Thursday, February 7, 2008

Can Families USA Count?

Its Cost-Shift Numbers Make One Wonder

The magic number being used to gin up support for a Massachusetts-style more-government-is-better health care reform in Colorado is $950, as in the "cost of doing nothing" about health care reform is $950. Or, as the Denver Post put it "Coloradans who have insurance spend an extra $950 each year to cover the costs of those who show up at the hospital without insurance."

How does the Denver Post know this? It doesn’t. It merely prints what people tell it, and the local "government is the solution" health care reform elites are all repeating, in unison, is the estimate of uncompensated care published in a 2005 report from Families USA. Apparently we are to believe that if Families USA says so, it must be true.

The problem is that the Families USA estimating technique is quite complex and has the added problem of using sparse national data to interpolate the cost for each state. This can introduce big errors. Before promoting the results of such estimation one would expect that the people producing it would compare their estimates with independent ones. As a public service, a few comparisons are provided in the table below. Unsurprisingly, these sketchy results suggest that the Families USA systematically overestimates uncompensated care.

The Families USA estimates are based on 1996 to 2003 data. Estimates from the independent authorities are for the years given. The Families USA estimates do not include "uncompensated care provided to insured people, who may be unable to pay," they are said to be only the cost of health care that is not paid out-of-pocket by the uninsured themselves. The independent estimates include bad debts where indicated. The independent estimates do not include uncompensated care provided by physicians unless indicated. As estimated by Hadley and Holahan, adding physician care would raise the total by roughly 15 percent.

Comparing Families USA Estimates of the Health Care Costs for the Uninsured With Independent Estimates (millions of dollars)
	Families USA Estimate, 2005	Independent Estimate	Independent Source, Comments
Percentage of total health care expenses paid out of pocket by uninsured	35% (Page 13 of June 2005 report.)	75% for 18-64 year olds (2003) 63.5% for those under 18 (2003)	MEPS
Total National Costs	$43,119	$34,500 (2001 prices)	Hadley and Holahan, 2003. Uncompensated care for late 1990s in 2001 prices. Includes uncompensated physician care.
Total national costs not paid for by government or uninsured	$28,943	$15,800	Hadley and Holahan, MEPS 1996-99. 2001 prices.
Pennsylvania	$1,414	$543	Pennsylvania Health Care Cost Containment Council, 2005. Uncompensated hospital care including bad debt
Massachusetts	$601.6	$565	Massachusetts uncompensated care pool, 2004 hospital charges. The state paid $386.7 million of the total.
Minnesota	$373.3 Percent insurance premiums: 3.3	$191.2	Total Hospital uncompensated care, 2004, Minnesota Department of Health. Percent of hospital operating expenses: 2.0
Washington state	$948.4	$416	Total hospital uncompensated care, State of Washington, 2002—charity care plus bad debt, charges. Estimated at less than 5 percent of operating expenses.
Colorado	$713.7	$239	Total expenditures. Lewin Group, 2007-2008.

As another check on the Families USA numbers, the 2005 report states that the number of uninsured in the USA in 2005 would be 47,564,000, or 16.1% of the population. The pooled Census estimates for the uninsured from 2004-2006 were 45,102,000 or 15.1% of the population ±0.1%.

In short, Families USA was high again.