– Richard J. Little
Yes, uncompensated medical care is a problem but it’s not as big as conventional wisdom leads us to believe. “Big government” may be a villain to the conservative Republicans and the “evil insurance” company may be the object of hatred by liberal Democrats. But the “ER freeloader” is unique in that he is despised by both sides of the Obamacare debate. Liberal democrats constantly attack the “ER freeloader” without mercy and relentlessly cite uncompensated care as justification for the individual mandate. Supposedly, the individual mandate will supposedly use government force to bear to “make the irresponsible freeloaders” pay their own medical bills.
However, what is missing from this narrative is the true cost of uncompensated care. Or more importantly, what is also missing is any information on the true costs of the Obamacare solution.
As it turns out, the data need to answer what the real cost of “ER Freeloading” has been publicly available for quite a while in a document that both sides of the Obamacare debate consider to be an unbiased and accurate source of information on the cost of uncompensated care: the Kaiser Family Foundation’s 2008 study on the Uninsured in America (.PDF File).
The study is clear up front that one of the biggest myths behind the legend of the “ER freeloader” is simply not true. It turns out that uninsured Americans can and do pay a lot for their medical care. According to the KFF study, uninsured Americans pay 35% of the total costs of their care. So right from the start, it’s evident we need to have a bit more faith in our fellow citizen. Not all uninsured Americans are “ER freeloaders”. Uninsured Americans are trying to pay their bills for medical care and spend $30 billion annually. Interestingly enough, since they have to be savvy consumers because they must shoulder the full costs from their own resources, the uninsured have only 38% of the typical annual medical cost of a privately or government insured person. In fact, it’s been argued that uninsured Americans pay their share in other ways too. The bottom line is it’s a gross mischaracterization to generalize the uninsured as “ER freeloaders.”
The remaining 65% amount that is “cost shifted” to other citizens is $58 billion a year. That sounds bad on its surface, but when compared to the total amount the U.S. spends on health care annually it’s a relative pittance. Uncompensated care is $58 billion out of a total health care spending of $2.4 trillion or about 2% of the total annual spending. 2% is not really that alarming considering how much we are spending in this country each year on health care. For example, it’s estimated that torts and the resulting defensive medicine practices may cost us up to 10 times this much ($500 billion or more). However, what is more interesting is how that $58 billion is broken down on who pays how much of this cost.
A significant chunk is old fashioned charity donated by medical providers totaled $8 billion. As free and independent citizens and organizations, that is their right and choice to provide charity care so let’s not dwell on this as it’s a moral and decent act that clearly is not costing us any money.
The private insurance customers’ portion is roughly the same. It’s $8 billion a year too. This is a very small percentage of the total health care spending by the privately insured. Out of $830 billion private insurance dollars spent in 2008, it’s about 1.7% of the annual costs. Out of the total annual national health care spending it’s tiny at about 0.3% of the annual costs. To put a more personal perspective on that, for the 180 million privately insured individuals (most estimates are that about 60% of estimated population of 300 million have private insurance) that’s about $44 a year per person or $3.60 a month.
The U.S. Taxpayer gets the rest of the bill at $42 billion a year (its paid to providers/doctors thru government programs but the largest of which are the usual suspects – Medicare, Medicaid, SCHIP, etc). That’s about 1.4% of the total annual health care spending. 1.4% breaks down to a tax bill of about $140 per person (based on an estimated population of 300 million in the U.S.). So if you also buy private insurance, your annual tab for uncompensated care is $184 per person or about $15 per month.
Uncompensated care is an added cost to be sure. But to gain some more perspective on this amount, the $184 lost to uncompensated care is roughly equal to the losses due to fraud, theft, or graft that routinely occurs in all other industries most people also interact with. For example, shoplifting loss in the retail sales industry during the past year was estimated to be $42.2 billion or an annual average of $109 per person. So how much does the Obamacare “fix” this relatively minor loss.
It turns out that each person will end up paying significantly more than $184. The CBO estimated Obamacare costs for the insurance subsidy schemes and Medicaid expansion (15 million more people will be added to an expanded Medicaid program) need to help an estimated 30 million people obtain health insurance will cost $940 billion over 10 years. Due to accounting gimmicks, the subsidies and Medicaid expansion costs will only be paid out only in the last 6 years of the program. So roughly speaking, for those 6 years we will average $156 billion per year in new government health care spending to eliminate a $50 billion per year cost. Essentially a bill that averaged $184 per person is traded for one that costs $520 per person.
And $520 per person is probably only the most optimistic ObamaCare cost scenario. Michael Cannon of the Cato Institute estimates that when you strip away all the budget tricks that the Democrats used to manufacture the unrealistic $940 billion figure, the real ten year cost for the taxpayer is likely to be closer to $2.5 trillion. So for our 6 years of benefits, that’s really a taxpayer cost of $417 billion a year or $1390 per person.
However, the true cost of ObamaCare is likely to be much more since the likely cost increases in premiums have been deliberately kept “off the books” in the CBO scoring. It’s likely based on the information on how premiums soared in Massachusetts under a similar compulsory insurance scheme (the now infamous RomneyCare) that, according to Mr. Cannon there will likely be an additional $3.75 trillion in higher premiums bills (private and taxpayer costs will total $6.25 trillion) due to all the other coverage mandates, regulations, and price controls that have been added thrown into Obamacare. Looking at just the private insurance cost hikes (now 195 million privately insured since taxpayers subsidies helped to add 15 million more customers), that’s an additional cost of $1923 per person annually in higher premiums over ten years. So when the higher Obamacare spending costs hit in the last six years of the program are added to these premium hikes, the real cost of attempting to eliminate the current $184 per person annual cost for Uncompensated care adds up to a potential annual low-side cost of $2443 per person (using the straight CBO estimate of $940 billion) or an annual high-side cost of $3313 (using Cato’s more realistic $2.5 trillion government spending estimate).
It is also assumed by both sides of the Obamacare debate that at least this huge cost and unprecedented us of government force essentially eliminates the “ER Freeloader” problem entirely. But, like every other law passed, its enforcement is never perfect and there are loopholes that individual who desire to “game” the system can exploit. Obamacare is no exception. The problem of “ER freeloaders” will not go away.
The CBO estimates that the United States will still have 20 million people uninsured in 2019 after using all that government force and spending all that additional money (and yes, this is one CBO estimate that actually conservative based on the Massachusetts’ current rate of 5.5% Uninsured under the similar RomneyCare law) because there will still be people who cannot afford insurance and will have to pay the government fine instead (yes, the uninsured will be worse off financially and still have no insurance. Actually, before President Obama flipped-flopped on the individual mandate, he routinely hammered Hillary on this very point).
A rough idea of what the remaining “ER freeloader” costs under Obamacare will be can be determined. Using static 2008 costs of $50 billion for 30 million uninsured, we can extrapolate a rough cost estimate of $33 billion or $110 per person that will still be paid for uncompensated care.
Plus we add a whole new class of “Freeloaders” thank to Obamacare: People who will wait to get sick or injured then walk in and buy insurance under the “preexisting condition” and “guaranteed issue” provisions who are a significant new factor in the predicted premium hikes.
Clearly, Obamacare and the individual mandate is a very ineffective and costly way to address the issue of uncompensated care. Conservative republicans could effectively dispel this myth if they would simply state: Its irrational to spend $2443 per person to attempt to eliminate a problem that costs $184 per person – and still have a $110 per person problem left!
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Richard J. Little is a resident of Lawton, Oklahoma. He is aspiring amatuer polical writer/commentator and active Tea Party member. He can be reached at rich-little@excite.com.