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California’s Uninsured: Not as bad a problem as you might think.
Commonsense policy changes can also help make health insurance more affordable.

John R. Graham
Medical Progress Today
March 9, 2006

Out here on the left coast, there’s no end to the hand-wringing over the “crisis of the uninsured.” Proposals to solve this crisis include Canadian-style, so-called “single payer” government monopoly health insurance (fully supported by the Democratic caucus in Sacramento), and ordering employers to provide health insurance to their employees – San Francisco City Supervisor Tom Ammiano wants to compel firms with as few as 20 employees to provide health insurance. The former, of course, is simply a recipe for long waiting lists for medical treatment (akin to waiting for bread in the Soviet Union), and the latter would result in higher unemployment for the lowest wage earners.

Like the rest of the U.S., there are many problems with health insurance in the Golden State, but we must keep the problem in perspective: the situation is not as awful as generally portrayed. The media keep circulating the claim that there are about seven million uninsured in California. Unanchored from its source, this figure simply floats on the ocean of public discontent without explanation or understanding.

The statistics most widely cited by the media and other parties come from the Census Bureau’s “Income, Poverty, and Health Insurance Coverage” publication. However, the Census Bureau conducts another survey, the Survey of Income and Program Participation (SIPP). One major difference between the two is that the first report, which contains the more alarming figure, stems from annual surveys. It collects information on myriad issues, one of which happens to be health care, and asks respondents (by telephone or in person) to think back a year. The SIPP, on the other hand, asks respondents about their actual state of health insurance, month after month. The two methods yield very different results. The figures from the annual report show over twice as many uninsured as those from the monthly survey.

Unfortunately, the more conservative SIPP does not collect data at the state level. However, using state level data from the report with the more severe estimate invites the question of whether asking people to think back a year yields more accurate results than quizzing them every month and then summing the twelve responses. If you think the latter, then you agree with Census Bureau researcher Shailesh Bhandari, who wrote a paper concluding that the monthly information makes the SIPP a more accurate depiction of the truth.

So, although we cannot quantify California’s uninsured directly from these monthly surveys, we can use the national differences between the two reports to make a pretty good estimate of the number of Californians who are uninsured for at least a year, without doing too much violence to good statistical practice. If the national numbers apply to California, the number of uninsured in our state drops from almost seven million persons to a little under three million, or about 9 percent of the population.

That’s a big difference, but 3 million is still a lot of folks without insurance. However, many of them are uninsured by choice, or at least by their parents’ choice. A report from UCLA’s Center for Health Policy Research figures that 900,000 Californian children are eligible for government programs, but not enrolled. So, nearly two thirds of California’s children who reportedly suffer from lack of health insurance in fact suffer only from parents who haven’t signed them up.

Some argue that low-income people don’t register for these programs because of cultural or linguistic barriers, but I don’t buy it. If someone wants or needs something, and someone else is offering it for free, the former will find the latter. Indeed, there is an entire “advocacy industry” dedicated to getting health and social services to people who have a claim on the state. It’s more likely that they don’t enroll because they don’t need to until they get sick.

Higher income people without insurance have a different challenge: the price is too high. If your car insurance plan charged you a $5 co-pay for a tank of gas, you’d use too much gas and car insurance would be way too expensive, for obvious reasons. You’d be involved in endless squabbles and paperwork with insurance bureaucrats, trying to prove that you “needed” so much gas. It would be even worse if you were forced to buy this “managed car” policy through your employer. However, rules that force health insurers to provide such policies ensure that many Californians will necessarily choose not to buy them.

One way to reduce the cost is to simplify the policies. In California, mandatory coverage of services such as alcohol and drug treatment, in vitro fertilization, acupuncture, and chiropractic care increases the cost of health care by about 30%, according to the Council for Affordable Health Insurance. Let’s cut out these benefits, which many patients do not value.

Another way to reduce the cost is to make health insurance look more like proper insurance: no more $5 co-pays for a tank of gas. Allow people to spend pre-tax dollars on ordinary health expenses, with an insurance policy that kicks in after a certain point. The vehicle for this is a Health Savings Account (HSA), a tax-advantaged account, similar to an IRA, at a financial institution. Combined with a high deductible health insurance policy, the whole package comes at a lower price than traditional policies. The IRS made HSAs available in 2004. California, however, continues to tax HSA contributions and earnings, reducing their appeal. California must repeal this health tax. Although the number of uninsured is not as bad as it’s made out to be, these two steps will nevertheless move it in the right direction, towards zero.

John R. Graham is Director of Health Care Studies at the Pacific Research Institute. This column is based on a report published by the Institute, California’s Uninsured: Crisis, Conundrum, or Chronic Condition?

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