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1
Why Health Insurance Matters
The Institute of Medicine (IOM) Committee on the Consequences of
Uninsurance launches an extended examination of evidence that addresses the
importance of health insurance coverage with the publication of this report.
Coverage Matters is the first in a series of six reports that will be issued over the next
two years documenting the reality and consequences of having an estimated 40
million people in the United States without health insurance coverage. These
reports will examine the implications of lacking health insurance for those without
it, for their families, for communities in which a substantial number of people are
uninsured, and for this country as a whole.
The Committee will look at whether, where, and how the health and finan-
cial burdens of having a large uninsured population are felt, taking a broad per-
spective and a multidisciplinary approach to these questions. To a great extent, the
costs and consequences of uninsured and unstably insured populations are hidden
and difficult to measure. Financial costs incurred by those without coverage may
be covered by payments for the health care of those with insurance or paid by
charities and taxpayers, and the health effects may be absorbed by families in the
form of diminished physical and psychological well-being, productivity, and in-
come.
The goal ofthis series of studies is to refocus policy attention on a longstanding
problem. Following the longest economic expansion in American history, in
1999, an estimated one out of every six Americans 32 million adults under the
age of 65 and more than 10 million children remains uninsured (Mills, 2000~. A
better understanding of the consequences of existing policies and health care
financing arrangements should reinvigorate discussions of the issue of coverage
19
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20
COVERAGE MATTERS: INSURANCE AND HEALTH CARE
and better equip us to design and evaluate policy initiatives and proposed reforms
intended to address this problem.
The Committee's charge is to communicate to the public and policy makers
analytical findings about the meaning of a large uninsured population for individu-
als, families, and their communities, as well as for society as a whole. Its reports
should contribute to the public debate about insurance reforms and health care
financing by assessing the theoretical and empirical research in health services,
medicine, epidemiology, and economics that bears on the effects of lacking health
insurance. It is not within the scope of this project to develop or advocate for a
specific set of reforms or policies.
The goal of this first report is to provide background for the findings and
conclusions that the Committee will present in subsequent reports about the
consequences of uninsurance by including common definitions and an overview
of the dynamics of health insurance coverage. This report addresses the extent to
which Americans are without coverage, identifies social, economic, and policy
factors that contribute to the existence and persistence of an uninsured population
in the United States, and reports the probability for members of various popula-
tion groups of being uninsured. In addition, it introduces a conceptual framework
that models how health insurance affects access to health care services and, through
such access, affects health and economic well-being. This framework will guide
the analysis in succeeding reports in the series and will be modified to address each
report's set of topics.
OBJECTIVES OF HEALTH INSU12ANCE
COVE12AGE
The first step in identifying and measuring the consequences of
being without health insurance and of high uninsured rates at the community level
is to recognize that the purposes and constituencies served by health insurance are
multiple and distinct. These purposes include promoting health, obtaining health
care for individuals and families, and protecting people financially from excep-
tional health care costs. Health insurance pools the risks and resources of a large
group of people so that each is protected from financially disruptive medical
expenses resulting from an illness, accident, or disability. In addition to serving the
typical functions of risk insurance, health insurance has developed as a mechanism
for financing or pre-paying a variety of health care benefits, including routine
preventive services, whose use is neither rare nor unexpected. Despite the fact that
a large proportion of persons with health insurance make claims against their
coverage every year, health care spending, and thus health insurance payouts,
remain concentrated among a relatively small number of claimants, who incur
high costs for serious conditions. Ten percent of the population accounts for 70
percent of health care expenditures, a correlation that has remained constant over
the past three decades (Berk and Monheit, 2001~. Thus health insurance continues
to serve the function of spreading risk even as it increasingly finances routine care.
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MY HEALTH INSURANCE MATTERS
21
From the perspective of health care providers, insurance carried by their patients
helps secure a revenue stream, and communities benefit from financially viable
and stable health care practitioners and institutions.
Employers offer health benefits both to attract and retain workers and to
maintain a productive workforce. Government provides health insurance to popu-
lations whom the private market may not serve effectively, such as disabled and
elderly persons, and populations whose access to health care is socially valued, such
as children and pregnant women.
