Families USA Makes Strong Bid for Worst Study of the Year Award

In the ominously titled Hidden Health Care Tax, Families USA claims the uninsured are costing other Americans $1,017 a year (family) or $368 (individual) in unpaid medical bills. That's five times previous estimates and in stark contrast to the estimate by Hadley et al. that uncompensated care amounts to at most 1.7 percent of the amount spent on private health insurance. [link] The latter estimate implies that an individual with expensive employer coverage priced at the 2006 average of $4,118 is incurring a "hidden tax" of about $70 a year. [link] A family with expensive employer coverage priced at the 2006 average premium of $11,381 is incurring a "hidden tax" of at most $200 a year. [link

Compared to the cost of any conceivable Congressional program to "make health coverage affordable for all Americans" of the type that Families USA supports, an annual $70 to $200 increase in private insurance premiums is a bargain.

Beginning with the reputable 2006 Medical Expenditure Panel Survey (MEPS), Families USA used three methods to pump up its uncompensated care numbers.

Disregarding Important Sources of Payment. Without explanation, Families USA disregarded categories accounting for roughly 33% of the payments MEPS allocates for uninsured care. These categories include payments under automobile coverage, Medicaid emergency coverage for women and newborns, state programs other than Medicaid, services provided by the federally subsidized community health centers, payments from employers that are not insurance, and payments from other kinds of insurance like liability insurance and critical illness insurance.

The sums involved can be substantial: Auto coverage medical payments account for $9 out of every $100 of automobile insurance premiums. [link] In 2006, U.S. drivers paid an estimated $447 billion in auto premiums. Nine percent of premiums would be roughly $40 billion in payments, a large number when compared to the $54.3 billion in uncompensated care that Hadley et al. estimate is the total amount of uncompensated care.

Inflating Estimates of Uncompensated Care. Families USA arbitrarily increased the number of 2006 MEPS uninsured by 2 percent to bring its 2008 estimates up to date. The last time the rate of uninsured increased by 2 percent over a two-year period was from 1980 to 1982. It has not increased by even 1 percent in any year since 1990. [link]

A back of the envelope calculation using Census Bureau estimates of the number of uninsured in 2006 and 2007, along with Census Bureau estimates of the number employed in 2006, 2007, and 2008 suggests that the Families USA arbitrary increase in the number of uninsured is accurate only if virtually all of the people who lost their jobs in 2008 both lost employer provided health insurance and failed to find any replacement for it. In view of the fact that many of these people were probably part-time workers, had spouses whose employers could provide health insurance, or could buy insurance for themselves directly, this does not seem particularly likely.

Families USA also ignored the fact that people who have part-year health insurance schedule medical care so that insurance pays for it. Furthermore, most uninsured people are only uninsured for part of a year. Hadley et al. report that the part-year insured incur 87 percent of their medical costs in the part of the year in which they have medical insurance. Families USA simply ignores this result.

Families USA assumes that the cost of services rendered to the uninsured should be based on what private insurance pays even though many uninsured people likely pay less for care. Furthermore, private insurance pays substantially more than any other third party payer. For physicians, a Milliman report on Washington state payments found that commercial payments were 24 to 45 percent higher than Medicare and Medicaid reimbursements.1 Given the economic literature showing that hospitals adjust the intensity of care to match the expected level of payment, there is no particular reason to expect that the uninsured consume, or would be billed for, the same services that people with private insurance receive.

Allocating All Costs to the Private Sector. Families USA assumes that every dime of uncompensated care costs is passed on to the privately insured because Medicare and Medicaid have firm fixed prices for care that are difficult to adjust. This assumption is unlikely. Providers are adept at Medicare coding games and at wringing extra money out of legislatures. Providers also can adjust the intensity of care in a variety of ways, and those who pay less generally receive less care.

  1. Will Fox and John Pickering. May 2006. Payment Level Comparison Between Public Programs and Commercial Health Plans for Washington State Hospitals and Physicians. Milliman, Inc. Seattle Washington. []

Comments (7)

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  1. Ken says:

    Hard choice, but I vote for Families USA.

  2. Joe S. says:

    I’m with Ken. But where do we get to actually register our votes?

  3. John R. Graham says:

    I just had another look at the press release. I know that Milliman is a consulting firm, and they have to do what their clients tell them, but producing this sort of report, out of context, puts its reputation at risk.

    I’m not surprised that Sen. Baucus endorsed the report: Anything that distracts taxpayers from the cost-shift of government-run health care is valuable to the political class.

    But I think it is appalling that the NFIB and Aetna also endorsed the report. Until these folks stop shilling for a government take-over of health care, they put their constituencies at risk.

  4. Brian says:

    Just another conservative trying to minimize the problem.
    Granted that not all un-insured are uninsured due to affordability but the drive to reduce the numbers of the uninsured to a small, paltry amount (10 million), is akin to ignoring the problem and hoping that it will go away.

    The problem will not go away, and the unisured are in need of health-care 100% of the time not 50% or 75% or even 90% of the time. It is disgusting to watch how manipulative conservatives are while they maintain the status quo.
    1) Tax- credits? already been done and proven failures in controlling costs and/or availability.
    2) Free-market? There is no such thing when talking about the healthcare industry. Continueing support of de-regulation only ensures that insurance can and will charge higher prices without increasing either availability or quality, and will ensure that insurance continues to dictate medical practice to you and your doctor.(RATIONING)
    3) Dis-allowing pre-existing condition clauses-
    Again, already done. Again proven to have no positive affect upon cost nor availability. What it does do is ensure that health-insurance charges 3-4 times the already high premiums for a full year before any benefit for any reason is paid out. In other words you can pay them for nothing to the tune of 15-20 THOUSAND dollars!

    Conservatives are bent upon maintaining the current system through fear. If conservatives have their way then we will be having the same conversation in another 4 years only the numbers of the un-insured will have doubled and premiums will have gone up 2-3 hundred percent. Hope you still win? If so then I hope you get really sick and find out just how worthless your insurance truly is.

  5. […] Update, June 18 2009:  What you do not know about the uninsured cost-shift: If you’ve heard from Families USA the uninsured costs families and individuals with commercial insurance big bucks, think again. Check out this critique here. […]

  6. Linda Gorman says:

    Between this, its claim that reductions in the rate of Medicaid growth were program cuts, and its claim that being without health insurance kills people, Families USA has been having a lot of trouble with numbers lately. Maybe the fact that it’s so poor at math is why this internal media guide instructs its allied organizations to shift the focus “to the people” and away from “the complicated budget numbers and policy rhetoric.”

    It should come as a relief to us all that it does think numbers are important, however. “The press and the public believe numbers,” it writes. “Use numbers to reinforce your talking points and real stories.”

    And if the real world numbers don’t agree with the talking points? In the past, Families USA has subjected them to enhanced interrogation techniques until they ‘fess up, as detailed in this and other posts on this blog.

  7. Ali says:

    Health care reform had been deeabtd? for 50 years, it is about time to vote. Republican don’t want reform. Bush had both houses, they could have reformed it the way Republican wanted. Republican DON’T WANT REFORM PERIOD. Insurance is the master of Repulbican party.