How much do the uninsured cost the American healthcare system? This is a question with great practical relevance, as without a clear understanding of the health needs of the uninsured and the cost of providing care for those needs, it’s impossible to make a policy which successfully addresses the issues facing them.
Now, I personally was under the impression that the uninsured pose a major burden to the healthcare system. After all, we’re talking about a fairly large number of individuals who cannot afford health care (and hence need to be subsidized by the American taxpayer). Much to my surprise, the blog Healthcare Economist quotes from a paper from the Journal of Health Economics that finds that the uninsured in net might not actually be a burden on doctors’ wallets at all (hat tip: A. Phan)
The majority of physicians actually make money, on net on their uninsured patients…12-14% of physicians found their uninsured patients patients more than twice as profitable as their insured patients; that is the net payments from the uninsured were more than twice the expected payments from the insured patients.
The reason? Apparently (although, as a consultant, I shouldn’t be surprised by this), insured patients are able to extract bargain prices for medical equipment/drug suppliers as a result of insurance companies being able to bargain for prices. Uninsured patients, on the other hand, have to pay the full list price, because they lack the scale (or, in other words, the bargaining power) to negotiate lower prices.
But, even more interesting, is that if the higher prices are ignored, the study concluded that
Even our most conservative estimates suggest that uncompensated care amounts to only 0.8% of revenues, or at most $3.2 billion nationally [Ben's note: (a) the report shows that most of this cost comes not from care that doctors hand out for free but by nonpayment and (b) this is TINY compared to total health spending, and even smaller compared to US GDP].
This is interesting, because while it is known that the standard statistics cited about the uninsured also count those who choose to forgo insurance or those who, although unable to pay for large expenses, are able to pay for smaller ones, there’s usually some level of controversy over the ability of uninsured patients to pay. This finding suggests that there is a reasonable capacity to pay amongst the uninsured. This isn’t a blanket statement that can be made, and this is certainly not claiming that individuals without insurance can pay for chemotherapy or heart surgery, but it’s a caution that we don’t necessarily have to jump to a single payor-universal health care form of coverage. We just need to find a way to get more people covered (kind of like my proposal).
Furthermore, this will hopefully shed more doubt on claims by individuals believing that the uninsured are a horrible burden — an insurmountable problem that can’t be solved.