The ultimate ends of health insurance coverage for the individual and com-
munities, including workplace communities of employees and employers, are
improved health outcomes and quality of life. Attributing success in achieving
these goals to health insurance alone presents a challenge because isolating the
relative contribution of different determinants of individual and population health
requires a complex analysis. Over the past quarter of a century, the importance of
health insurance has grown, as clinical medicine has become increasingly sophisti-
cated, technological advances have become more commonplace, and the range of
therapeutic interventions (and their costs) has expanded rapidly. As a society, we
invest heavily in health insurance through direct personal expenditures, forgone
wages, and tax policy. Health insurance in the United States has developed as a
common but not universal component of the employment contract. Employees
rank health insurance first by far in importance among all the benefits offered in
the workplace (Salisbury, 2001~. Although there have been sizable investments of
personal and public funds to provide health insurance, many people still have no
coverage.
MYTHS AND REALITIES ABOUT HEALTH
INSU12ANCE
Despite extensive reporting of survey findings and health care
research results, the general public remains confused and misinformed about
Americans without health insurance and the implications of lacking coverage.
This section presents basic information about health insurance and who lacks it in
the context of several pervasive popular myths. Without question, the complexity
of American health care financing mechanisms and the wealth of sources of
information add to the public's confusion and skepticism about health insurance
statistics and their interpretation. This report and those that will follow aim to
distill and present in readily understandable terms the extensive research that bears
on questions of health insurance coverage and its importance.
Myth: Uninsured people get health care when they really need it.
Fifty-seven percent of Americans polled in 1999 believed that those without
health insurance are "able to get the care they need from doctors and hospitals"
(Blendon et al., 1999, p.207~. In 1993, when national attention was focused on the
problems of the uninsured and on pending health care legislation, just 43 percent
of those polled held this belief (Blendon et al., 1999~.
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22
CO VERA GE MA TTERS: INSURANCE AND HEALTH CARE
Reality: The uninsured are much more likely to forgo needed care
(Schoen and DesRoches, 2000~. They also receive fewer preventive services and
are less likely to have regular care for chronic conditions such as hypertension and
diabetes. Chronic diseases can lead to expensive and disabling complications if
they are not well managed (Lurie et al., 1984; Lurie et al., 1986; Ayanian et al.,
2000~. One national survey asked more than 3,400 adults about 15 highly serious
or morbid conditions. Of those reporting any such symptoms (16 percent of those
surveyed), and with adjustment for demographic and economic characteristics,
health status, and a regular source of cared an uninsured person was far less likely
than someone with insurance to receive care for the reported condition (odds ratio
= 0.43) (Baker et al., 2000~. Additional evidence is presented later in this chapter
in the discussion of insurance and access to health care.
Myth: People without health insurance are young and healthy and
choose to go without coverage. Almost half (43 percent) of those surveyed in
2000 believed that people without health insurance are more likely to have health
problems than people with insurance. About as many (47 percent) thought the
likelihood of health problems is about the same for insured and uninsured people
(NewsHour-Kaiser, 2000~. Voters and policy makers in focus group discussions
characterize those without insurance as young people who have the opportunity
to be covered and feel they do not need it (Porter Novelli, 2001~.
Reality: Compared to those with at least some private coverage, the
uninsured are less likely to report being in excellent or very good health
(Agency for Healthcare Research and Quality, 2001~. In contrast, people report-
ing excellent or very good health are more likely to be insured. Among those
under age 65 who are in fair or poor health, nearly one in five lacks health
insurance (Rhoades and Chu, 2000~. Of young adults (ages 19-34 years) in poor
health, 16 percent are uninsured and 27 percent of those reporting fair health
status are uninsured (Figure 1.1) (Agency for Healthcare Research and Quality,
2001~.
Young adults between 19 and 34 are far more likely to lack health insurance
than any other age group. This is chiefly because they are less often eligible for
employment-based insurance due to the nature of their job or their short tenure in
it. They are also more likely than older adults to be in excellent or very good
health and consequently may forgo the cost of workplace coverage if it is offered.
