New Study Helps Makes Case for Universal Health Care

Posted: September 2, 2008 at 1:00 am, Last Updated: November 30, -0001 at 12:00 am

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More than 45 million Americans were uninsured in 2007, making health-care reform a leading issue in the current presidential campaign. A timely new study led by Mason professor Jack Hadley turns up some surprising facts about the cost of treating those who lack health insurance.

By Marjorie Musick

According to the U.S. Census Bureau, more than 45 million Americans were uninsured in 2007, making health-care reform a leading issue in the current presidential campaign. A new study led by Jack Hadley, professor and senior health services researcher in Mason’s Department of Health Administration and Policy in the College of Health and Human Services, examines the price tag associated with treating those who lack health insurance.

Jack Hadley
Jack Hadley
Photo by Evan Cantwell

“The large number of uninsured is both a political issue and a major social issue,” says Hadley. “Identifying the current health care costs of the nearly 16 percent of Americans who are uninsured is critical to the political debate over universal health care.”

Hadley conducted the study in collaboration with researchers John Holahan, Teresa Coughlin and Dawn Miller of the Urban Institute, and the findings appear in a web-exclusive edition of the journal Health Affairs. The study was commissioned by the Henry J. Kaiser Family Foundation.

Using data from the 2002–2004 Medical Expenditure Panel Surveys, which included more than 102,000 participants, Hadley and his colleagues found that Americans who lack health insurance for any part of 2008 will spend $30 billion out-of-pocket for health services and receive $56 billion in uncompensated care.

This means that someone who is uninsured for an entire year will pay 35 percent toward their average annual medical costs of $1,686 per person in contrast to the privately insured, who will pay only 17 percent toward their average annual medical costs of $3,915.

“The uninsured receive a lot less care than the insured, and they pay a greater percentage of it out-of-pocket,” says Hadley. “Contrary to popular myth, they are not all free riders.”

Breakdown of Current Health Care Spending

The researchers found that government programs pay for about 75 percent, or approximately $43 billion, of the uncompensated care bill, with uncompensated care being defined as treatment received but not paid for fully by the uninsured or by a health insurer.

This spending includes close to $18 billion in special payments to hospitals by Medicare and Medicaid, $15 billion in tax appropriations and indigent care programs by state and local governments, and almost $10 billion in spending by the Veterans Health Administration, the Indian Health Service, community health centers and similar direct-care programs.

“Federal dollars already comprise the largest share of the uncompensated care spending by direct-care programs,” says Hadley. “Recognizing the political difficulties of eliminating existing subsidies, most actual reform plans look to savings or increased efficiencies in other parts of the system to fund increased coverage.”

Although there is a widespread belief that the privately insured pay for uncompensated care through cost shifting, in which health care providers offset losses by charging higher prices to privately insured patients, only a relatively small amount of medical care for the uninsured is financed this way.

With total private health insurance expenditures in 2008 estimated to be $829.9 billion, Hadley notes that the amount potentially associated with cost shifting represents, at most, 1.7 percent of private health insurance costs.

“Hospitals do not raise charges in response to increased demand for care by the uninsured,” says Hadley. “If this were so, hospitals’ uncompensated care costs would likely grow with the uninsured’s share of the population, which is not the case. Hospitals’ charges to the privately insured have probably fluctuated in response to the rise and fall of aggressive, private-managed care and perhaps to fluctuations in Medicare and Medicaid payment rates.”

A Case for Universal Health Care

If all of the 77 million people who will be uninsured during a part of 2008 were to gain full-year insurance coverage, the researchers estimate that total medical spending for these people would increase by $122.6 billion, or approximately 5 percent of current total national health spending. This increase represents the cost of the additional medical care that the previously uninsured would receive, rather than either the cost of a specific reform proposal or the cost to the government.

“From society’s perspective, covering the uninsured is still a good investment,” says Hadley. “Failure to act in the near term will only make it more expensive to cover the uninsured in the future, while adding to the amount of lost productivity from not insuring all Americans.”

Because many prior studies have shown that the uninsured delay seeking care for conditions that worsen if left untreated, Hadley notes that universal health care could lead to accrued savings as a result of increased access to medical care.

“Right now, an uninsured person in poor health is more likely to receive some care than an uninsured person in excellent health,” says Hadley. “If you think of expanding health coverage as an investment, what is the return on the investment? The return is increased health. Some estimates suggest that the value of the improved health is substantially greater than the cost of the additional medical care the uninsured would receive if they were fully covered.”

On Thursday, Sept. 18, Hadley will present “Uninsured in America: Costs, Consequences, and Possible Solutions” as part of the Center for Health Policy Research and Ethics’ Fall 2008 Speaker Series. The free session will take place at 6 p.m. in Mason Hall on the Fairfax Campus. To register, send an e-mail to

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