Earlier in this decade we demonstrated

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1 Trends Hard Times And Health Insurance: How Many Americans Will Be Uninsured By 2010? Health spending and uninsurance keep rising in tandem, making the need for health system reform even more compelling for those who have lost their coverage. by Todd P. Gilmer and Richard G. Kronick ABSTRACT: In earlier work we demonstrated that increases in the cost of health care accounted for the decline in insurance coverage from 1979 to Here we examine whether our model adequately accounts for observed changes in coverage though 2007, and we provide an estimate of the effects of the recession on the number of uninsured Americans through We project that the number will increase by at least 6.9 million. The estimate does not directly take into account the additional effects of job losses, which are likely to add millions more to the number of uninsured Americans. [Health Affairs 28, no. 4 (2009): w573 w577 (published online 28 May 2009; /hlthaff.28.4.w573)] Earlier in this decade we demonstrated that increases in the cost of health care from 1979 to 2002 accounted for the decline in health insurance coverage during that time period. 1 3 Here we examine whether our model adequately accounts for the observed changes in coverage from 2003 through 2007, and we estimate the effects of the recession on the number of uninsured Americans in Study Data And Methods Using methods identical to those in our 2005 paper to estimate per capita health spending for insured nonelderly adults during , we used data from the following sources: (1) the National Health Accounts developed by the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS); (2) data from the 1977 National Medical Care Expenditure Survey (NMCES); (3) data from the 1987 National Medical Expenditure Survey (NMES); and (4) data from the 1996 and 1999 Medical Expenditure Panel Surveys (MEPS). 4 Using these data and data from the March supplements to the Current Population Survey (CPS) from , we calculated an affordability index, defined as the ratio of per capita health spending for insured adults to the median income among workers; and we calculated the percentage insured among nonelderly workers who were not covered by a spouse s plan or a public program. 5 We reestimated the logistic regression model from our earlier work using data from The logistic regression model predicts the probability of coverage among nonelderly adult workers as a piecewise linear function (spline) of per capita health spending divided by personal income; 6 employment Todd Gilmer (tgilmer@ucsd.edu) is an associate professor in the Department of Family and Preventive Medicine at the University of California, San Diego, in La Jolla. Rick Kronick is a professor in that department. HEALTH AFFAIRS ~ Web Exclusive w573 DOI /hlthaff.28.4.w Project HOPE The People-to-People Health Foundation, Inc.

2 Health Tracking characteristics such as firm size, industry, selfemployment status, and part-time status; demographic and socioeconomic characteristics such as age, sex, marital status, race, ethnicity, education, and home ownership; and indicators for region and year. 7 We used data from the CMS national health spending projections to estimate the rate of growth in per capita health spending for insured adults. 8 We used economic projections of the Federal Reserve Governors and Bank Presidents from the Congressional Budget Office (CBO) to estimate the rate of growth in personal income. 9 We then used the parameter estimates from the logistic regression model to estimate the insurance status of each worker in the March 2008 CPS sample, assuming that per capita spending and personal income follow their projected growth curves. Finally, we used the historical relationship between the proportion uninsured among workers (not covered as a dependent or by a public program) and the proportion uninsured among the nonelderly population to estimate the proportion of Americans under age sixtyfive expected to be uninsured in The percentage uninsured among all nonelderly adults closely paralleled the percentage uninsured among adult workers during Therefore, we regressed the insurance rate among all adults on the insurance rate among working adults and a year covariate, andweusedtheestimatedcoefficientsandthe estimated rate of insurance among workers in to predict the rate of insurance among all adults in In contrast, coverage rates among children did not follow as closely the rates among working adults, primarily as a result of the Medicaid eligibility expansions of the late 1980sandtheeffectsoftheStateChildren s Health Insurance Program (SCHIP, now known simply as CHIP). 10,11 We regressed the coverage rate among children on the coverage rate among workers, including indicator variables for the Medicaid expansions (in 1990 and later) and CHIP (in 1999 and later); and we used the estimated coefficients and the estimated rate of insurance among workers in to predict the rate of insurance among children in Study Results The fraction of workers without health insurance increased from 2003 to 2007 largely in parallel with the decline in the affordability of health insurance (Exhibit 1). The ratio of per capita health spending for insured adults (which we estimated to be $4,821 in 2007) to the median income among workers increased sharply from 11.1 percent in 2002 to 12 percent in 2003 and then continued a slower but steady increase from 2003 through 2006, ending 2006 at 13 percent. Among workers not covered as a dependent or by a public program, the fraction who were uninsured closely paralleled the movements in the affordability index from 2003 to 2006, increasing sharply from23.0percentin2002to23.8percentto 2003 and continuing to increase to 25.1 percent in The results for 2007 indicate that the two series did not move completely in lockstep: the affordability index was flat, but the percentage uninsured declined slightly. Exhibit1alsopresentsourprojectionsfor the uninsurance rate among workers for The CMS estimates that per capita spending will continue to grow 6.3 percent per year. Using CBO projections, we estimated that the recession will slow personal income growth among workers to 2.9 percent in 2008, 1.0 percent in 2009, and 0.4 percent in As a result, the fraction of workers who are uninsured is expected to increase sharply, by 2.1 percentage points, to 26.4 percent in Translating our results among workers to an estimate for the entire nonelderly population, we project that 19.2 percent of all nonelderly Americans will be uninsured in 2010, an increase of 2.0 percentage points from The number of uninsured people is projected to increase by 6.9 million: 5.5 million because of an increase in the percentage uninsured, and 1.3 million because of an increase in population size. In 2010, in the absence of policy change, we expect that fifty-two million nonelderly Americans will lack coverage. w May 2009