Turning down a workplace offer is not, however, a significant factor in explaining
their lack of coverage. Younger workers accept workplace offers of coverage more
often than not, and only 4 percent of all workers between 18 and 44 years of age,
i"Regular source of care" is defined as the place or provider from which one usually seeks care or
advice about health care. A regular source of care may be a physician's office, a clinic, a health plan
facility or a hospital emergency room or outpatient clinic. Optimally, one's regular source of care
provides continuity of attention, facilitates access to appropriate services, and maintains records.
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WHY HEALTH INSURANCE MATTERS
35 -
30 -
25-
a)
Q
-
in 10-
._
5 -
20 -
15
O
23
30.5
27.4
16.3
an.
25.8 ~ 25.6
22.2
L
Poor Fair Good Very Good Excellent ForAII Young
Adults
FIGURE 1.1 Probability of being uninsured for young adults, ages 19 to 34 years, by
self-reported health status, 1999.
SOURCE: Center for Cost and Financing Studies, Agency for Healthcare Research and
Quality, based on MEPS data.
roughly 3 million, are uninsured after turning down workplace insurance (Custer
and Ketsche, 2000b). Another 11 million uninsured workers between the ages of
18 and 44 (15 percent) hold jobs that do not include an offer of coverage.
The perception that people without insurance have better-than-average health
follows frown confusing the relatively young age profile of the uninsured with the
better health, on average, of younger persons. This obscures the link between
health status and health insurance. For those without access to workplace health
insurance, poor health is a potential barrier to purchasing nongroup coverage
because such coverage may be highly priced, exclude preexisting conditions, or be
simply unavailable. Older women (55-64 years) in the work force are especially
at risk of being uninsured for this reason: 23 percent of those in good, fair, or poor
health have no coverage compared to 10 percent of those in excellent or very
good health (Monheit et al., 2001~.
Myth: The number of uninsured Americans is not particularly large
and has not changed in recent years. Seven out of ten respondents in a
nationally representative survey thought that fewer Americans lacked health insur-
ance than actually do (Fronstin, 1998~. Roughly half (47 percent) believed that the
number of people without health insurance decreased or remained constant over
the latter half of the last decade (Blendon et al., 1999~.
Reality: During 1999, an estimated 42 million people in the United
States lacked health insurance coverage (Mills, 2000~. This number rep-
resents about 15 percent of a total population of 274 million persons.
According to Census Bureau statistics, the number of Americans under
R0120_B1493--01 Uninsurance 23
7/11/03, 2:05 pm
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24
CO VERA GE MA TTERS: INSURANCE AND HEALTH CARE
age 65 without health insurance grew from 39 million (17 percent of the
population under age 65) in 1994 to 44 million (18 percent) in 1998,
before falling to 42 million (17 percent) in 1999 (Fronstin, 2000d). This drop
of almost 2 million in the number of people without insurance (a reduction of
about 4 percent) is certainly a positive change. With a softer economy in 2000 the
latest reported gains in insurance coverage may not continue (Fronstin, 2001~.
The decline in the number of uninsured will not continue if the economy remains
slow and health care costs continue to outpace inflation. Due to the lag in
measurement and reporting, however, the Census Bureau estimate of health in-
surance coverage for 2000 may show a further decline in the uninsured rate. This
is because the data were collected for a period of strong economic performance.
Ofthe estimated 42 million people who were uninsured, all but about 420,000
(about 1 percent) were under 65 years of age, the age at which most Americans
become eligible for Medicare;232 million were adults between ages 18 and 65,
about 19 percent of all adults in this age group; and 10 million were children
under 18 years of age, about 13.9 percent of all children (Mills, 2000~. Through-
out this report, the discussion focuses on these uninsured working-age adults and
children.
These estimates of the number of persons uninsured are generated from the
annual March Supplement to the Current Population Survey (CPS), conducted
by the Census Bureau. Unless otherwise noted, national estimates of people with-
out health insurance and proportions of the population with different kinds of
coverage are based on the CPS, the most widely used source of estimates of
insurance coverage and uninsurance rates. Seven different governmentally and
privately sponsored surveys can, however, be used to make nationally representa-
tive estimates of the number of people without health insurance. These surveys
and the estimates they yield are described briefly in Table B.1 in Appendix B.
