Armchair Finance

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New Allies for the Uninsured

Those who decry the plight of the nation's 47 million uninsured--if that's the number you believe--are gaining some fresh new allies of late.

The Federation of American Hospitals, a trade group that represents the for-profit hospital industry, has joined the fray, recommending a plan that would require all people to carry health insurance--a proposal modeled most closely after the recently enacted Massachusetts law, which was itself modeled after state laws requiring motorists to carry auto insurance. While the jury is still out on whether the Bay State plan will reduce bad debt and cover more people without a substantial state funding hike, the fact that the FAH weighed in may signal that something will eventually be done nationally about this seemingly intractable problem.

The fact that so many people don't carry any kind of health insurance is an enormous problem that causes untold market distortions. No matter what demographic groups are represented in that 47 million number (illegal immigrants, upper middle class young people, the poor), the fact that so many don't have health insurance makes healthcare more expensive for us all in the long run. Lack of health insurance has driven up bad debt rates to unprecedented levels. Some estimates show the total bad debt burden among all hospitals approaches $40 billion a year--one reason most investors would much rather buy shares of Chinese Internet companies or Russian oil companies with opaque accounting standards than those of American hospital companies.

FAH's proposal would require individuals to take health insurance if it is offered through their employer, buy it on their own or receive it through existing government programs for the poor. Meanwhile, major corporations are getting involved that never paid much attention to bad debt or covering the uninsured. Wal-Mart, for example, is cooperating with the Service Employees International Union, and other large companies are recognizing the healthcare insurance burden is hurting their ability to compete globally and doesn't provide any sort of cost certainty in the future.

In essence, the federal government has been offloading its responsibility to pay for the medical care of its citizens to the commercial insurance market for so many years that the model is finally breaking down. I can't believe I just typed those words, but by the government's "responsibility," I mean that the government requires hospitals to incur the cost of treating the uninsured, yet bureaucratic and systematic burdens make it difficult or impossible for hospitals to collect even the cost of that care. Congress can't have it both ways. If you require hospitals to provide care on one hand, it has to be paid for, and if you don't find some way to require or provide health insurance for the vast majority of the uninsured, your bill is coming due.

-Philip Betbeze

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