Short-Term Uninsurance: the Problem No One Is Trying to Solve

By John C. Goodman

According to Politico, the White House is trotting out some new arguments lately, including pushing a report from the Treasury Department that tries to make clear that lack of insurance can happen to anyone, not just those with low incomes. For example, the report found that:

  • 48 percent of the population is uninsured at some point over a 10-year span and
  • 41 percent go without coverage for at least six months.

The New York Times, for one, considers this a convincing argument for reform. But what kind of reform? The Treasury report is consistent with the observation that uninsurance, like unemployment, happens to lots of people for short periods of time. This is particularly true during recessions, when changes in insurance status are likely to be tied to changes in employment and, therefore, to changes in income.

Now for an unwelcome surprise: None of the health reform bills before Congress actually deals with the problem of the short-term uninsured. In fact, it’s probably fair to say that no one is even seriously thinking about it.

One of the amazing features of health policy discussions is how often they initially focus on the uninsured before quickly shifting focus to everybody else. By the time solutions are put on the table, the uninsured typically have been long forgotten.

Almost all the proposals before Congress assume that people have stable incomes, stable jobs and stable insurance problems. That allows the plan designers to sort people into convenient categories: the poor go into Medicaid; employees of large firms go into an employer plan; people with no employer plan go into the Exchange; people get subsidies based on their stable annual income; etc.

Now, it is certainly true that most people do have a stable job and a stable income. But this is typically not true of the uninsured. Nor is it true of many low-income families.

Take Medicaid and S-CHIP. It is estimated that a fourth of the uninsured are eligible for these two programs, but not enrolled. Part of the problem is there is an income test that causes people to be eligible and ineligible as their incomes rise and fall. In fact, it is probably fair to say that these two programs were not designed at all for people whose incomes fluctuate.

A similar problem arises with proposals to subsidize premiums with vouchers or tax credits. These are attractive solutions until you realize that the people you are trying to help have unstable incomes. Take someone making $80,000 a year who loses his job and has no income for six months and then finds a new job paying $60,000. What health insurance premium subsidy should this person get during the period when he had zero income? The answer is not obvious.

Under the bills before Congress, the IRS is the information gatherer that forms the basis for fines (for being uninsured) and subsidies (for being insured). But people only file tax returns once a year and over longer periods in the case of extensions.

To consider an extreme case, imagine a world in which everyone experiences a job change and an income change every month. In such a world, what is the best way to encourage insurance and how would you implement it? Whatever the right answer, it is not in any bill before Congress.

Full confession: I don’t know the full solution to this problem. But I promise to return to it.

John C. Goodman, Ph.D., is founder and president of the National Center for Policy Analysis and a Senior Fellow for the Georgia Public Policy Foundation, an independent think tank that proposes practical, market-oriented approaches to public policy to improve the lives of Georgians. Nothing written here is to be construed as necessarily reflecting the views of the Georgia Public Policy Foundation or as an attempt to aid or hinder the passage of any bill before the U.S. Congress or the Georgia Legislature.

© Georgia Public Policy Foundation (November 6, 2009). Permission to reprint in whole or in part is hereby granted, provided the author and his affiliations are cited.

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