These surveys differ in size and sampling methods, the questions that are asked
about insurance coverage, and the time period over which insurance coverage or
uninsurance is measured (Lewis et al., 1998, Fronstin, 2000a). Each survey pro-
duces a different estimate of the number of Americans without insurance. The
estimates range from 32 million (e.g., Medical Expenditure Panel Survey, 1996,
uninsured throughout the year) to 42 million (CPS, 1999, uninsured throughout
the year).3
The CPS has been criticized for producing estimates of persons uninsured
Medicare, the federal insurance program for the elderly, disabled, and those with end-stage renal
disease, provides almost universal coverage for hospital care for those over age 65. A small fraction of
the elderly do not qualify for the program because they do not have sufficient Social security work
credits. The clergy and other religious workers comprise the largest single category of people without
ties to Social security and Medicare.
Sin 1996, the Ups estimate of the number of nonelderly persons uninsured was 41 million (Fronstin,
2000a).
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MY HEALTH INSURANCE MATTERS
25
throughout the year that are too high and probably reflect periods without insur-
ance of less than a full year as well as underreporting of Medicaid coverage
(Swartz, 1986; Lewis et al., 1998; Fronstin, 2000a). The Census Bureau has
recently revised its survey questionnaire to include an additional question verify-
ing that the respondent means to report lack of coverage over the entire previous
year (see Appendix B for further explanation). Still, the CPS is especially useful
because it produces annual estimates relatively quickly, reporting the previous
year's insurance coverage estimates each September, and because it is the basis for
a consistent set of estimates for more than 20 years, allowing for analysis of trends
in coverage over time. For these reasons, as well as the extensive use of the CPS in
other studies of insurance coverage that are presented in this report, we rely on
CPS estimates, with limitations noted. The Committee finds the variation among
estimates of the number of persons uninsured produced by the different surveys
less critical to its analysis than the order of magnitude of the range of estimates that
these surveys yield.
The estimate of the number of uninsured people expands when a population's
insurance status is tracked for several years. Over a three-year period beginning
early in 1993, 72 million people, 29 percent of the U.S. population, were without
coverage for at least one month. Within a single year (1994), 53 million people
experienced at least a month without coverage (Bennefield, 1998a).
Myth: Most people who lack health insurance are in nonworking
families. An April 2000 national telephone survey by the NewsHour with Jim
Lehrer-Kaiser Family Foundation found that 57 percent of the adults polled
believed that most people without health insurance were unemployed or from
families with unemployed adults (News Hour-Kaiser, 2000~. Other surveys report
comparable findings (Blendon et al., 1999; Wirthlin Worldwide, 2001~.
Reality: More than 80 percent of uninsured children and adults un-
der the age of 65 live in working families. Six out of every ten uninsured
1 1 1 1 1 1 A 1 1 1 1 · 1 · 1 1 ·1 1 ·1 1
adults are themselves employed. Although working does improve the llkellhoou
that one and one's family members will have insurance, it is not a guarantee. Even
members of families with two full-time wage earners have almost a one-in-ten
chance of being uninsured (9.1 percent uninsured rate) (Hoffman and Pohl, 2000~.
See Chapter 3, especially Figures 3.1 and 3.2, for further details.
Myth: New immigrants account for a substantial proportion of
people without health insurance. One analysis has attributed a significant
portion of the recent growth in the size of the U.S. uninsured population to
immigrants who arrived in the country between 1994 and 1998 (Camarota and
Edwards, 2000~.
Reality: Recent immigrants (those who came to the United States
within the past four years) do have a high rate of being uninsured (46
percent), but they and their children account for just 6 percent of those
without insurance nationally (Holahan et al., 2001~. In fact, there has been a
net decrease in the number of recently arrived immigrants since 1994 (Holahan et
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26
CO VERA GE MA TTERS: INSURANCE AND HEALTH CARE
al., 2001~. Overall, noncitizens account for fewer than one in five uninsured
persons (Mills, 2000~.
