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Make Money off of the Uninsured

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 patients12-14% 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

 

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