Study Estimates that the U.S. Will Spend Nearly $41 Billion for Uncompensated Care for the Uninsured in 2004; While Full-Year Uninsured Receive About Half as Much Care as Those Fully Insured

Covering All Uninsured Americans Would Add $48 Billion to Total Medical Spending

WASHINGTON, DC— Uninsured Americans could incur nearly $41 billion in uncompensated health care treatment in 2004, with federal, state and local governments paying as much as 85 percent of the care, according to a new Kaiser Commission on Medicaid and the Uninsured (KCMU) study. Even with uncompensated care, the study shows that people uninsured for the entire year can expect to receive about half as much care as people fully insured.

Another major finding of the study, authored by Urban Institute researchers Jack Hadley and John Holahan, is that if the country provided coverage to all the uninsured, the cost of additional medical care provided to the newly insured would be $48 billion—an increase of 0.4 percent in health spending’s share of the gross domestic product.

"Leaving 44 million Americans uninsured exacts a substantial price on society as well as individuals, while covering the uninsured would improve their health care without generating large increases in overall health spending," said Diane Rowland, executive director of the Kaiser Commission on Medicaid and the Uninsured.

The study, released on the first day of Cover the Uninsured Week, measures the direct cost of care if all the uninsured were provided coverage and used the health system at rates comparable to the insured population. It reflects the potential increase in overall health spending directly attributable to the uninsured, but does not take into account the additional costs associated with major health coverage proposals.

What Do We Spend Now?

Medical costs for all the uninsured may reach $125 billion in 2004. See Figure 1.

One-third of this care ($41 billion) is uncompensated, meaning it is not paid by insurance or out-ofpocket by the individual. Over one-quarter of the uninsured’s health care costs is paid out-ofpocket by individuals. The remaining 42 percent of care for the uninsured is paid by private and public insurance for those individuals who have health coverage for part of the year.

Of the $41 billion in spending on uncompensated care, $35 billion or as much as 85 percent is federal, state, and local government spending. Two thirds of the $35 billion in government spending on uncompensated care is attributable to the federal government, most of which goes toward payments to hospitals to offset losses incurred when a large share of patients are unable to pay their hospital bills.

Even after accounting for the $41 billion in uncompensated care, 2004 per capita spending for people uninsured for the full year is projected to remain about half (55 percent) of what medical spending is for a full-year insured person, $1,629 compared to $2,975.

What Would Extending Full Coverage Cost in Additional Medical Spending?

If all the uninsured were granted full-year health coverage, medical spending is estimated to increase by $48 billion in 2004 dollars. This sum, added to current medical spending on the uninsured, would bring the total medical spending on the currently uninsured population to $173 billion. See Figure 2.

Putting the necessary new dollars in perspective, $48 billion in new funds to cover the uninsured would increase personal health care spending by less than 3 percent. The new spending would shift 0.4 percent of the country's gross domestic product (GDP) into health care from other areas of spending. The authors of the study conclude, "When one considers the modest share of this spending to the nation’s economy and the long-term economic benefit of good health, $48 billion appears to be a sound investment."

Today’s released report is available online at http://www.kff.org/covertheuninsured2004. The new study updates previous KCMU reports by Hadley and Holahan. To make the estimates relevant to current debate over the costs and value of covering the uninsured, the authors updated underlying data sources and extended the projections to 2004 health care costs. In addition, the webcast of a policy briefing in Washington, DC on these subjects can be viewed after 5 p.m. EDT today at the following link http://www.kaisernetwork.org/healthcast/kff/10may04.

The Kaiser Commission on Medicaid and the Uninsured provides information and analysis on health care coverage and access for the low-income population, with a special focus on Medicaid's role and coverage of the uninsured. Begun in 1991 and based in the Kaiser Family Foundation's Washington, DC office, the Commission is the largest operating program of the Foundation. The Commission's work is conducted by Foundation staff under the guidance of a bipartisan group of national leaders and experts in health care and public policy. The Kaiser Family Foundation is a non-profit, private operating foundation dedicated to providing information and analysis on health care issues to policymakers, the media, the health care community, and the general public. The Foundation is not associated with Kaiser Permanente or Kaiser Industries.