Myths and Policy Making
Popular confusion about the facts of health insurance coverage and its
importance can hamper effective policy making, as can policy makers' uncertainty
about the interpretation of coverage trends and consequences. This report and
those that will follow aim to provide reliable information, useful to both the
public and policy leaders legislators, employers, program managers as they meet
the ongoing challenges of financing health care.
THE COMMITTEE'S ANALYTIC STIU`TEGY
Measuring Impacts of Coverage
Health insurance coverage is a key element in most models that depict access
to health care. The relationship between health insurance and access to care is well
established, as documented later in this chapter. Although the relationship be-
tween health insurance and health outcomes is neither direct nor simple, an
extensive clinical and health services research literature links health insurance
coverage to improved access to care, better quality, and improved personal and
population health status. The Committee's conceptual framework for considering
the extent and nature of these and additional effects of health insurance builds
selectively upon the most widely used behavioral model of access to health services
(Andersen, 1995; Andersen and Davidson 2001~. The framework focuses primar-
ily on the economic, financial, and coverage-related factors that facilitate the use
of health care services. The Committee uses the framework in this introductory
report to conceptualize various effects of health insurance and to provide an
overview of the subsequent analyses in future reports (see Figure ES.2 and Appen-
dix A for a further description of this model).
The Committee will use this conceptual model to identify, organize, and
assess the evidence regarding important consequences of uninsurance, each of
which will be the subject of a future report: individual health outcomes, family
well-being, community impacts, and economic costs for society as a whole. Figure
1.2 depicts the relationship among the topics of the Committee's reports in terms
of a series of overlapping circles. For example, the second report, on personal
health outcomes for uninsured adults, is represented by the innermost circle of the
figure, while the third report, on family well-being, encompasses the subjects of
the second report but emphasizes a different unit of analysis, namely, the family.
The sixth report in the series will present information about strategies and initia-
tives undertaken locally, statewide, or nationally to address the lack of insurance
and its adverse impacts. Each of these planned reports is described briefly in
Chapter 4.
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MY HEALTH INSURANCE MATTERS
FIGURE 1.2 Levels of analysis for examining the effects of uninsurance.
Scope of This Report
27
This discussion of health insurance coverage focuses primarily on the U.S.
population under age 65 because virtually all Americans 65 and older have Medi-
care or other public coverage. Furthermore, it focuses specifically on those with-
out any health insurance for any length of time. While the effects of lacking health
insurance on access to care and thus potentially on health may not be apparent for
those who are uninsured only briefly, even short periods without insurance entail
a measure of financial risk to self and family of incurring high expenses for health
care.
The Committee does not attempt to address the condition of"underinsur-
ance." By the "underinsured" is meant individuals or families whose health
insurance policy or benefits plan offers less than adequate coverage. Most people
would consider themselves underinsured if their health plan required extensive
out-of-pocket payments in the form of deductibles, coinsurance or copayments,
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28
CO VERA GE MA TTERS: INSURANCE AND HEALTH CARE
or maximum benefit limits. Many policies also exclude specific services such as
mental health treatment, long-term care, or prescription drugs. The problems
faced by the underinsured are in some respects similar to those faced by the
uninsured, although they are generally less severe. Uninsurance and underinsur-
ance, however, involve distinctly different policy issues, and the strategies for
addressing them may differ. Throughout this study and the five reports to follow,
the main focus is on persons with no health insurance and thus no assistance in
paying for health care beyond what is available through charity and safety net
institutions.
INSURANCE AND ACCESS TO HEALTH CARE
For individuals and families, health insurance both enhances
access to health services and offers financial protection against high expenses that
are relatively unlikely to be incurred as well as those that are more modest but are
still not affordable to some. Health insurance is a powerful factor affecting receipt
of care because both patients and physicians respond to the out-of-pocket price of
services. Health insurance, however, is neither necessary nor sufficient to gain
access to medical services. Nonetheless, the independent and direct effect of health
insurance coverage on access to health services is well established. This section
documents that research literature and presents the Committee's findings regard-
~ng access to care.
