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Government Picks Up Health Tab of Uninsured Workers

FRIDAY May 2, 2008 -- Working people and their families who don't have employer-based health insurance cost the American public $45 billion a year, a new study reveals.

This includes $33 billion in the costs of Medicaid and the State Children's Health Insurance Program, and $12 billion in uncompensated care expenses, which are paid by federal, state and local governments and shifted to other payers.

In addition, one-third of low-paid workers do not have health insurance, an increase of 9 percent since 1996, another study finds. Both reports were released Friday by The Commonwealth Fund.

"There's a lot of government money going to pay for workers and their family members who are employed," said Sherry Glied, co-author of both reports and a professor of health policy and economics at Columbia University.

"We usually think that government money goes to pay for health care of people who are unemployed, but a lot of that money is actually going to people who are working, and that amount is going up all the time," Glied said.

The first report, Who Pays for Health Care When Workers Are Uninsured, shows how much the U.S. health-care system depends on employer money to cover health-care costs, Glied said. "Public programs are really vulnerable if that money disappears," she noted.

Even though many employers offer health insurance, the costs of publicly paid health care for full-time workers and families increased from $31 billion in 1999 to $45 billion in 2004. This includes an increase in public insurance costs from $21.2 billion to $32.5 billion, and an increase in uncompensated care costs from $9.4 billion to $12 billion, according to the report.

Glied noted that it is mostly small companies that don't provide their workers with health insurance, thereby shifting the burden to public money.

But large companies also play a role. In fact, 1.6 million people at companies with more than 100 employees were uninsured in 2004, compared with 1.2 million in 1999, a 33 percent increase, according to the report.

"We need to think about how to use public money in the most efficient way," Glied said. "We need to find ways to supplement what employers are doing and how to keep employers in the game."

The second report, The Widening Health Care Gap Between High- and Low-Wage Workers, shows that low-wage workers do not have the same access to health care as high earners.

"This is really a very depressing report," Glied said. "What it really says is that the good things that are happening in our health-care system are only happening to higher-wage people. Low-wage people really don't see much gain at all from all the extra good stuff we are spending on health care -- they're just getting shut out of it."

In 1996, 22 percent of low-wage workers were uninsured compared with 6 percent of higher wage workers. But by 2003, nearly 33 percent of low-wage workers were uninsured with no change in the share of uninsured higher-wage workers, according to the report.

Because health-care expenditures have not risen as fast as costs, low-wage workers are frozen out of many of the latest medical innovations and new drugs, Glied said. "We are seeing an increasingly two-class, health-care delivery system," she said.

Glied thinks there need to be more subsidies provided for low-wage workers to allow equal access to health care. "Or we have to reconcile ourselves to the idea that being rich is not only good for your living, but also how long you live and how well you live," she said. "That's a kind of frightening thought."

One expert noted that uninsured workers subsidize the health-care system through the taxes they pay.

"Public spending on uninsured workers is not huge, and much of it is offset by the workers' own tax payments," said Dr. Steffie Woolhandler, an associate professor of medicine at Harvard Medical School and co-founder of Physicians For A National Health Program.

All workers must pay the Medicare payroll tax, which is 3 percent of earnings and nominally split equally between employer and worker. However, according to standard labor economics, all the money is coming from the workers' compensation, Woolhandler explained. "So, a worker earning $33,000 per year would pay $1,000 in Medicare payroll taxes alone," she said.

Most workers also pay property taxes, either directly for their homes, or indirectly through higher rents, Woolhandler noted. "Virtually all workers must pay sales taxes, and many pay income taxes. Hence, uninsured workers/dependents should not be seen as freeloaders -- although perhaps some of their employers should be," she said.

Woolhandler believes the only way to solve the health insurance crisis and offer care to everyone is a universal health-care system run by the federal government.

Another expert thinks the answer to the crisis is to get the medical community to control the costs of care.

"In is absolutely unacceptable to employees and employers be squeezed the way they are on health care," said Mohit Ghose, a spokesman for America's Health Plans, which represents private health insurance companies.

"The only way to fix that is to address the underlying cost drivers," Ghose said. "We must focus on reducing waste in the system, enhance best practice in the practice of medicine and encourage people to be value-conscious, cost-conscious as they seek out their health care."

Ghose thinks that everybody should be covered by some type of health insurance. For those who can afford it, private insurance, and for those who can't afford health coverage, public assistance. In addition, health-care resources may need to be rationed.

"We need to get everyone covered, we need to have solutions that work for different types of people," Ghose said. "But the public safety net needs to be shored up -- there are going to have to be extended federal outlays. We're also going to have to optimize the use of limited health-care resources and target them appropriately so that we don't break the bank."

More information

For more information on health insurance, visit the U.S. Department of Labor.

Posted: May 2008


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