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The Uninsured: A Primer - Key Facts about Health Insurance and the Uninsured Under the Affordable Care Act

What are the financial implications of lacking insurance?

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 being very or moderately worried about paying basic monthly expenses such as rent or other housing costs and monthly bills.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 2016.13 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. In 2016, nonelderly uninsured adults were over twice as likely as those with insurance to have problems paying medical bills (29% vs. 14%; Figure 7) with two thirds of uninsured who had medical bill problems unable to pay their medical bills at all (67%).16 Uninsured adults are also more likely to face negative consequences due to medical bills, such as using up savings, having difficulty paying for necessities, borrowing money, or having medical bills sent to collection.17

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,18 and half of uninsured families living below 200% of poverty have no savings.19,20 Uninsured nonelderly adults are over twice as likely as insured adults to worry about being able to pay costs for normal health care (63% vs. 26%; Figure 11). Furthermore, over three quarters of uninsured nonelderly adults (76%) say they are very or somewhat worried about paying medical bills if they get sick or have an accident, compared to 44% of insured adults.21

Figure 11: Problems Paying Medical Bills by Insurance Status, 2016

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 2016, uninsured adults were more likely than insured adults to say they have medical bills that are being paid off over time (30% vs. 24%).22 Medical debts contribute to over half (52%) of debt collections actions that appear on consumer credit reports in the United States,23 and uninsured people are at higher risk of falling into medical bankruptcy than people with insurance.24

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.