Subsequent Committee reports will build on this finding and evaluate evi-
dence for the further relationship between insurance coverage and health out-
comes. Appendix A describes and depicts schematically the Committee's concep-
tual model of this complex relationship, which is affected by a variety of personal,
economic, and social factors and health care processes that are in turn subject to
many influences.
Health Insurance Facilitates Access to Care
Many people who lack health insurance will forgo the care they need until
their condition becomes intolerable. Others will obtain the health care they need
even without health insurance, by paying for it out of pocket or seeking it from
providers who offer care free or at highly subsidized rates. For still others, health
insurance alone does not ensure receipt of care because of other nonfinancial
barriers, such as a lack of health care providers in their community, limited access
to transportation, illiteracy, or linguistic and cultural differences. Nonetheless,
health insurance remains a key factor in assuring access to health care.
Formal research about uninsured populations in the United States dates to the
late 1920s and early 1930s when the Committee on the Cost of Medical Care
produced a series of reports about financing physician office visits and hospitaliza-
tions. This issue became salient as the numbers of medically indigent climbed
during the Great Depression. With the rise of commercial insurers and the decline
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MY HEALTH INSURANCE MATTERS
29
of community rating offered by Blue Cross-Blue Shield and other nonprofit
insurers in the 1950s, new studies of individual and family health expenditures
were co-sponsored by the University of Chicago and the Health Information
Foundation. These studies became the factual basis for legislation that was enacted
as the Medicare and Medicaid amendments to the Social Security Act in 1965.
Since the enactment of Medicare and Medicaid, health services research on
uninsured populations has been sponsored federally and privately, at increasing
levels of support over time and using new survey tools and data sets (Somers and
Somers, 1961; Numbers, 1979; Starr, 1982; Andersen and Anderson, 1999~. The
Census Bureau started collecting detailed information about health insurance in
the latter half of the 1970s and the National Center for Health Services Research,
a predecessor to AHRQ, conducted the National Medical Care Expenditure
Survey (NMCES) in 1977, followed by the National Medical Expenditure Survey
(NMES) in 1987 and AHRQ's Medical Expenditure Panel Survey (MEPS),
launched and conducted annually since 1996. A summary of the major surveys
collecting health insurance and utilization information is presented in Appendix B.
Population-based surveys have been used to examine access to health services
by measuring components of primary care, such as number of physician visits and
immunization rates, sites of care (e.g., physician office, hospital outpatient depart-
ment, clinic), barriers to care (e.g., inability to pay), and unmet health needs (e.g.,
health status, inability to obtain care when needed) (Andersen and Aday, 1978;
Aday et al., 1984; Lurie et al., 1984; Monheit et al., 1985; Lurie et al., 1986;
HaLner-Eaton, 1993; Newacheck et al., 1993; Himmelstein and Woolhandler,
1995; Sox et al., 1998; Hsia et al., 2000; Kasper et al., 2000~. The likelihood of
having any physician visit within a year, the number of visits annually, and having
a regular source of care are well established measures of access. Empirical studies
consistently support the link between access to care and improved health out-
comes (Bindman et al., 1995; Starfield, 1995~.
Having a regular source of care can be considered a predictor of access, rather
than a direct measure of it, when health outcomes are themselves used as access
indicators. This extension of the notion of access measurement was made by the
IOM Committee on Monitoring Access to Personal Health Care Services
(Millman, 1993, p.33~:
"tT]he committee defined access as follows: the timely use of personal health
services to achieve the best possible health outcomes. Importantly, this definition
relies on both the use of health services and health outcomes to provide yard-
sticks for judging whether access has been achieved."
Thus, in Access to Health Care in America, the earlier IOM committee incorporated
health outcomes into the definition of access. In this first report of the Committee
on the Consequences of Uninsurance, consideration of the relationship between
health insurance and access is limited to well established findings regarding process
measures of access. The next report, which will examine health outcomes for the
uninsured, will evaluate clinical and epidemiological research evidence in terms of
the more demanding concept of realized access to health care.
