David R. Henderson  

Dean Baker on the Uninsured

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Dean Baker correctly takes to task people who claim that the estimated average cost of covering the uninsured with Obama's proposal is a whopping $62,500. Here's his key paragraph:

Republicans were quick to put the cost at $62,500 for each additional insured person. This is a good joke, but has no place in serious policy discussions. The relevant question is the cost per year ($6,250). If the projections were done over 20 years, then the cost would be $125,000 per insured person using the Republican methodology.

But then Baker himself makes an important error, claiming incorrectly that the number of people in the United States who go without health insurance for a whole year is 45 million. It's actually substantially lower than that. Baker does cite a source for his statistics. But although the source he cites refers to a Census Bureau estimate of this 45 million figure, this very source states (in Table 2, page 6) that in 2002, 92.1 percent of people had health insurance coverage at some time in the year. That leaves 7.9 percent of people with no coverage for the whole year. 7.9 percent of a 2002 population of 281 million is 22 million. If the same percent applies to 2008 (and these percentages vary little year to year), that makes 7.9% of 304 million, or 24 million, only a little over half of the number Dean Baker claims.

Why the huge difference? The Congressional Budget Office explains:

The CPS [Current Population Survey] is the source of that widely cited estimate of about 40 million uninsured. By interviewing people in March about their insurance coverage the previous calendar year, the CPS is intended to yield an estimate of the number of people who are uninsured all year. However, comparisons with estimates from other surveys indicate that the CPS estimate overstates that number. Some analysts believe the overstatement stems from an underreporting of insurance coverage by CPS respondents, who are asked to recall their coverage over a longer period than other surveys require.(4) Other analysts have concluded that the similarity of the CPS estimates to the point-in-time estimates from other surveys suggests that many CPS respondents report their insurance status as of the time of the interview rather than for the previous calendar year, as requested.(5)

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COMMENTS (6 to date)
John Thacker writes:

And another small technical point-- the bill actually ramps up over six years. That's not that unusual for such a complex program. However, it does mean that the steady-state cost of insuring someone is more than the ten year average, since the program won't have really gotten started for half of those ten years.

John Thacker writes:

If you look at the CBO report, you'll see that the subsidies only reach their steady-state level (growing at 6.5% per annum after that, more than inflation, but similar to health care inflation) at 2014-- and the that number of uninsured does not decline to the steady-state level of 13% until then as well.

It's bad mathematics to use the number of uninsured reduced at the end when the program is fully in place, but use the costs averaged over 10 years, when the program won't be ramped up (and spending nearly as much) during the first four years.

Milton Recht writes:

Someone should tell the President's Council of Economic Advisers.

In their June 2009 report, "THE ECONOMIC CASE FOR HEALTH CARE REFORM," the CEA states on page 7,

"In 2007, 45.7 million Americans did not have health insurance. About one out of every six U.S. residents under the age of 65 is currently without health insurance. Moreover, an even larger number of non-elderly individuals experience gaps in coverage over longer time periods. For example, one study found that 31.8 percent (82 million individuals) were uninsured for at least one month during the 2004 and 2005 calendar years."

John Thacker writes:

Milton Recht--

But your numbers don't disagree with David's. If one of every six is without health insurance, then some smaller percentage of those people will go the entire year without having health insurance. Others of that one in six will have health insurance at some other time in the year.

It's entirely believable to me that at any one time, 16% of people don't have insurance, 32% have at least one month in the year with no insurance, and 8% go the entire year without having insurance for any month.

Dave writes:

Wow, what a blatant distortion of the truth. Dean Baker is NOT correct in his criticism of Republicans using the 10 year figure. The Republican figure is in response to Obama's own 10 year savings figure. Obama cited savings over 10 years resulting from reductions in hospital bills for uninsured visits and Orrin Hatch responded with the 10 year figure. Baker doesn't cite where he got the $62,500 number but every news source (other than some guy's blog) where I've seen it quoted has made it clear that it's over 10 years and that it is a response to Obama's own 10 year number. If you want to criticize someone for using a number projected over 10 years then criticize Obama, not Hatch who was simply responding to the original number. This level of distortion and bias "has no place in serious policy discussions."

David Triche writes:

I think this is an example of the lack of social intelligence of economists. These economists focus on trying to make the number of unisured as small as possible, as if that means nothing should be done. As a 58 year old, recently unemployed high school teacher who lost his health insurance, I am more concerned about the fact that anyone can lose there health insurance. Of all developed economies, only in America.

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