Uninsured in America: The Patient Protection and Affordable Care Act 2010 and the Uninsured.

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Uninsured in America: The Patient Protection and Affordable Care Act 2010 and the Uninsured. Gregory Galloway Economics 5190 Ethan Doetsch University of Utah

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The current state of the economy, with the recent recession, stagnant wages, and increasing health care costs, has created a “perfect storm” for the rising rates of uninsured Americans. In the span of less than ten years, almost nine million additional Americans became uninsured. This paper discusses the current demographic composition of the uninsured population. Overall decrease in well-being and poorer health has been observed in individuals without insurance when compared the insured. Research has demonstrated that the uninsured experience higher costs in health care and greater personal financial risks associated with those costs. Americans that have insurance also experience spillover effects from the uninsured population. This research paper explores how the Patient Protection and Affordable Care Act (PPACA) of 2010 addresses the issue of “uninsurance” and how the solutions contained in the law will reduce the number of uninsured people in America.

Who are the uninsured? In recent years the number of the uninsured has steadily increased. In 2003, approximately 15 % of the population in the United States was uninsured; in 2010, that number climbed to over 19.5 %. Since 2007, over 5.7 million more Americans have become uninsured. In 2010, 49.1 million nonelderly American were uninsured.

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The majority of the uninsured in the United States are from working class families. 60% of the uninsured have at least one full-time worker in their family. Over 65 % of the uninsured are between the ages of twenty-six to sixty-four and hail from low and moderate-income families. “Some 40 % of the uninsured have family incomes below the federal poverty level (In 2010 for a family of four FPL is $22,500)” (The Kaiser Commission on Medicaid and the Uninsured [KCMU], 2011). Individuals in the southern and western regions of the United States are the most likely to be uninsured. Minority populations are more likely than whites to be uninsured. Three quarters of the uninsured in 2010 were without insurance for more than a year (KCMU, 2011). The standard of economic theory of health economics posits that the desire for insurance represents and attempt by risk-adverse people to maximize utility in the face of uncertainty, subject to budget constraints: People…would often rather take a certain, moderate loss paying an insurance premium instead of taking a chance of a large financial loss from a serious illness” (Gilmer & Kronick, 2005, p. W5-143). The majority of Americans, if given the option, would choose to have coverage if available to them even at a small financial loss. It is not by choice that many Americans are uninsured.

Most Americans receive insurance coverage as a benefit through either their own employment or the employment of a family member. Though, currently employers are not required to offer coverage and a high percentage of the uninsured are not offered coverage from their employer. Because of these factors, many uninsured do not have access to coverage.

Price is a large factor in America. Many of the uninsured cannot afford coverage. “Since the average annual cost of employer sponsored coverage in 2010 was $13,770, many cannot afford coverage” (KCMU: Five Facts, 2011). “Premiums for employer-provided health insurance…

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jumped 9% in 2011 while workers’ wages grew just 2%... Since we began doing this survey thirteen years ago, worker contributions to premiums have increased 168%, wages 50%, and inflation 38%” (Kaiser Family Foundation [KFF], 2011). Those with limited or no post high school education are less likely to be employed at higher skilled jobs which are more likely to provide health insurance.

The recession has contributed to increasing rates of individuals being uninsured. Between 2009 and 2010, real median household income declined, the poverty rate increased, and the rate of the uninsured also increased during this same time period (DeNavas-Walt, Proctor, & Smith, 2011). An increase in employment loss, along with declining incomes in American families and

