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Hidden Costs, Values Lost Uninsurance in America Committee on the Consequences of Uninsurance Board on Health Care Services INSTITUTE OF MEDICINE OF THE NATIONAL ACADEMIES THE NATIONAL ACADEMIES PRESS Washington, D.C.www.nap.edu
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THE NATIONAL ACADEMIES PRESS 500 Fifth Street, N.W.Washington, DC20001 NOTICE: The project that is the subject of this report was approved by the Govern-ing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The members of the committee responsible for the report were chosen for their special competences and with regard for appropriate balance. Support for this project was provided by The Robert Wood Johnson Foundation. The views presented in this report are those of the Institute of Medicine Committee on the Consequences of Uninsurance and are not necessarily those of the funding agencies. International Standard Book Number 0-309-08931-X (Book) International Standard Book Number 0-309-51139-9 (PDF) Library of Congress Control Number 2003106651 Additional copies of this report are available for sale from the National Academies Press, 2101 Constitution Avenue, N.W., Box 285, Washington, DC20055. Call (800) 624-6242 or (202) 334-3313 (in the Washington metropolitan area); Internet, http://www.nap.edu. For more information about the Institute of Medicine, visit the IOM home page at www.iom.edu. Copyright 2003 by the National Academy of Sciences. All rights reserved. Printed in the United States of America. The serpent has been a symbol of long life, healing, and knowledge among almost all cultures and religions since the beginning of recorded history. The serpent adopted as a logotype by the Institute of Medicine is a relief carving from ancient Greece, now held by the Staatliche Museen in Berlin.
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“Knowing is not enough; we must apply. Willing is not enough; we must do.” —Goethe INSTITUTE OF MEDICINE OF THE NATIONAL ACADEMIES Shaping the Future for Health
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THE NATIONAL ACADEMIES Advisers to the Nation on Science, Engineering, and Medicine The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. Upon the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Bruce M. Alberts is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. Wm. A. Wulf is president of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, upon its own initiative, to identify issues of medical care, research, and education. Dr. Harvey V. Fineberg is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy’s purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Bruce M. Alberts and Dr. Wm. A. Wulf are chair and vice chair, respectively, of the National Research Council. www.national-academies.org
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COMMITTEE ON THE CONSEQUENCES OF UNINSURANCE MARY SUE COLEMAN(Co-chair), President, University of Michigan, Ann Arbor ARTHUR L. KELLERMANN(Co-chair), Professor and Chairman, Department of Emergency Medicine, Director, Center for Injury Control, Emory University, Atlanta, Georgia RONALD M. ANDERSEN, Wasserman Professor in Health Services, Chair, Department of Health Services, Professor of Sociology, University of California, Los Angeles, School of Public Health JOHN Z. AYANIAN, Associate Professor of Medicine and Health Care Policy, Harvard Medical School, Brigham and Women’s Hospital, Boston, Massachusetts ROBERT J. BLENDON,* Professor, Health Policy and Political Analysis, Department of Health Policy and Management, Harvard School of Public Health and Kennedy School of Government, Boston, Massachusetts SHEILA P. DAVIS, Associate Professor, University of Mississippi Medical Center, School of Nursing, Jackson GEORGE C. EADS, Charles River Associates, Washington, DC SANDRA R. HERNÁNDEZ, Chief Executive Officer, San Francisco Foundation, California WILLARD G. MANNING, Professor, Department of Health Studies, University of Chicago, Illinois JAMES J. MONGAN, President and CEO, Partners HealthCare, Inc., Boston, Massachusetts CHRISTOPHER QUERAM, Chief Executive Officer, Employer Health Care Alliance Cooperative, Madison, Wisconsin SHOSHANNA SOFAER, Robert P. Luciano Professor of Health Care Policy, School of Public Affairs, Baruch College, New York STEPHEN J. TREJO, Associate Professor of Economics, Department of Economics, University of Texas at Austin REED V. TUCKSON, Senior Vice President, Consumer Health and Medical Care Advancement, UnitedHealth Group, Minnetonka, Minnesota EDWARD H. WAGNER, Director, MacColl Institute for Healthcare Innovation, Center for Health Studies, Group Health Cooperative, Seattle, Washington LAWRENCE WALLACK, Director, School of Community Health, College of Urban and Public Affairs, Portland State University, Oregon * Served from September 2000 to December 2002.
