Sunday, April 18, 2010

On Healthcare Pt. 2.5: Demographics of the Uninsured (UPDATE-1)

Health-care reform has been a BigDeal(tm) lately, and I wanted to express some thoughts about it, the way it works and my general gripes about what is decidedly not real progress in my mind. In this series I will explore the benefits and failures of the current path of health-care reform in the United States. I will talk about insurance companies and risk pools; the difference between moral, political and economic decisions; and (in)efficiencies of scale in different levels of the industry.

Last week, I ranted about risk pools. This week I continue, since the rest of my work on the next post is not ready. See, I have this work thing that I have to do if I want to get paid. I was perusing through a report on the uninsured from the CDC and stumbled upon this interesting chart (click for full version). The chart focuses only on people under 65 because anyone older than 65 is covered by Medicare.

This is really interesting! The younger groups are less likely to be covered.  If we make the (admittedly big)  assumption that older people need more treatment, what we are seeing is a rational economic choice by the younger population to stay uninsured. I have no hard statistics on this, but from anecdotal evidence--I am in my mid 20s--younger people often will go without health insurance if they are short on money or in order to free-lance or work part-time; the price elasticity of demand for health insurance in this group is larger. I know many, many young people who go without health insurance, some because they can't afford it, and some because they are taking their chances because of the cost of coverage. Of the group that "can't afford" it, all of them could, they just refuse to reduce their standard of living for it. It makes sense if the healthy younger population gets sick less; they may not need enough coverage to justify the premiums. This means that the younger population is not subsidizing the older population, making the rising costs of insurance a self-fulfilling prophecy (remember the cost of coverage has to be less than or equal to the premiums paid plus the return on float for the system to be sustainable). If you knew the cost of your insurance was priced to subsidize someone else's, you might elect not to buy, and therefore drive the cost up for the remaining participants. By forcing everyone to participate in the risk pool, we are introducing a large set of young people, bringing down the median age of the risk pool, reducing the cost-per-particpant, and hopefully reducing the cost of participation too.

Before anyone thinks I am saying that young people going increasingly uninsured is responsible for a rise in premiums, let me clear it up: I am not. The uninsured as a percentage of the population has largely remained steady over the last couple of 20+ years, as you can see below. What I am saying is that making participation compulsory will create an implicit transfer payment system that will allow us to smooth out the changes in cost of care over the life of the participant. We are paying a little more now so we have to pay less in the future. The young can bitch about this now, but they'll probably have to pay this no matter what. If the old people can't afford health-care, the government will chip in and guess who will end up paying the government? Yup, that's right, the young. If the old can pay, but end up severely draining their wealth reserves, guess who's going to either inherit less or have to help them more? Yup, the young.

Now look at the other half of the graph (full version linked)

What is most obvious here is that blacks and hispanics are disproportionally less insured. Supporting a system where there is such huge disparities by race is definitely not progress. One could argue that this is because black and hispanics are more likely to be poor, but the really poor have Medicaid. It's the  marginally less-poor that are more likely to be uninsured:

Lack of access to health insurance could be holding back this not-so-poor segment of the population. Say it with me: This is not progress.

UPDATE-1: Got another nifty little piece of data, thanks to my sister. According to this report from the census, uninsured individuals by households income level break down like this (click image for full-size):

  • < $25,000: 24.5%
  • $25,000 - $49,999: 21.4%
  • $50,000 - $74,999: 14%
  • > $75,000: 8.2%

I am looking for more data as far as value of coverage utilized by age group and premium levels by age group so I can see if my theory checks out. Please shoot me an email if you have access to any of this data or know where I can find it.


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