A true count of the 'uninsured'

By Michael Tanner

No single statistic drives the health-care reform debate like the number of uninsured Americans, variously characterized as 45, 46, 47, or even 50 million. Unfortunately, though, most of what we think we know about the uninsured is wrong.

For the record, according to the latest data from the Census Bureau, 45.6 million Americans lack health insurance. This is actually down slightly from the 47 million who were uninsured in 2006.

However, those numbers don't tell the whole story. For example, roughly one-quarter of those counted as uninsured, or 12 million people, are eligible for but have not enrolled in Medicaid or the State Children's Health Insurance Program (S-CHIP). This includes 64 percent of all uninsured children and 29 percent of uninsured parents.

Since these people would be enrolled in those programs automatically if they went to a hospital for care, calling them uninsured is misleading.

An additional 10 million uninsured Americans are not American citizens. Approximately 5.6 million of them are illegal immigrants. An additional 4.4 million are legal immigrants who have not been naturalized.

Nor are the uninsured necessarily poor, as one might assume. A study by former Congressional Budget Office director June O'Neill found that 43 percent of the uninsured have incomes above 250 percent of the poverty level, making at least $55,125 for a family of four. Slightly more than a third have incomes above $66,000.

Another study, by Mark Pauly of the University of Pennsylvania and Kate Bundorf of Stanford University, concluded that nearly three-quarters of the uninsured could afford coverage but have chosen not to purchase it.

Most of the uninsured are young and in good health. According to the CBO, roughly 60 percent are under the age of 35, and fully 86 percent report that they are in good or excellent health.

Finally, when we hear about the 45 million Americans without health insurance, the suggestion is that they were all born without health insurance and will die without health insurance. But the reality is that most of them are uninsured only for a relatively short period of time.

No more than about 30 percent of the uninsured remain so for more than a year. Sixteen percent go without insurance for at least two years, and less than 2.5 percent for three years or longer. About half are uninsured for just six months or less. Because health insurance is too often tied to employment, the working poor who cycle in and out of the job market also cycle in and out of health insurance.

None of this is meant to suggest that those without health insurance don't face severe hardship in many cases, or that we shouldn't try to expand health coverage. But it does mean that we might be able to deal with this problem in a much more targeted way, rather than with a huge, expensive new government program.

For example, young, healthy, and well-off people might be more inclined to buy insurance if it cost less. That could be achieved by eliminating regulations that increase the cost of insurance for younger, healthier workers; eliminating costly benefit mandates; and creating more competition by allowing people to purchase insurance across state lines.

Because people are losing their insurance when they lose their jobs, we should move away from a health-care system dominated by employer-provided insurance. That means changing the tax treatment of health insurance.

The current system excludes the value of employer-provided insurance from a worker's taxable income. However, a worker purchasing health insurance on his or her own must do so after paying taxes on income. This gives a significant advantage to employer-provided insurance.

Workers should receive a standard deduction, a tax credit, or - better still - large Health Savings Accounts for the purchase of health insurance, regardless of whether they get insurance through their employers or purchase it on their own.

After all that, we can begin to look at those who may need some kind of subsidy to afford insurance.

As doctors know, if you don't get a diagnosis correct, you are not going to prescribe the right treatment. That also holds true for health-care reform. So before we start expanding coverage to those who need it, let's make certain we understand who they are.