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IOM Staff Wilhelmine Miller, Project Co-director Dianne Miller Wolman, Project Co-director Lynne Page Snyder, Program Officer Tracy McKay, Research Associate Ryan Palugod, Senior Project Assistant Consultants Hanns Kuttner, Senior Research Associate, Economic Research Initiative on the Uninsured, University of Michigan M. Eugene Moyer, Economist, Annandale, Virginia Elizabeth Richardson Vigdor, Assistant Professor of Public Policy Studies, Terry Sanford Institute of Public Policy, Duke University
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Reviewers This report has been reviewed in draft form by individuals chosen for their diverse perspectives and technical expertise, in accordance with procedures approved by the NRC’s Report Review Committee. The purpose of this independent review is to provide candid and critical comments that will assist the institution in making its published report as sound as possible and to ensure that the report meets institutional standards for objectivity, evidence, and responsiveness to the study charge. The review comments and draft manuscript remain confidential to protect the integrity of the deliberative process. We wish to thank the following individuals for their review of this report: ARTHUR L. CAPLAN, Director, Center for Bioethics, University of Pennsylvania, Philadelphia HAILE T. DEBAS, Dean, School of Medicine and Vice Chancellor, Medical Affairs, University of California, San Francisco ALAN M. GARBER, Henry J. Kaiser, Jr., Professor and Professor of Medicine, Director, Center for Health Policy, Director, Center for Primary Care and Outcomes Research, Stanford University, Stanford, California MARTHE R. GOLD, Logan Professor and Chair, Department of Community Health and Social Medicine, City University of New York Medical School BRIGITTE MADRIAN, Associate Professor of Economics, Graduate School of Business, The University of Chicago, Illinois JOHN McCONNELL, Assistant Professor, Emergency Medicine Research, Oregon Health & Science University, Portland
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DOROTHY P. RICE, Professor Emeritus, Institute for Health and Aging, University of California, San Francisco MURRAY N. ROSS, Director of Health Policy Research and Analysis, Kaiser Permanente Institute for Health Policy, Oakland, California DALLAS L. SALISBURY, President, Employee Benefit Research Institute, Washington, DC PAMELA FARLEY SHORT, Professor, Health Policy and Administration, Pennsylvania State University, University Park Although the reviewers listed above have provided many constructive comments and suggestions, they were not asked to endorse the conclusions or recommendations nor did they see the final draft of the report before its release. The review of this report was overseen by Hugh H. Tilson, Clinical Professor, School of Public Health, University of North Carolina, Chapel Hill, and Joseph P. Newhouse, John D. MacArthur Professor of Health Policy and Management, Harvard University. Appointed by the National Research Council and Institute of Medicine, they were responsible for making certain that an independent examination of this report was carried out in accordance with institutional procedures and that all review comments were carefully considered. Responsibility for the final content of this report rests entirely with the authoring committee and the institution.
