During Sunday's interview with George Stephanopoulos, President Obama, while promoting his proposal for an individual mandate that would require every US citizen and legal alien to have health insurance, claimed that the average family is paying "$900, on average -- our families -- in higher premiums because of uncompensated care".
Health care researchers, however, believe the President is vastly overstating the impact that the uninsured have on the cost of health insurance premiums.
I. Obama's Claim
Here is the relevant portion of the transcript from Sunday's interview:
STEPHANOPOULOS: You were against the individual mandate...
STEPHANOPOULOS: ...during the campaign. Under this mandate, the government is forcing people to spend money, fining you if you don’t. How is that not a tax?
OBAMA: Well, hold on a second, George. Here -- here's what's happening. You and I are both paying $900, on average -- our families -- in higher premiums because of uncompensated care. Now what I've said is that if you can't afford health insurance, you certainly shouldn't be punished for that. That's just piling on. If, on the other hand, we're giving tax credits, we've set up an exchange, you are now part of a big pool, we've driven down the costs, we've done everything we can and you actually can afford health insurance, but you've just decided, you know what, I want to take my chances. And then you get hit by a bus and you and I have to pay for the emergency room care, that's...
This is not the first time the President has made a similar claim. On June 11 of this year, Obama stated the average premium cost of uncompensated care was $1000:
"The average family pays a thousand dollars in extra premiums to pay for people going to the emergency room who don’t have health insurance. So you’re already subsidizing other folks; it’s just you’re subsidizing the most expensive care."
The President also repeated his $1000 claim during his September health care speech before a Joint Session of Congress:
"Those of us with health insurance are also paying a hidden and growing tax for those without it – about $1,000 per year that pays for somebody else’s emergency room and charitable care."
II. Obama's Source
Do insured families really pay $1,000 in extra premiums to carry the uninsured? The figure doesn’t come from thin air. A 2005 report by health care advocacy group Families USA found that this "cost shifting" amounted to $922 per family or $341 for those insured individually, and a May 2009 update revised those numbers to $1,017 and $368 respectively.
Wikipedia describes Families USA as "a progressive American non-profit consumer health-care advocacy organization" and "influential health-care lobbyist in Washington, D.C." Families USA was founded by former Clinton Administration appointee Ron Pollack, and was named by the Hill newspaper as "one of the top twelve lobbyists on health insurance issues".
III. Obama's Numbers Disputed
While President Obama has repeatedly cited a number in the range of $1000 as the extra cost in premiums that the average US family pays because of uncompensated care, other research groups believe that the premium cost figure is significantly lower.
[T]he claim is disputed. A 2008 report conducted by researchers from the Urban Institute for the nonpartisan Kaiser Family Foundation examined the first Families USA study, and found its claims to be unconvincing....
Jack Hadley, the lead researcher on the KFF study, told us that to assume that the insured end up paying for all uncompensated care is "clearly an exaggeration." According to KFF, the amount of uncompensated care that providers could shift to the privately insured is much less, only $8 billion, not the $42.7 billion Families USA said could be passed on to premium payers in 2008. The KFF number is less than 19 percent of Families USA’s, and by our figuring that implies a per-family increase in health insurance premiums of less than $200 a year, not $1,000.
According to the KFF study, President Obama is inflating the premium costs of uncompensated care by approximately a factor of five to support his argument that we need an individual Health Insurance Mandate.
IV. Obama previously acknowledged the inaccuracy...
Some might be tempted to write off this discrepancy between the two studies as simply the actuarial version of he-said she-said - with no one really able to say which amount of money ($900-$1000 vs. less than $200) is actually correct.
After criticism of his June 11 speech in which he first used the $1000 figure as the cost to premiums from uncompensated care, the President, four days later at the AMA conference, stated that the $1000 per family figure is reflected not just in premiums, but overall in "higher taxes, higher premiums and higher health care costs".
Each time an uninsured American steps foot into an emergency room with no way to reimburse the hospital for care, the cost is handed over to every American family as a bill of about $1,000 that’s reflected in higher taxes, higher premiums and higher health care costs."
The change in Obama's language is significant, because it is acknowledgment that the cost of the uninsured is not directly the cause of a $900 or $ 1000 jump in premiums for the average American, but is simply the overall cost to the entire system when calculated per family.
V. ...yet continues to tout the high premium number anyway.
Despite this previous acknowledgment that the $1000 per family is actually the systemic cost, and not just the cost to premiums, the President continues as late as today to imply that an insurance mandate will save us $900 to $1000 on an average family's health premiums, even while the average savings on those premiums is actually less than $200 per family.
And even that $200 may be pushing it. According to the KFF study:
[W]e are highly skeptical that the high and growing cost of private insurance is strongly related, if at all, to the amount of uncompensated care delivered by private providers or to the growing number of uninsured people."
Given that total private health insurance expenditures in 2008 are estimated to be $829.9 billion (from NHEA projections), the amount potentially associated with cost-shifting represents less than one percent of private health insurance costs. Even if all private funding for uncompensated care were recouped from private insurance payments, this would still amount to only 1.7% of private insurance premiums.
So before any of you folks who are lucky enough to have health insurance start thinking that President Obama has suddenly morphed into the Geico Gecko, and believe that his proposal for an individual health insurance mandate is going to personally save you hundreds of dollars on your health insurance premiums - you may want to check the fine print.
Previous essays in this series: Dump the Health Insurance Mandate
x post: Docudharma
Update: After crunching some numbers (thanks pragprogress and nickrud below), it appears that in exchange for President Obama's plan to require a Health Insurance individual mandate and to give billions upon billions of dollars tax payer subsidies every year to private insurers, policy holders will see a reduction in their premiums of, at most, 1/2 of 1%.
Congratulations everyone! Go buy yourselves a cup of coffee.