Costs of Covering the Uninsured: Projections

Research Objective:

This study is to assess how much it would cost if the currently uninsured population are to be covered by public and private insurance plan.

Study Design:

We identify individuals of aged 18-64 by three insurance coverage categories: full-year uninsured, full-year Medicaid, and full-year private insurance coverage. Then, we compare their descriptive characteristics, in particular, such as poverty status of family income and employment status to assess what determines their insurance status. Then, by propensity score matching methods, we estimate the average treatment effect on the controls (the uninsured) to predict the potential health care costs which would be generated if they are covered by Medicaid benefit and by private insurance, respectively.

Population Studied:

Our sample is carefully drawn from the 2004 Medical Expenditure Panel Survey. As public health insurance programs are available for children and the elderly, we focus on the most vulnerable group of the population in the U.S. in terms of health insurance status, the nonelderly adults of working ages 18-64.

Findings:

The nonelderly adults are vulnerable to the health and financial risks as they are lack of insurance coverage: 21.6% of the full-year employed are uninsured; and more than half of those with low or less family income level are uninsured. Stable employment status and high family income are positively correlated with insurance coverage, but there are still the substantial risk of being uninsured among nonelderly adults.

The predicted total annual health expenditures for one uninsured person are estimated as $1728 in Medicaid and $1477 in private insurance, respectively.

Conclusions:

Covering the uninsured nonelderly adults is an urgent policy issue in health care as they are exposed to the risk of going without any health insurance. However, covering them either by public program or by private initiative would be highly costly for the society as insurance coverage provision would drive them to take advantage of the benefit.

Policy Implications:

Results of this study suggest the possibility that covering the uninsured nonelderly adults by the extended Medicaid program would be more costly than covering them by employment-sponsored private insurance. Therefore, policy effort should be carefully put to design health insurance system for the uninsured from the cost efficiency perspective as well as public welfare perspective. Further, the extension of public insurance benefits for the uninsured should accompany the incentive system to lead the voluntary uninsured to be willing to pay for the insurance.