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ANESTHESIADOTCALM NEWSLETTER AUGUST 2010

Health Care

A Different Point of View

The rising costs of American health care, which currently occupies 17.5% of our GDP, the current economic recession, the recently passed Patient Protection and Affordable Care Act (PPACA), and concerns about illegal immigrants have converged into emotional arguments repeated adnauseum on news networks, editorial pages and social networking sites. There hardly seems time to consider the validity of a statement before the sympathetic response kicks in and blood pressures rise in anger.

Florida lawmakers, for example, are now preparing to introduce their own version of Arizona's strict immigration law. Republican state Rep. Ritch Workman has been championing the cause by painting the state's illegal immigrant population as the scourge of fiscal conservatism, business owners and taxpayers (1).

In a June 6 opinion piece published in Florida Today, Workman wrote, "In Florida alone, more than $3.5 billion a year is spent on health care and criminal justice for illegal immigrants. Given this, I think it is time for Florida to follow Arizona's lead."(2)

Testimonials like the one by Carol Plato, Director of Corporate Business Services for Martin Memorial Medical Center in Florida, featured in the video below certainly fuels the fire over the imposing influence of illegal immigrants on health care costs.

To be sure, the uninsured consume more than $50 billion in uncompensated care, the costs of which are passed through health care institutions to insured Americans(3). And although, undocumented immigrants are driving up the number of people without health insurance, illegal immigrants represent only about 15% of the nation's 47 million uninsured people (4).

In fact, illegal immigrants make up less than 5% of the cost in most states. In 2000, for example, counties along the Mexican border lost more than $800 million in health care services for which they were not paid but only 25% of that went to care for illegal immigrants, according to a report by the United States/Mexico Border Counties Coalition (4).

Data on health care costs for illegal immigrants are actually quite sketchy because hospitals and community health centers don't ask about the legal status of patients (4).But over the past two decades, efforts to estimate the fiscal impact of immigration in the United States have concluded that, in aggregate and over the long term, tax revenues of all types generated by immigrants—both legal and unauthorized—exceed the cost of the services they use (5).

The Congressional Budget Office (CBO) reviewed certain measurable costs associated with providing services to unauthorized immigrants that ranged from a few million dollars in states with small unauthorized populations to tens of billions of dollars in California (currently the state with the largest population of unauthorized immigrants). Costs were concentrated in programs that make up a large percentage of total state spending—specifically, those associated with education, health care, and law enforcement. In most of the estimates that CBO examined, spending for unauthorized immigrants accounted for less than 5 percent of total state and local spending for those services. Spending for unauthorized immigrants in certain jurisdictions in California was higher but still represented less than 10 percent of total spending for those services (5).

And according to Federation for American Immigration Reform (FAIR) Taxpayer-funded, unreimbursed medical outlays for health care provided to the Florida’s nearly 1 million illegal aliens in 2009 amounted to only about $165 million (6,7). This is a drop in the bucket when you consider that the cost for the estimated 4.8 million uninsured Floridians that year was $1.5 billion (8). What this means is that the greatest amount of uncompensated health care costs is generated not by illegal aliens but by the uninsured of which illegal aliens constitute only a small percentage. And this seems to be true of the United States as a whole.

Nationwide 15.4% or 46.3 million people of the 307 million people that call the US home are uninsured (9) and according to the “Income, Poverty, and Health Insurance Coverage in the United States,” a Census Bureau report published in August 2008, 22.7 million of these persons were of foreign extraction. Since the Census Bureau does not ask whether someone is legally in the United States, it is unknown how many of these 22.7 million are actually illegal aliens. But the Census Bureau has been able to estimate that in 2007 the majority of non-citizens residing in the United States did in fact have health insurance. Of the approximately 23 million non-citizens residing in the country in 2007, says the Census Bureau, 12.5 million had health insurance, with 9.4 million covered by private plans. This leaves approximately 11 million foreign nationals or approximately 4% of the US population responsible for the rising costs of health care.

So, controlling the influx of illegal immigrants may help reduce the the cost of health care costs but greater efforts need to be made in reducing the number of uninsured. In 2008 the uninsured received $116 billion worth of care from hospitals, doctors, and other providers of which $42.7 billion was unpaid&$42;(10). To make up for this unpaid care, costs were shifted to insurers in the form of higher charges for health services with the result being higher premiums for families and businesses. This in essence amounted to a hidden tax on premiums which has been estimated to range from $200 to $1,017 per family (11).