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the higher cost of insurance coverage, has added to the increase of the uninsured. Having a high percentage of uninsured in a population produces negative health consequences along with a variety of economic and social costs. Approximately one of every six Americans are uninsured, and this has important consequences that manifest themselves in reduced access to health care and poor health outcomes for this population. (Pauly & Pagan, 2007, p. 1305) Health insurance makes a difference in whether and when people get necessary medical care, where they get care and ultimately, how healthy people are. Uninsured adults are far more likely than the insured to postpone or forgo care altogether. The consequence of this can be severe, particularly when preventable conditions go undetected. (KCMU “Primer”, 2011, p. 11) Over half of uninsured adults have no regular source of health care Worried about high medical bills, they are more than twice as likely to delay or forgo needed care as the insured. (KCMU, 2011) A serious health problem may arise because of forgoing or delaying the care that is needed. The uninsured are less likely to seek preventive care and are more likely to be hospitalized for avoidable conditions (KCMU, 2011). Uninsured individuals are less likely to receive timely preventative care. Many chronic and acute health problems go undiagnosed and detected without routine preventive care. “Uninsured nonelderly adults, compared to those with coverage, are far less likely to have had preventive care, including cancer screenings. Consequently, uninsured patients are diagnosed in later stages of diseases, including cancer, and die earlier than those with insurance” (KCMU “Primer”, 2011, p. 11).

Because of high costs of treatment, many uninsured do not follow recommended treatment regimens or seek follow up care. Lack of insurance and high costs translates to more than onefourth of uninsured individuals reporting poor health.

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An uninsured population can create negative indirect outcomes called spillovers or externalities in a population. Demand in medical markets differs between the insured and uninsured population. The uninsured generally demand medical care that is lower in quality as well as a different mix and type of health care services due to affordability. “Quality is a kind of public good whose level is determined by the mix of demands in the community and is then experienced by all in the community. Lower demand for quality by more uninsured people will lower the quality of health care services available to the insured” (Pauly & Pagan, 2007, p. 1306).

Within a population, spillovers may manifest their effects in quality of care, access, and utilization in a population. In 2003 it was reported that “Insured adults in high-“uninsurance” communities were less likely than their peers in low-“unisurance” communities to have a place to go when they were sick or in need of advice about health, less likely to have visited a doctor, and less likely to have had a physical exam or check up” (Pauly & Pagan, 2007,p. 1309). It was also noted that the insured in high-“uninsurance” areas had more problems in getting a needed referral to see a specialist. The insured in high-“uninsurance” communities reported they were less likely to trust their practitioners and were also not very satisfied with the provider (Pauly & Pagan, 2007, p. 1309). The insured populations where there are high levels of uninsured individuals report unmet medical needs.

Evidence suggests that there is a correlation between the ability to provide quality care by providers and the financial stability of providers. Providers in areas of high-uninsurance reported facing financial difficulties because of high rates of uncompensated care and low

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demand for their services. “We believe that physicians…have lower career satisfaction and lower perception of quality of care provided in communities with larger shares of uninsured people” (Pauly & Pagan, 2007, p. 1310).

Cost barriers to health care have been increasing in recent years, many times; uninsured and “self pay” patients are presented with provider bills that are 2.5 times what most insured patients pay (Anderson, 2007, p.780). The majority of the uninsured, contrary to what many may believe, do not receive health care or services for free. “Hospitals frequently charge uninsured patients two to four times what health insurers and public programs actually pay for hospital services” (KCMU “Primer”, 2011, p. 14). Many patients that do not have insurance are requested to pay “up front” before they receive services. Often times these patients are able to negotiate a payment plan that will include additional fees or chose to pay with a credit card that might have a high interest rate, thus paying more for services. Many times these uninsured patients will be turned away because they cannot pay (KCMU “Primer”, 2011).

The burden of uncompensated care varies across providers. Hospitals incur 60% of the cost of uncompensated care because of the high cost of medical needs requiring hospitalization, despite the fact that physicians and community clinics see more uninsured patients. Most government funding of uncompensated care is paid to hospitals based indirectly on the share of uncompensated care they provide. The cost of uncompensated care provided by physicians is not directly or indirectly reimbursed by public dollars. In 2009, federal grants covered less than half of the cost of caring for uninsured patients in health center. (KCMU “Primer”, 2011, p. 14) Many of the uninsured are faced with an increased risk of accumulating unaffordable medical bills. “Uninsured adults are three times as likely as the insured to have been unable to pay for basic necessities such as housing or food due to medical bills. Medical bills may also force

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uninsured adults to exhaust their savings. In 2010, 27% of uninsured adults used up all or most of their savings paying medical bills” (KCMU “Primer”, 2011, p.14).