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Preface Hidden Costs, Value Lost: Uninsurance in America consolidates and builds on previous Committee work in order to develop estimates of the costs to our society of tolerating a large and shifting population who lack health insurance—more than 41 million in any single year. Nearly twice as many lack coverage at some point over a 2-year period. Lack of coverage among Americans under age 65 exacts a number of costs that are borne by uninsured people themselves, by their families, by communities and health care institutions, and by the nation at large; ultimately, we all bear these costs in one form or another. This fifth report by the Committee on the Consequences of Uninsurance immediately precedes our sixth and final analysis, in which we will articulate principles that should guide policy reforms to pursue and ideally achieve universal coverage. In this final report, we will also assess prototypical strategies and gauge their impact in light of these principles. While previous reports have focused on health and social consequences of uninsurance, Hidden Costs, Value Lost considers the financial impact of this problem for the nation overall. In part, this is done by “cashing out” what the Committee has learned and reported in its first four studies (in dollar terms when feasible, qualitatively when not). In this report, the Committee considers not only the costs created by uninsurance but frames these costs in terms of the potential benefits that might be realized by providing health insurance to the entire population. These benefits are then evaluated in light of the projected costs of the additional health care services that the uninsured would use if they had coverage and could therefore afford these services. Hidden Costs, Value Lost takes the broadest societal view of the economic and social costs that our nation incurs as a result of our current health care financing policies—approaches that leaves tens of millions without coverage at any point in
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time and most adults under age 65 at risk over time of losing their coverage. As with its investigation of community-level effects of uninsurance in A Shared Destiny, the Committee again faces the limitations of research addressing many of the costs throughout society that accompany the lack of health insurance. The Committee contended with the problem of limited data by using analytic approaches such as estimating the economic value of healthier life years forgone due to uninsurance. This strategy can be compared with that of governmental agencies that assess the risks and benefits to health and longevity of a variety of safety, environmental and health care interventions. Viewed from the broadest perspective, the lack of health insurance is a health risk at the population level. Likewise, universal coverage, however achieved, can be considered a health intervention at the population level. We encourage readers of this report to adopt a societal perspective as they consider the costs of uninsurance and to balance these costs against the potential benefits of various reform strategies. Historically, many have argued that we cannot afford to cover the uninsured. Perhaps, after reading this report, many will conclude that we can no longer afford not to cover the uninsured. Mary Sue Coleman, Ph.D. Co-chair Arthur L. Kellermann, M.D., M.P.H. Co-chair June 2003
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Acknowledgments Hidden Costs, Value Lost: Uninsurance in America reflects the contributions of many people. The Committee acknowledges and thanks those who participated in its development. The Subcommittee on the Societal Costs of Uninsured Populations prepared the report for the Committee’s consensus review and issuance. James Mongan chaired the Subcommittee. Members included Norman Daniels, Sherry Glied, Jack Hadley, Ruby P. Hearn, Emmett Keeler, Willard G. Manning, Jack Needleman, Gordon R. Trapnell, and Stephen J. Trejo. The members of the drafting subcommittee, through a number of working groups, prepared and analyzed data on costs and health expenditures as well as directed and reviewed the work of consultants and staff. The Committee is indebted to their intensive efforts to bring this work to fruition. As consultant to the Committee, economist Elizabeth Richardson Vigdor, Duke University, prepared an analysis of health capital losses among the U.S. population due to the lack of health insurance. (The complete study is included as Appendix B.) Elizabeth expertly and graciously conducted additional analysis and derived estimates at the requests of the Subcommittee and Committee. Eugene Moyer, senior economist with the Department of Health and Human Services (retired), and Hanns Kuttner, economist, University of Michigan, also served as Committee consultants, researching and drafting sections of the report and standardizing and updating expenditures and cost projections. The Committee and Subcommittee benefited from presentations from a number of experts on topics addressed in Hidden Costs, Value Lost. Cathi Callahan, Actuarial Research Corporation; Jack Hadley, Urban Institute; Jack Needleman, Harvard University; and John Sheils, Lewin Group, discussed approaches to cost
