Uninsured Health Care is a Hidden Health Care Tax that Americans are already Paying in Premiums

This study by the independent actuarial consulting firm Milliman Inc. analyzed federal data and produced the study with findings that ach insured family and individual with private health insurance have premiums that are higher, in part, because the costs of uncompensated care for the uninsured are shifted to those who have insurance, a "hidden health tax." The report quantifies this "tax" for family and individual coverage. (May 2009)

As the number of Americans without health insurance continues to rise, so too do the costs borne by those who have coverage, who face what might be called a “hidden health tax.” Private health insurance premiums are higher, at least in part, because uninsured people who receive health care often cannot afford to pay the full amount themselves. The costs of this uncompensated care are shifted to those who have insurance, ultimately resulting in higher insurance premiums for businesses and families.

During 2007 and 2008, one out of every three non-elderly Americans—86.7 million people—went without health insurance for some period of time. When those who do not have health insurance get sick, their first response is often to avoid or delay seeking care due to the cost.

When the uninsured do obtain care, they struggle to pay as much as they can afford. Often, however, the uninsured cannot afford to pay the entire bill, and a portion of it goes uncompensated. To make up for these uncompensated care costs, doctors and hospitals charge insurers more for the services provided to patients who do have health coverage. In turn, the costs that are shifted to insurers are passed on in the form of higher premiums to consumers and businesses that purchase health coverage.

This cost shift to health insurance premiums is a “hidden health tax.”
To quantify this “tax,” Families USA contracted with Milliman, Inc., an independent actuarial consulting firm, to analyze federal Medical Expenditure Panel Survey (MEPS) data and data from other federal and private sources. Based on these data, Milliman estimated the total national cost of uncompensated care provided to the uninsured, and it quantified that amount spread across the privately covered, non-Medicare, non-Medicaid population.

KEY FINDINGS OF THE STUDY

While people without health insurance often delay or forgo care, in 2008, the uninsured received $116 billion worth of care from hospitals, doctors, and other providers. Those costs were covered in the following ways:

• The uninsured paid for, on average, more than one-third (37 percent) of the total costs of the care they received out of their own pockets.
• Third-party sources, such as government programs and charities, paid for another 26 percent of that care.
• The remaining amount, approximately $42.7 billion in 2008, was unpaid and constituted uncompensated care.

To make up for this uncompensated care, the costs were shifted to insurers in the form of higher charges for health services.

These higher charges are then passed on to families and businesses as higher premiums.

The impact of this hidden health tax on annual premiums for families and individuals in 2008 was as follows:

• For family health care coverage, the hidden health tax was $1,017.
• For health coverage provided to single individuals, the hidden health tax was $368.

Read the full report: Click Here