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CO VERA GE MA TTERS: INSURANCE AND HEALTH CARE
The likelihood that those without health insurance lack a regular source of
care has increased substantially since 1977. In 1996, people without insurance
were 2.5 times more likely to lack a regular source of care than were the insured
(Zuvokas and Weinick, 1999; Weinick et al., 2000~. Children without insurance
were three times as likely as children with Medicaid coverage to have no regular
source of care (15 percent versus 5 percent), and uninsured adults were more than
three times as likely as either privately or publicly insured adults to lack a regular
source of care (35 percent versus 11 percent) (Haley and Zuckerman, 2000~.
The benefits for children of having health insurance and a regular source of
care, in terms of routine physician visits and appropriate preventive care, are well
documented (Lave et al., 1998; Newacheck et al., 1998; Haley and Zuckerman,
2000~. However, the impact of parents' health and health insurance on the well-
being of their children has received attention only recently. Whether or not
parents are insured appears to affect whether or not their children receive care
as well as how much care even if the children themselves have coverage (Hanson,
1998~. The health of parents can affect their ability to care for their children and
the level of family stress. Worrying about their children's access to care is itself a
source of stress for parents.
Uninsured adults are less likely to receive health services, even for certain
serious conditions. In a study described earlier (Baker et al., 2000), even after
adjusting for differences in age, sex, income, and health status, uninsured people
were less than half as likely as insured persons to receive care for a condition that
physicians deemed highly serious and requiring medical attention. People without
insurance are also less likely than people with insurance to receive preventive
services and appropriate routine care for chronic conditions, even as the impor-
tance of preventive care and the prevalence of chronic disease become more
prominent elements within health care (HaLner-Eaton, 1993; Ayanian et al., 2000;
Institute of Medicine, 2001~. Finally, those who lack health insurance are more
likely to be hospitalized for conditions that might have been avoided with timely
ambulatory care (Weissman et al., 1992; Kozak et al., 2001~.
The level of out-of-pocket costs for care has been demonstrated in random-
ized trials, natural experiments, and observational studies to have substantial effects
on the use of health care services (Newhouse et al., 1993; Zweifel and Manning,
2000~. Table 1.1 gives a sense of the magnitude of these costs. Uninsured patients
may be charged more than patients with coverage, who benefit from discounts
negotiated by their insurer, which amplifies the financial impact of lacking cover-
age (Wielawski, 2000; Kolata, 2001~.
Differential Access to Care for the Uninsured
Not only do persons without insurance receive less care, but the providers
who serve them differ systematically from those who treat insured patients. Public
hospitals, health departments, and health clinics (e.g., community, migrant, or
rural health centers) are more likely than other providers to serve uninsured
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ICY HEALTH INSURANCE MATTERS
TABLE 1.1 Illustrative Charges to Patients, Insured and Uninsured, 1999a (in
dollars)
31
Physician Normal Hospital
Office Visit Delivery (Childbirth)
Hospital, Simple
Pneumonia (Adult)
Fee for serviced 100 - 1,590 100 - 3,434
Before deductible is met 62
After deductible is met 6
Managed care plan 10 0 0
No insurance 62 4,543 9,812
aThese illustrative charges are based on policies offered under the Federal Employees Health
Benefits Program plans in 2001 and on national average actual charges to Mutual of Omaha health
insurance policy holders for 1999 (Office of Personnel Management, http://wu~w.opmgov; Mutual of
Omaha, http: //www. mutualofomaha.com/acrodocs/group /mug6440.pdfj.
bAnnual deductibles range Tom $100-$500 per person; coinsurance rates for outpatient services are
10% if preferred providers are used, 2(}35% for other providers.
persons, two-thirds of whom are members of lower-income families (annual
income below 200 percent of the federal poverty level tFPL]: $33,400 for a family
of four in 1999~. These institutions generally receive public funding to support the
provision of free or reduced fee care to those who cannot afford to pay private
fees. They serve as "core safety-net providers," with two distinguishing character-
. .
tlCS:
"~1) either by legal mandate or explicitly adopted mission they maintain an
"open door," offering access to services for patients regardless of their ability to
pay; and (2) a substantial share of their patient mix is uninsured, Medicaid, and
other vulnerable patients" (Institute of Medicine, 2000~.
