actually 47 million people in America uninsured and rising at over 2 million per year.

A point was made that not all of uninsured were Americans. I'm not really sure why it matters what nationality a sick person has but let's assume that it does, then that would have dropped the 2006 uninsured total to only 37.5 million.

Anecdotally, several years ago my wife and her mother were traveling in London when, at Madam Tussuad's Wax Museum, her mother fell and fractured her pelvic bone. She was taken to the local hospital, treated and it was several days before they even asked about any insurance coverage. What a wonderful experience is was to have her treated first! Several days later I faxed the hospital her insurance information. Now that is a much more civilized way to handle medical crises! [BTW her emergency treatment was not billed to her insurance, and her 5 day stay in the hospital was billed at a total of 2,400 pounds (about $4,000 back then)]

Anyway, back on point....

In the US it used to be that everyone obtained their health insurance through their employer. Now the number is down to 59.7%. It used to be that there was no charge to the employee and now most companies are deducting some amount from the pay. It used to be that families were also covered, now that option may not even be available even if the employee would pay for all of the extra.

All of these changes have occurred while inflation-adjusted wages have been stagnant.

All of these changes have occurred while the cost of insurance has been escalating at a double digit pace.

One of the main arguments I hear for not going to a nationalized system of health insurance is: "Why should I pay for someone who is too lazy to go out and get enough income to pay for their insurance?"

This question has a presupposition embedded within it. It presupposes that if the nationalized health insurance didn't get enacted that the person wouldn't have to pay for anyone else not having the insurance. But that is just not the way it works. If you are a businessperson you prorate all of your costs across all of your products and that impacts the end price of all products. Part of the cost of doing business is the delinquent and noncollectable accounts. Therefore in the health care industry the uninsured costs get charged to the insured patients. Ergo, you are paying for it now anyway!

The two main differences to a nationalized system would be: the average cost per insured would go down (witness medical costs per citizen in the countries which have nationalized health insurance); and second, every American would have health insurance.

The Census Data is at the following link which is to a pdf file. Page 26 of that file starts the discussion and statistics on health insurance.

Here are the bullet points of an article from NCHC:

Who are Who are the uninsured?

* Nearly 46 million Americans, or 18 percent of the population under the age of 65, were without health insurance in 2007, the latest government data available.1
* The number of uninsured rose 2.2 million between 2005 and 2006 and has increased by almost 8 million people since 2000.1
* The large majority of the uninsured (80 percent) are native or naturalized citizens.2
* The increase in the number of uninsured in 2006 was focused among working age adults. The percentage of working adults (18 to 64) who had no health coverage climbed from 19.7 percent in 2005 to 20.2 percent in 2006.1 Nearly 1.3 million full-time workers lost their health insurance in 2006.
* Nearly 90 million people - about one-third of the population below the age of 65 spent a portion of either 2006 or 2007 without health coverage.3
* Over 8 in 10 uninsured people come from working families - almost 70 percent from families with one or more full-time workers and 11 percent from families with part-time workers.2
* The percentage of people (workers and dependents) with employment-based health insurance has dropped from 70 percent in 1987 to 62 percent in 2007. This is the lowest level of employment-based insurance coverage in more than a decade.4, 5
* In 2005, nearly 15 percent of employees had no employer-sponsored health coverage available to them, either through their own job or through a family member.6
* In 2007, 37 million workers were uninsured because not all businesses offer health benefits, not all workers qualify for coverage and many employees cannot afford their share of the health insurance premium even when coverage is at their fingertips.1
* The number of uninsured children in 2007 was 8.1 million - or 10.7 percent of all children in the U.S.1
* Young adults (18-to-24 years old) remained the least likely of any age group to have health insurance in 2007 - 28.1 percent of this group did not have health insurance.1
* The percentage and the number of uninsured Hispanics increased to 32.1 percent and 15 million in 2007.1
* Nearly 40 percent of the uninsured population reside in households that earn $50,000 or more.1 A growing number of middle-income families cannot afford health insurance payments even when coverage is offered by their employers.

Why is this a macro-economic issue? Well, anything that effects the costs of all Americans is, by definition macro in scope. If the costs to all Americans can be substantially reduced, then that has the potential to be stimulative in recessionary times. The costs of such a program if not well-conceived could end up overwhelming the US coffers when added to the bailout monies already committed plus all the previously underfunded spending sprees.

Sticking our heads in the sand is not going to make the problem go away. What has the best chance of having this country develop the best plan of any country anywhere is open dialog. Yes, dialog! It seems as though over the last decade we have devolved our treatment of major issues to one-sided monologues, it would be refreshing to have all points of view engaged in finding a solution rather than trying to just score points.