How private health insurance slashed the uninsured rate for Americans

  • Title:

    American Health Economy Illustrated
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    7" x 10"
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The latest Census figures show the United States now has 49.9 million uninsured, an increase of nearly 1 million over the preceding year. Both in terms of absolute numbers and the percentage of Americans without coverage, this is the highest figure recorded since the Bureau began asking questions about health insurance in its annual survey three decades ago. If fully implemented, the Affordable Care Act is expected to cut this number by more than half. But this is a pittance compared to the dramatic decline in the number of uninsured that occurred before the introduction of Medicare and Medicaid in 1966. This is not unlike the dramatic decline in the poverty rate that occurred before the nation officially declared a war on poverty in the 1960s.

Over 70 years, the uninsured rate has declined by more than 80 percent (figure 6.6). It is noteworthy to see just how much of this decline occurred before the government got heavily involved in providing coverage during the 1960s. In 1940, approximately nine of ten Americans lacked health insurance coverage. By 1960, this had fallen to 25 percent. There were at least 60 million fewer Americans without health insurance in 1960 compared to 1940 despite a population increase of nearly 50 million over that same period. This dramatic decline reflected the enormous expansion of employer-based health coverage fueled by the tax subsidy that began in 1943.

These numbers are approximations for the earliest decades. The nation did not start to seriously measure the extent of lack of coverage until the mid-1970s. Before that time, the only consistent annual data on coverage came from health insurance industry surveys that counted the number of individuals with various types of medical insurance policies (for example, hospital insurance). Thus, one could obtain an approximate count of the uninsured using assumptions about how much duplication there was between policies of various types and then subtracting this insured number from the total population. Today, the most widely quoted current numbers about the uninsured (such as this week’s report) come from the Current Population Survey (CPS), which did not start collecting a consistent measure of coverage until 1988. There are multiple surveys, each with various shortcomings, but the CPS has gradually improved over time so that it is less likely to over-count the number of uninsured than it was in the past. The point is that the numbers for 1990 forward are a more precise approximation of the truth than the numbers that precede it, although every effort has been made to convert these earlier figures into estimates of how many uninsured would have been counted had a CPS-like survey been conducted in those earlier years.

By 1970, the uninsured rate had fallen to less than 15 percent, reflecting continued expansion of employer-provided coverage and the introduction of Medicare and Medicaid. There is substantial evidence of “crowd-out” of private health coverage by both programs: that is, the programs cover individuals who otherwise would have had private insurance. For example, one-quarter of seniors had comprehensive health insurance even before Medicare was introduced. When Medicaid expanded coverage to children and pregnant women between 1987 and 1992, crowd-out accounted for nearly half of those who were newly enrolled through these eligibility expansions. Consequently, there is much less than a one-for-one reduction in the number of uninsured for each new beneficiary who is enrolled. Conversely, the entire decline in the uninsured rate through 1970 cannot be attributed to public coverage since private coverage also was expanding during this same period.

After 1970, the uninsured rate remained quite stable for decades. Thus, the slight increase between 1990 and 2010 is barely a blip from this much longer-term view. Official government projections of what is supposed to happen to the uninsured rate if health reform is fully implemented are included in the figure shown. There still is substantial uncertainty about how much of the Affordable Care Act (ACA) will ultimately be implemented. But the 2020 number is a useful reminder that the ACA did not intend, nor will it possibly achieve, universal coverage. Some 23 million uninsured Americans would still be uninsured that year, according to the latest projections by the Congressional Budget Office. By 2021, assuming ACA is fully in place, half of the decline in the number of uninsured would be attributable to expansions of Medicaid and the Children’s Health Insurance Program (CHIP). This is a marked contrast to prevailing patterns of coverage: that is, in 2010, there were four people covered by private insurance for every person covered through Medicaid/CHIP. In short, notwithstanding the many severe limitations of Medicaid, the ACA would move the system in the direction of much heavier reliance on that program to cover those who cannot afford their own health insurance coverage. Moreover, the decline in the rate of being uninsured will be much more modest over the next decade than during the remarkable expansion of private coverage in the 1940s and 1950s. We can only imagine what might have happened had the designers of ACA been more willing to contemplate greater reliance on the expansion of private, rather than public health insurance.

Christopher J. Conover is a research scholar at Duke University’s Center for Health Policy and Inequalities Research and an adjunct scholar at AEI. The charts shown are from his new book American Health Economy Illustrated, to be released in January 2012 by AEI Press. See PowerPoint version of Figure 6.6 and Excel spreadsheet on health insurance coverage from 1940-2020 for data, sources, and methods.

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