For those who watched the six hour health care summit Thursday, as Beezer did, my sympathies.  The Republicans made an effort to explain themselves, but eventually got quite frustrated because unlike the tea party parties and town hall meetings, there were other people at the summit who knew when the Republicans were blowing smoke.  And said so.  Got kind of embarrassing I suspect.

Eventually they fell back on their ideological underpinnings and just said they believed free market solutions were better than what would arise from health care reform.  Well heck, we all knew that was their ideology.  Why waste everyone’s time talking about reforming what one doesn’t, in fact, want to reform?

There was one part of the discussion about whether premiums would rise, or fall, if the reform passed.  Republicans said they would rise.  Democrats basically said if they did rise, it would be because a lot of people would have the chance to receive far better policies compared to what they have now, and would take advantage of the opportunity to trade up.

But that’s about as far as the discussion got.   It needs more explaining.  And the explaining has been done by the New York Times.  The author is journalist Catherine Rampell who writes about economics for the Times.

“Better health doesn’t seem to explain why so many young people forgo health insurance. Rather, income does, according to new survey data released by Gallup.

First, some background. One of the explanations for rising health care costs is that relatively healthy people are taking their chances and going without insurance.

The relatively sick pool of insured customers who are left then drives up the cost of premiums, at least if there is any form of risk-sharing (like community rating) within that pool. Which drives out the healthiest people who are willing to take their chances, which drives the cost of premiums up further, and so on. This is sometimes referred to as the “death spiral” of health insurance.

The trend shown in the chart below — which shows what percentage of people at each age is uninsured — is sometimes used as empirical evidence for the presence of this “adverse selection” in health insurance:

As you can see, young adults are significantly less likely to have health insurance than their older counterparts. The percentage of people with health insurance troughs at age 22, when just 66 percent of Americans are covered.  Many people assume that this is because young people are also less likely to have health problems than their older, presumably more decrepit peers. Perhaps young adults don’t buy health insurance because they don’t think they’ll need it; this would be a relatively rational conclusion for young people to make, statistically speaking.

But if you look a little closer at health insurance purchases among young people alone, this demographic actually appears more risk-averse about their health than is commonly believed.

In fact, last year, healthy young adults were much more likely to have health insurance than their sicker peers, according to Gallup:

Of course, figuring out why healthy young people are more likely to have health insurance coverage is tricky; maybe the causality runs in the other direction, in that insurance helps keep people healthier. There is some debate about the effects of health insurance on health, however.

Perhaps people who are likely to have health insurance are also likely to be healthy for an independent reason: It costs money to buy health insurance, and it costs money to maintain a healthy lifestyle. In other words, perhaps it is money, not perceived risk of getting sick, that determines whether young people get insurance.

As it turns out, people who can afford health insurance are much, much more likely to get it:

Among young adults, 86 percent of those in the top third of the income distribution (people earning $48,000 or more annually) have health insurance. In the middle third (those earning between $24,000 and $48,000), 72 percent have health insurance. And in the bottom third (those making less than $24,000), just 58 percent are on a health plan.

It appears to be affordability, not recklessness (or even rational cost-benefit analysis of health risk), that is driving young people away from insurance policies.

One policy implication of all this is that cheaper health insurance premiums — or, I suppose, across-the-board real wage gains — might encourage more people to buy insurance voluntarily.”

Tags: Catherine Rampel, Health Care reform, Health Care Summit, New York Times

This entry was posted on Sunday, February 28th, 2010 at 1:40 pm and is filed under Economics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.