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estimation with the Committee at its October 2001 meeting in Woods Hole, Massachusetts. John Grgurina, Jr., Pacific Business Group on Health; Richard Kronick, University of California, San Diego; and Jill Yegian, California HealthCare Foundation, participated in a panel discussion on small business perspectives on health insurance at the February 2002 Committee meeting in San Francisco. Economists Robert Helms, American Enterprise Institute, and Ellen O’Brien, Georgetown University, shared their insight and research on health insurance and uninsurance at the Subcommittee’s initial meeting in July 2002. Jessica Banthin, Edward Miller, and John Moeller, economists at the Agency for Healthcare Research and Quality, presented their simulation model of health spending by uninsured and insured populations at the second meeting of the Subcommittee in January 2003. Susan Milner, Maryland State Department of Health, and Hugh Waters, Johns Hopkins University, shared their ongoing research on the costs of the uninsured population of Maryland with the Subcommittee. Timothy Westmoreland provided information to the Subcommittee on the conventions that the U.S. Congress uses to estimate the costs of legislative proposals. The Committee thanks these individuals and their organizations for sharing generously their time, expertise, and work. In particular, the Committee would like to acknowledge the support The Kaiser Commission on Medicaid and the Uninsured has provided to Jack Hadley and John Holahan of The Urban Institute for their research on the costs related to uninsurance, and thanks The Commission for making this work available to the Committee in its study and deliberations. The Committee recognizes the work of Institute of Medicine (IOM) staff. Project co-director Wilhelmine Miller served as principal staff to the Subcommittee and coordinated the drafting of the report. Project co-director Dianne Wolman advised on and edited multiple drafts. Program officer Lynne Snyder assisted in drafting and editing, and research associate Tracy McKay conducted literature searches and prepared the figures and tables in the report. Senior project assistant Ryan Palugod maintained the project’s research database and helped prepare the manuscript for publication. The IOM Board on Health Care Services, directed by Janet Corrigan, sponsors and provides overall guidance to the Committee. The Committee thanks The Robert Wood Johnson Foundation for its generous and continued support of the work on the consequences of uninsurance and especially acknowledges The Foundation’s president, Risa Lavisso-Mourey, and senior program officer Anne Weiss for their interest and assistance with this project.
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Contents EXECUTIVE SUMMARY 1 1 INTRODUCTION 12 Context, 13 Purpose, 16 Organization, 18 2 COSTS, BENEFITS, AND VALUE: CONTEXT, CONCEPTS, AND APPROACH 20 Analytic Context, 21 Concepts of Cost, 28 Approach to Estimating the Costs of Uninsurance and the Costs and Benefits of Coverage, 31 Limitations of the Evaluation of Costs and Benefits Related to Coverage, 36 Summary, 37 3 SPENDING ON HEALTH CARE FOR UNINSURED AMERICANS: HOW MUCH, AND WHO PAYS? 38 Uninsured People Use Less Medical Care Than Do Those with Coverage, 39 Out-of-Pocket Costs for Uninsured Individuals and Families, 42 Uncompensated Care to Uninsured Persons, 46 Who Bears the Costs of Uncompensated Care for Those Who Lack Coverage?, 53 Summary, 59
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4 OTHER COSTS ASSOCIATED WITH UNINSURANCE 63 The Value Lost in Healthy Life Years, 64 Quality of Life and Security for Families, 69 Developmental Outcomes for Children, 73 Uninsurance and Public Programs, 76 Workforce Participation, Productivity, and Employers, 79 Health Systems Impacts, 89 Summary, 93 5 THE COST OF THE ADDITIONAL CARE THAT THE UNINSURED WOULD USE IF THEY HAD INSURANCE COVERAGE 95 Long and Marquis Estimates, 1994, 96 Miller, Banthin, and Moeller Estimates, 97 Hadley and Holahan Estimates, 100 Comparing Results, 103 Conclusion, 104 6 SOCIAL AND ECONOMIC COSTS OF UNINSURANCE IN CONTEXT 105 Summarizing Costs and Comparing Investments in Health, 106 Realizing Social Values and Ideals, 112 Conclusion, 119 APPENDIXES A Glossary 123 B Coverage Does Matter: The Value of Health Forgone by the Uninsured, Elizabeth Richardson Vigdor 129 C Biographical Sketches 170 REFERENCES 181
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Hidden Costs, Value Lost Uninsurance in America
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