Part of the solution to the ever upward spiraling costs of health care may be the enactment of mandated health care insurance for every American citizen. Although much debate continues on the legality of this mandate, that is, whether such a mandate falls under the purview of article1, section 8, clause 3 of the Constitution’s Commerce Clause, one thing is known if the individual mandate is not enacted. If people who

are in better health can opt out of the market and effectively gamble that they can pay for whatever health care they need at the point of service, prices rise for those who are in poorer health, leading to an “adverse selection” spiral that raises insurance prices for all. Whether you agree with this assertion, of course depends on your analysis of the data. For example, the Pacific Research Institute, a conservative think tank, asserts that the uninsured actually use fewer services than the insured and do not drive up the cost of health care; and in fact subsidize the insured(12). According to an 2004 editorial appearing in USA Today, hospitals over bill the uninsured for the same services rendered to the insured and that this over-billing forces “millions of [uninsured patients]...to subsidize insured patients”(13). Even the Congressional Budget Office found that while broadening insurance coverage might lead to less cost shifting, "that effect would probably be relatively small and would not directly produce net savings in national or federal spending on health care”(14).

The Patient Protection and Affordable Care Act (PPACA) is now law. It doesn’t matter what side the fence you were on when the law was passed, the fact is we must all deal with the ramifications of it. One of its impacts is that now all individuals with family incomes below 133% of the poverty line (i.e.,below about $30,000 for a family of four) are eligible for free public insurance, and there are tax credits to help make health insurance affordable for families with incomes of up to 400% of the poverty level. For these individuals, the PPACA may be all that there is between their health and financial ruin. But not all America's 46 million uninsured people can be considered victims of poverty. An Employment Policies Institute study found that 43 percent of the uninsured – about 20 million people - earn more than 2.5 times the federal poverty level, or $55,125 for a family of four (15).Yet even if some of these uninsured people may appear well-to-do on paper, other factors could still push insurance costs out of reach. Around 7.5 million uninsured Americans have family incomes higher than $75,000 but premiums may be high because of health status, age, cost of living and geography. And while the federal poverty level is the same across the country--$10,830 for an individual and $22,050 for a family of four - premiums on the individual insurance market vary widely by state, according to research by America's Health Insurance Plans. For example, in Massachusetts, the average annual premium for family coverage was $16,897 in 2007. In Wisconsin, it was $3,087. So it is easy to see that depending on various factors even if one is relatively affluent, the cost of health insurance my reduce an an individual’s expendable income to a barely sustainable level. The PPACA now levels the playing field. The Act assures that insurance companies can not turn away patients because of preexisting conditions. Prohibiting preexisting conditions entails enacting two different regulations, known as "community rating" and "guaranteed issue." There are variations on each, but in basic terms, these regulations mean that insurance companies have to charge everyone the same amount for the same policy, regardless of risk factors, and that they have to issue policies to everyone who's willing to pay.

The problem is that with these regulations in place, there's no incentive to buy insurance until the individual is already very sick. After all, if the insurance companies can't turn him/her down or jack up his/her rates, why buy in early? According to an unpublished Kaiser Family Foundation analysis of the CDC's 2008 National Health Interview Survey, 2 percent of uninsured people said they simply didn't want health insurance (15). So what happens is that, in hopes of saving money, some number of healthy people decline to buy insurance, creating a sicker, more expensive pool. That pushes a new wave of the healthy people to jump ship, which creates a pool that's even sicker and even more expensive. Go through a couple iterations of this, and fairly quickly you have a very small, very sick, and very, very expensive insurance pool.

Insurance companies refer to this as a "death spiral," and states like Kentucky, Maine, Massachusetts, New Hampshire, New Jersey, Vermont, Washington and New York that have enacted those two insurance regulations have experienced disastrous results. The state of New York, is a prime example of what happens when community rating and guaranteed issue are enacted. The individual health insurance market declined from 4.7 percent of the state's health insurance to 0.2 percent, while, premiums skyrocketed. And according to an October 2009 report from the insurance lobby, the state's individual market premiums are now the highest in the nation.

So for the new health care law to be effective an individual health care mandate is imperative. In fact it is the core to making it work. All Americans need it to work. Yes, illegal immigrants add some burden the health care system, but they are only a small part of the total picture. Obtaining health insurance for every person in the United States- legal or illegal- may be part of the answer to curtailing the burgeoning costs of health care.

* The uninsured paid for,on average,more than one-third (37percent) of the total costs of the care they received out of their own pockets. Third-party sources,such as government programs and charities, paid for another 26 percent of that care.

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