Many of the uninsured do not have the financial means readily available to pay for medical care costs. Those that are uninsured, in most cases, have little to no assets or savings that they can use to pay these costs.”Half of uninsured households had $600 or less in total assets (not including
their house and cars) in 2004, compared to median assets of $5,500 for insured households. Moreover, after households' debts are subtracted from assets, the median net worth of uninsured households drops to zero—leaving many of the uninsured with no financial reserves to pay unexpected medical bills” (KCMU “Primer”, 2011, p.15).

In 2010 legislation which was titled the Patient Protection and Affordable Care Act (PPACA) was passed. This piece of legislation was drafted in hopes of combating rising costs in health

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care and the high number of uninsured in the United States. The majority of the provisions contained in the PPACA will be implemented in 2014. The PPACA contains provision that addresses barriers to acquiring insurance coverage in hopes of addressing the high rates of the uninsured in the United States. “The PPACA promotes greater health coverage by building on existing public private systems for providing health insurance coverage” (KCMU “Primer”, p. 22). The following is a summary provided by the Kaiser Family Foundation of the provisions in the PPACA and the means it will use to reduce the uninsured population in the U.S.

“Beginning in 2014, Medicaid will be expanded to nearly all individuals under age 65 with incomes at or below 138% of the federal poverty level. This expansion will create a uniform minimum Medicaid eligibility threshold across states and will provide a new avenue for coverage for many low-income adults without dependent children who are currently not eligible for Medicaid in most states” (KCMU “Primer”, p. 23).

In 2014 Health Insurance Exchanges will be introduced. These exchanges, as outlined in the PPACA, will be set up and controlled by the states on a state level. These exchanges will be made available to small businesses and individuals which will allow them to purchase health insurance. “These new marketplaces are designed to ensure a more level competitive environment for insurers and to provide consumers with information on cost and quality to enable them to choose among plans”. “To help ensure that coverage in these new exchanges is affordable for those above the Medicaid eligibility levels, the federal government will make available premium subsidies for individuals and families with incomes from 139% to 400% of the federal poverty level” (KCMU “Primer”, p. 23).

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A portion of the uninsured in the past has been denied or lost coverage from a variety of health conditions by insurance companies. Many individuals that are sick pay more for coverage than those who are healthy. Under the PPACA beginning in 2014, insurance providers will no longer be able to deny or drop patient coverage for health reasons and are not able to charge sick people more. The only exception to this is that insurers can charge older individuals more for coverage, though the amount they can charge will be limited under the PPACA. This will increase the availability of coverage to the uninsured (KCMU “Primer”, p. 23).

Beginning in 2014, the law will require most individuals to have health insurance. However, this requirement will only apply to those with access to affordable coverage, defined as costing no more than 8% of an individual’s or family’s income…Still, those who choose not to have coverage and who are not exempt from the requirement will be required to pay a yearly financial penalty through their taxes. Employers with more than 50 employees will be assessed a fee of up to $2,000 per full-time employee (in excess of 30 employees) if they do not offer affordable coverage and if they have at least one employee who receives a premium credit through an Exchange. This requirement does not apply to small employers. Recognizing the challenges that small employers, especially those with low-wage workers, face in providing coverage to their employees, the law provides tax credits to the smallest employers (those with fewer than 25 workers and average annual wages of less than $50,000) to offset the cost of that coverage. These tax credits are available beginning in 2010. (KCMU “Primer”, p. 24) Will the above provisions provided in the PPACA reduce the amount of the uninsured here in the United States? The following are statistics issued by the Congressional Budget Office and the PPACA’s estimated effect in reducing the number of the uninsured: When fully implemented in 2019, the Congressional Budget Office (CBO) estimates the law will expand coverage to 33 million people, cutting the uninsured rate by more than half. According to CBO, the legislation will result in 16 million more people enrolling in Medicaid and CHIP. Another 24 million people (19 million of whom will receive federal premium subsidies) will obtain coverage in the newly created Health Insurance Exchanges, including some who previously purchased coverage on their own in the individual market. (KCMU “Primer”, p. 24)

