The Costly Reality: 10 Myths of Uninsured Americans

If members of Congress want to make a “serious dent” in reducing the number of Americans without health insurance, they will have to “claim and redirect a considerable amount of public resources,” according to economist Len Nichols, Ph.D., vice president of the Center for Studying Health System Change (HSC).

“The single most important reason people are uninsured in this country is they are not willing to pay what it costs to insure themselves, and their unwillingness to pay is highly but not perfectly correlated with low income,” Nichols testified at a recent hearing of the U.S. House of Representatives Ways and Means Subcommittee on Health.

Nichols provided testimony about 10 myths of the uninsured:

Myth No. 1: We know how many people are uninsured. Forty-four million is the “official” number from the most recent U.S. Census Bureau but the truth could be (and is) on either side. The CPS asks: Did you have health insurance at any time in the 12 months ending two months ago? Even if answered perfectly, this concept omits people who lack insurance for a period shorter than 12 months, so the truth is that far more than 44 million people are uninsured for a period shorter than 12 months in a given year. Other surveys make clear that the 44-million number overstates by as much as a factor of two the people who were uninsured for all of the prior 12 months. The bottom line: pay attention to time frame. The longer the period of time, the smaller the number of people who are always without health insurance and the larger the number of people who are without insurance for some of the relevant time period.

Myth No. 2: The uninsured are all alike. This is manifestly false. The uninsured tend to be somewhat lower-income and in somewhat poorer health. But because there are so many uninsured, there are many who are young and healthy and many who are not.

Myth No. 3: Coverage is Coverage is Coverage. Not all coverage is equal; designs of insurance policies really do matter.

Myth No. 4: Health insurance would improve the health of all the uninsured. The bulk of the evidence suggests that health insurance does indeed have positive effects on the health of certain populations, and indeed, those most often at the center of policy debate: the poor, the elderly, the truly sick and children. What has not been proved is that universal coverage would improve the health of all of the uninsured.

Myth No. 5: Individuals without insurance choose to be so. In some general sense this is true. No law prohibits people from buying insurance, and most could buy individual insurance. But for low-income people or high risks, obtaining insurance voluntarily without further subsidies is probably not a realistic option.

Myth No. 6: U.S. employers spend $400 billion a year for workers’ health care. The answer that economics gives is no. Economists believe that ultimately most workers end up paying for health insurance in the form of lower wages.

Myth No. 7: The decision to remain uninsured has no effect on anyone else. An overarching feature of modern labor markets is worker diversity. Some workers’ willingness to work at jobs without health insurance means employers have a choice about whether to offer health insurance. As a consequence, many workers will not be offered insurance on the job.

Myth No. 8: Workers used to be afraid to switch jobs because of health insurance, and Health Insurance Portability and Accountability Act of 1996 fixed that. Research indicates two reasons that many workers are still reluctant to switch jobs for health insurance-related reasons, even after HIPAA: They stem from Myth No. 3, coverage is coverage is coverage. First, workers could have more generous coverage on their current job than HIPAA requires. Second, insurance in the individual market costs more per dollar of coverage. Thus, workers are often reluctant to leave a job with health insurance for a job that might pay higher wages but does not have health insurance attached.

Myth No. 9: Economists don’t know anything about why people are uninsured. There are three things most economists actually do believe about the lack of insurance coverage: (1) The single most important reason people are uninsured is they are not willing to pay what it costs to insure themselves. This unwillingness to pay is highly but not perfectly correlated with low income. (2) The prices people are required to pay vary a lot. Workers at large firms probably face the lowest prices, and they, correspondingly, have the highest offer rates and the most generous policies on average. (3) Even though price really, really matters, most people and firms have fairly inelastic demands for health care and health insurance.

Myth No. 10: The combined research evidence supports doing nothing to address the problems of the uninsured today. Economists and health policy analysts cannot as a scientific matter say that government should implement new policies to reduce the number of the uninsured. But they can articulate the trade-offs involved. Still, the case for some kind of significant coverage expansion seems strong to many health economists and health policy researchers, though science cannot tell policy makers the best particular way to accomplish this for that would require political value judgments.