The IOM report on the safety net also stressed the diversity of local safety-net
providers and services across states, communities, and geographic regions. In rural
areas, for instance, the mix of safety-net providers tends to feature private physi-
cians and health centers or clinics, whereas urban areas are more likely to be served
by teaching hospitals (Schur and Franco, 1999~.
In addition to those providers whose patient populations include substantial
proportions of uninsured persons, in the aggregate, private physicians, community
hospitals, and teaching hospitals affiliated with academic health centers provide
significant amounts of care to uninsured patients (Cunningham and Tu, 1997;
Mann et al., 1997; Institute of Medicine, 2000~. Nationally representative surveys
show that between two-thirds and three-quarters of physicians report providing
some charity care, accounting for about 5 percent of their case load on average
(Foreman, 1992; Cunningham, 1999b).
The wide geographic variation in the organization, financing, and delivery of
health services contributes to the scarcity of quantitative information about ser-
vices for uninsured people. Compared with insured persons, greater numbers of
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32
CO VERA GE MA TTERS: INSURANCE AND HEALTH CARE
uninsured persons obtain care from hospitals and clinics or health centers than
from office-based physicians, and are less likely to identify a person, rather than a
facility, as their usual source of care (Shi, 2000a). Uninsured patients are less than
half as likely as insured patients to report that a physician's office is their usual
source of care (about one-third of all uninsured patients compared with about
two-thirds of the general population) (Cunningham and Whitmore, 1998~.
Hospital emergency departments or outpatient departments serve as the regu-
lar source of care for one out of every six uninsured patients that report having a
regular source of care (Weinick et al., 1997~. A substantial proportion of emer-
gency department visits is for nonurgent conditions (Pane et al., 1991; Grumbach
et al., 1993; Baker et al., 1994; Zimmerman et al., 1996~. Because hospital emer-
gency departments are legally required to assess and stabilize all patients with any
medical condition without regard for ability to pay, they are the only providers
who cannot turn uninsured patients away for lack of a source of payment.4
Although emergency departments are portrayed as a costly and inappropriate site
of primary care services, many uninsured patients seek care in emergency depart-
ments because they are sent there by other health care providers or have nowhere
else to go. Emergency care specialists argue that the nation's emergency depart-
ments not only serve as providers of last resort but are a critical entry point into the
health care system (O'Brien et al., 1999~.
WHAT FOLLOWS
Three chapters follow in this report. Chapter 2 provides an
overview of how employment-based health insurance, public programs and indi-
vidual insurance policies operate and interact to provide extensive but incomplete
coverage of the U.S. population. This includes a review of historical trends and
public policies affecting both public and private insurance, a discussion of the
interactions among the different types of insurance, and an examination of why
people move from one program to another or end up with no coverage.
Chapter 3 synthesizes existing information to arrive at a composite descrip-
tion of the uninsured: What characteristics do people without coverage often
share? Where do the uninsured live? The chapter also presents information about
the risk of being or becoming uninsured: How does the chance of being uninsured
change depending on selected characteristics, such as racial and ethnic identity,
rural or urban residency, and age? What are the probabilities for specific popula-
4The federal Emergency Medical Treatment and Active Labor Act, part of the Consolidated
Omnibus Budget Reconciliation Act of 1985, requires hospital emergency rooms to assess and stabi-
lize all patients with a life- or limb-threatening or emergency medical condition or those who are
about to give birth. Hospitals are not required to provide continuing care after the patient has been
stabilized and transferred or released. No federal funds directly support this mandate.
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WHY HEALTH INSURANCE MATTERS
33
lions, such as racial and ethnic minorities, rural residents, and older working-age
persons, of being uninsured? How does the chance of being uninsured change
over a lifetime?
In addition to characterizing the likelihood of being uninsured in terms of a
single dimension, such as gender, age, race, work status, or geographic region,
Chapter 3 also presents the results of multivariate analyses that offer a more
informative depiction of the factors that contribute to the chances of being unin-
sured.
Finally, in Chapter 4 the Committee presents the research agenda for its
overall project and previews the five future reports.
Representative terms from entire chapter:
insurance coverage
