The number of people who lack health insurance now stands at about 43 million, more than were uninsured a decade ago. Moreover the growth in the uninsured has occurred during a period when income and wealth was rising for the vast majority of American families.
Why are there so many Americans without insurance? One reason is that a lot of families still can't afford it. But another reason is many people are uninsured by choice. And unless government policies are changed, more will choose to be uninsured in the future.
Although it is common to think of the uninsured as having low incomes, many families who lack insurance are solidly middle class. And, the largest increase in the number of uninsured in recent years has occurred among higher income families. In fact, about one in seven uninsured persons lives in a family with an income between $50,000 and $75,000, and almost one in six earns more than $75,000. Further, in recent years, almost all the increase in the uninsured has been among households who earn more than $50,000. Households earning under $50,000 actually saw a 5 percent decrease in the number of uninsured.
What are we doing wrong? In a nutshell, federal, state and local governments are spending millions on free care for the uninsured. At the same time, government does little to help the uninsured buy private insurance. People are simply responding to the incentives government gives them.
While no one knows exactly how much is spent nationwide on charity care, it's bound to be a large number. In Texas, the State Comptroller recently conducted an extensive study and found that public and private organizations spend about $1,000 per uninsured individual per year on charity care, on the average. That equals $4,000 for a family of four-an amount that would buy adequate private insurance in most Texas cities.
The alternative to free care is purchasing private insurance. Federal and state tax subsidies total about $141 billion per year. But these subsides are only for employer-provided health insurance. Most of the uninsured have no opportunity to enroll in an employer plan, and they get virtually no tax relief when they purchase insurance on their own. Unlike most other Americans, they must purchase their insurance with after-tax dollars.
This is one of the great social injustices of our time. Think about it. The businessman who eats at a local restaurant probably gets a tax subsidy equal to half the cost of his insurance. But the waitress who serves him his lunch is likely to get no subsidy at all. No wonder an increasing number of waitresses, and people in other occupations as well, are deciding to be uninsured.
Fortunately, President Bush has promised to take a fresh approach to the problem of the uninsured – one that empowers individuals rather than expanding government programs. The plan would create a refundable tax credit of up to $1,000 per person ($2,000 per family) for the purchase of health insurance. Refundable means that even those families who owe no taxes would be able to file a tax return and get the $2,000, so long as they spend at least that much on health insurance premiums.
Bush's proposal is not as generous as it should be. If we are going to spend $4,000 on free care for the uninsured, we should be prepared to offer tax subsidies at least as generous to people who insure. But the plan is a step in the right direction. It comes at a time when a bipartisan consensus has begun to form around the idea that it's better to encourage people to buy private insurance instead of relying on charity care when they can't pay their medical bills. There are proposals similar to the Bush plan in both the House and Senate.
Under the Bush plan, people who do the right thing and insure their families would be rewarded with tax relief. The sooner this idea is enacted the better. It's and idea whose time has come.