Friday, September 17, 2010

Adverse Selection and the Uninsured

Let's connect some dots, shall we?

According to the folks at Kaiser Health News, the US Census Bureau reports that "[t]he number of people with health insurance in the United States dropped for the first time in 23 years ... percentage of people without health insurance increased to 16.7 percent."

Certainly not great news, but then, not unexpected, either.

Why's that, you ask?

Some of it's basic economics: if Mom and/or Dad has lost their job (as a record number of folks have over the past 2 years), then there's less income. Some expenses are pretty much unavoidable: rent or mortgage payments, food, utilities, that kind of thing. Others are important, but expendable: cable and internet, cell phones, maybe the second car. And some things are "necessary evils:" say, insurance. The life insurance is probably the first to go, but the health insurance is pretty expensive, and the folks are relatively healthy...

If you're down to one (or no) income - as so many Americans are - then you start looking at ways to trim the budget that may not be all that attractive, but are necessary nonetheless. If Dad had a heart attack last year, you're not dropping him, but Mom's past the baby-making years and in good health, and her health insurance premiums could pay a good chunk of the mortgage. Little Timmy is epileptic, so he stays, but his sister Suzie is in pretty good shape, we'll roll the dice on her.

There are some long-term problems with that kind of thinking. For one thing, you're assuming that, if little Suzie gets sick, ObamaCare© will allow her to buy health insurance. As we've seen, that's not necessarily the case. But no one really knew that until now (although a lot of us suspected it). And it also means that the healthier folks are the first ones to bail, leaving behind a sicker insured population. Sicker people means more expensive and frequent claims, which means higher premiums, which means more people dropping their insurance, which means...well, you get the picture.

Is this good news or bad news for folks who see ObamaCare© as the solution? It seems to me that the overarching problem is that it doesn't address the problem that health care costs keep going up, and it's actually driven back any gains we might have made because of what's happened (and continues to happen) to the insurance marketplace. Fewer people working means more people on Medicaid, but also fewer people paying taxes to fund Medicaid (and SCHIP and all the rest). Now, that’s not completely accurate, because there are any number of folks who have ditched the corporate world (some voluntarily, some not) and started their own businesses. But even if they stay insured, that's a wash, no net loss in the pool of insured folks, but no gain, either.

And there's this: as we pointed out some time ago, a rather large cohort of the uninsured is those here illegally. They have health care expenses but no insurance. What portion of that 16.7% are illegals? Who knows, but it's more than a couple. How does ObamaCare© plan to deal with them?

Well, we had to pass the bill to find out what's in it; maybe that's next.
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