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The Uninsured: A Primer - Key Facts about Health Insurance and the Uninsured in the Wake of National Health Reform

What are the financial implications of lacking coverage?

For many uninsured people, the costs of health insurance and medical care are weighed against equally essential needs, like housing, food, and transportation to work, and many uninsured adults report difficulty paying basic monthly expenses such as rent, food, and utilities.1 When uninsured people use health care, they may be charged for the full cost of that care (versus insurers, who negotiate discounts) and often face difficulty paying medical bills. Providers absorb some of the cost of care for the uninsured, and while uncompensated care funds cover some of those costs, these funds do not fully offset the cost of care for the uninsured.

Most uninsured people do not receive health services for free or at reduced charge. Hospitals frequently charge uninsured patients two to four times what health insurers and public programs actually pay for hospital services.2, 3 In 2014, only 40% of uninsured adults who received health care services reported receiving free or reduced cost care.4

Uninsured people often must pay “up front” before services will be rendered. When people without health coverage are unable to pay the full medical bill in cash at the time of service, they can sometimes negotiate a payment schedule with a provider, pay with credit cards (typically with high interest rates), or be turned away.5 Among uninsured adults who received health care in 2013, nearly a third (31%) were asked to pay for the full cost of medical care before they could see a doctor.6

People without health insurance have lower medical expenditures than those with insurance, but they pay a much larger portion of their medical costs out-of-pocket. Compared to insured nonelderly people with full-year coverage, whose average per capita medical expenditures were $4,876 in 2013, nonelderly people who were full-year uninsured used health care services valued at about half that amount, or just $2,443 per capita in 2013.7 Despite lower overall medical spending, people without insurance pay nearly as much out-of-pocket as insured people.8

The uncompensated costs of care for the uninsured amounted to about $84.9 billion in 2013. Funding from a number of sources, totaling $53.3 billion in 2013, helps providers defray the costs associated with uncompensated care. Most of these funds (62%) came from the federal government through a variety of programs including Medicaid and Medicare, the Veterans Health Administration, the Indian Health Service, the Community Health Centers block grant, and the Ryan White CARE Act. States and localities provided $19.8 billion, and the private sector provided $0.7 billion. While substantial, these payments to providers for uncompensated care amount to a small slice of total health care spending in the U.S.9

The burden of uncompensated care varies across providers. Hospitals, community providers (such as clinics and health centers), and office-based physicians all provide care to the uninsured. Given the high cost of hospital-based care, the majority (60%) of the cost of uncompensated care is incurred in hospitals. Community-based providers that receive public funds provide a little over a quarter (26%) of total uncompensated care, and the remainder of uncompensated care, 14%, is provided by office-based physicians.10

With the expansion of coverage under the ACA, providers in states that expanded Medicaid are seeing reductions in uncompensated care costs. For example, between 2013 and 2014, total uncompensated care costs for hospitals (including charity care costs and bad debt) dropped from $34.9 billion to $28.9 billion, a $6 billion or 17% drop, with nearly all of the decrease occurring in expansion states. In non-expansion states, the change in uncompensated care was nearly flat between 2013 and 2014, dropping just 1% in 2014.11

Many safety net hospitals that serve a large number of Medicaid and low-income uninsured individuals receive Medicaid disproportionate share hospital payments (DSH); however, federal DSH payments are scheduled to be cut beginning in FY 2018.12 Federal law requires that state Medicaid programs make DSH payments to qualifying hospitals that serve a large number of Medicaid and uninsured individuals. Unlike other Medicaid payments, federal DSH funds are capped and each state receives a capped allotment.  DSH allotments vary across states and totaled about $11.9 billion in FY 2015.13 Anticipating fewer uninsured and lower levels of uncompensated care, the ACA called for a reduction in federal Medicaid DSH payments. Cuts were originally scheduled to begin in 2014 but were delayed to FY 2018. These reductions will amount to $43 billion between 2018 and 2025.14 The HHS Secretary is required to develop a methodology to allocate the reductions that must take into account factors outlined in the law.15 While safety-net hospitals across the country will be affected, hospitals in states that do not expand Medicaid may face cuts without additional revenues from new coverage.

Being uninsured leaves individuals at an increased risk of financial strain due to medical bills. Uninsured people are more likely than those with insurance (53% vs. 20%) to report having trouble paying or being unable to pay medical bills in the past year. Medical bills may also lead to serious financial strain. In 2015, 27% of uninsured adults reported that medical bills caused them to use up all or most of their savings, 21% said they led to difficulties paying for basic necessities, 22% said it led them to borrow money, and 27% said it led to being contacted by a collection agency. These rates were significantly higher than those among individuals with insurance (Figure 11).

Figure 11: Problems Paying Medical Bills by Health Insurance Status, 2015

Figure 11: Problems Paying Medical Bills by Health Insurance Status, 2015

Most uninsured people have few, if any, savings or assets they can easily use to pay health care costs. The average uninsured household has no net assets,16 and half of uninsured families living below 200% of poverty have no savings.17,18 The uninsured are much more likely than those with insurance to say they are worried or very worried about paying medical bills if they get sick or get into an accident (79% vs. 45%).19

Uninsured people are at risk of medical debt. Like any bill, when medical bills are not paid or are paid off too slowly, they are turned over to a collection agency.  In 2015, uninsured adults were three times as likely as insured adults to say they owed money on at least one medical bill (45% vs. 16%).20 Medical debts contribute to over half (52%) of debt collections actions that appear on consumer credit reports in the United States,21 and uninsured people are at higher risk of falling into medical bankruptcy than people with insurance.22

How does lack of insurance affect access to health care? Conclusion

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Filling the need for trusted information on national health issues, the Kaiser Family Foundation is a nonprofit organization based in Menlo Park, California.