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PPACA and Estimated Effects On Coverage
60% 50%

40%

30%

2011 Prior to Law 2021 After Law Takes Effect

20%

10%

0% Medicaid & Chip Employer Uninsured Other/Non Group Exchanges

*CBO & JCT March 2011 www.CBO.GOV

Rising health care costs and the recent recession has contributed to an increased number of uninsured here in the United States. Lack of insurance is associated with poor health outcomes and not having insurance places a risk to one’s health and general well-being. Having an uninsured population creates negative spillovers to those with insurance through lower demand in services and quality of care. The uninsured typically pay higher rates for care and many, because of high costs and needed care, are unable to pay for other life necessities. A huge financial burden is placed upon the uninsured segment as compared to those with health insurance.

With close to 50 million people uninsured in the United States, the PPACA is an important piece of legislation that addresses and provides solutions that decrease the number of uninsured.

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The PPACA institutes various options for coverage starting in 2014 by removing past barriers that existed in access to affordable insurance coverage. With these laws in place, fewer citizens will not have to face the health and financial risks currently associated with the lack of health insurance coverage.

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References

Anderson, G. (2007). From 'soak the rich' to 'soak the poor': Recent trends in hospital pricing. Health Affairs, 26(3), 780-89. doi:10.1377/hlthaff.26.3.780 Retrieved from http://content.healthaffairs.org CBO/JCT (2011, March 18). CBO's March 2011 Estimate of the Effects of the Insurance Coverage Provisions Contained in the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010. Retrieved December 5, 2011, from http://www.cbo.gov/budget/factsheets/2011b/HealthInsuranceProvisions.pdf DeNavas-Walt, C., Proctor, B. D., & Smith, J. C. (2011, September). Income, poverty, and health insurance coverage in the United States: 2010. U.S. Census Bureau. Retrieved December 3, 2011, from www.census.gov/prod/2011pubs/p60-239.pdf Gilmer, T., & Kronick, R. (2005). It's the premiums, stupid: Projections of the Uninsured through 2012 . Health Affairs, W5-143. doi:10.1377/hlthaff.w5.142 Retrieved from http://content.healthaffairs.org Kaiser Family Foundation (2011, October). The uninsured and the difference health insurance makes. Medicaid and the Uninsured. Retrieved December 8, 2011, from http://www.kff.org/uninsured/upload/1420-13.pdf

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Kaiser Family Foundation (2011, September 27). Rising health costs are not just a federal budget problem. Pulling It Together. Retrieved December 6, 2011, from http://www.kff.org/pullingittogether/rising_health_costs_federal.cfm Pauly, M. V., & Pagan, J. A. (2007). Spillovers and vulnerability: The case of community uninsurance. Health Affairs, 5(26), 1304-1314. doi:10.1377/hlthaff.26.5.1304 Retrieved from http://content.healthaffairs.org The Kaiser Commission on Medicaid and the Uninsured (2011, October 13). The Uninsured: A Primer. Kaiser Family Foundation. Retrieved November 27, 2011, from The Kaiser Commission on Medicaid and the Uninsured The Kaiser Commission on Medicaid and the Uninsured (2011, October). The uninsured and the difference health insurance make. Kaiser Family Foundation. Retrieved December 5, 2011, from http://www.kff.org/uninsured/upload/1420-13.pdf The Kaiser Commission on Medicaid and the Uninsured (2011, September 15). Five facts about the uninsured. Medicaid and the Uninsured. Retrieved December 4, 2011, from http://www.kff.org/uninsured/upload/7806-04.pdf

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