3 EXHIBIT 1 Uninsurance Rate (Percentage) Among Workers And Per Capita Health Spending Divided By Median Income, , And Projected, Percent uninsured Spending divided by income Percent of workers uninsured Per capita health spending divided by median income SOURCE: Authors analysis of data from the Current Population Survey, March supplements, Annual Demographics Files, ; and Centers for Medicare and Medicaid Services, National Health Accounts, NOTES: Percentage uninsured (black line) relates to the left-hand y axis. Per capita spending divided by median income (gray line) relates to the right-hand y axis. The series for workers is restricted to those not covered as a dependent or by a public program. Projected uninsurance and spending divided by income are denoted by dashed lines. Data for 1980 were not available. Foreach1percentincreaseinhealthspending (relative to personal income), the number of uninsured people will increase by an estimated 314,000, or 0.7 percent. This increase is similar to an earlier estimate from the Lewin group using different methods, but it is higher than the estimate of 164,000 by Michael Chernew and colleagues (2005). 14 Discussion And Policy Implications Ourfirstpaperexplainingcoveragedecline analyzed data through 1995; it demonstrated the close connection between the affordability of insurance and the percentage of workers who were uninsured. We updated those results once with data through 1999, and again with data through We are heartened that our third update continues to demonstrate the parallel movement of the affordability and coverage data, although disheartened that both continue to increase. In the absence of policy change, if the recession follows the CBO s estimated path, 15 we expect that the number of uninsured Americans will increase by 6.9 million over the three-year period Our model focuses on forecasting the rate of uninsurance among workers; it does not directly take unemployment into account. During recessions we would expect the number of uninsuredpeopletoincreasebymorethan projected by the model, because some of the newly unemployed will lose coverage when they lose their jobs. Our model has a mixed track record during recessions. The model fit the data quite well during the relatively mild recession of , primarily because health care costs increased rapidly, resulting in a rapid increase in the predicted fraction uninsured. However, during the recession of the actual percentage uninsured increased more rapidly than predicted. John Holahan and Bowen Garrett have estimated that each 1 percent increase in unemployment leads to a 0.59 percent increase in the percentage uninsured among nonelderly adults, 16 an estimate that is similar in magnitude to estimates from other studies They estimated that if unemployment were to increase to 10 percent, then, in the absence of policy change, the number of uninsured people would increase by close to six million. Some of this projected increase would be in addition to HEALTH AFFAIRS ~ Web Exclusive w575

4 Health Tracking our projected increase of 6.9 million, which will occur primarily as a result of the increasing unaffordability of health care for adults who continue working. The 65 percent subsidy for continuation premiums for laid-off workers provided for in the American Recovery and Reinvestment Act (ARRA) of 2009 may somewhat attenuate the effects of increasing unemployment on the number of uninsured people. Also, the extension and expansion of CHIP is expected to reduce the number of uninsured children. Given major uncertainties about the depth and length of the recession, about federal and state policy responses, and about the effect of any public policy response, it would be foolish to attempt to offer precise forecasts of the number of uninsured Americans. These caveats notwithstanding, our work demonstrates that if personal income grows as slowly as projected by the CBO and health care costs grow at the rate projected by the CMS, then the number of uninsured people is likely to grow by at least 6.9 million during Beyond the short-term measures enacted in the stimulus bill, major public policy changes will be required to reverse the steady rise in the number of uninsured Americans. It is heartening that efforts to solve the problem are a priority for the Obama administration and the 111th Congress. NOTES 1. Gilmer T, Kronick R. It s the premiums, stupid: projections of the uninsured through Health Aff (Millwood). 2005;24:w Gilmer T, Kronick R. Calm before the storm: expected increase in the number of uninsured Americans. Health Aff (Millwood). 2002; 20(6): Kronick R, Gilmer T. Explaining the decline in health insurance coverage, Health Aff (Millwood). 1999;18(2): National health expenditure data: overview [Internet]. Baltimore (MD): Centers for Medicare and Medicaid Services Mar 17 [cited 2009 May 5]. Available from: For each year, we aggregated national health spending for services typically included in an acute care benefit package: hospital care, physician and clinical services, other professional services, home health care, prescription drugs, other nondurable medical products, durable medical equipment, and net administrative costs of insurance. We used data from the 1977 NMCES, the 1987 NMES, and the 1996 and 1999 MEPS to estimate the proportion of spending in each sector accounted for by those ages 19 64, the proportion of out-ofpocket spending accounted for by this age group, and the ratio of spending on insured people to spending on uninsured people. 5. Asdescribedinmoredetailinourearlierwork, we limited the analysis to workers not covered by a spouse or a public program for two reasons. First, very few workers thus covered purchase coverage on their own or through their employer, so including them in the analysis might bias our estimates of the effect of price on purchase decisions. Second, the CPS questions on health insurance coverage changed in 1988, in 1995, and again in The 1988 and 1995 changes primarily affected coverage estimates for children, Medicaid, and dependent coverage: see Swartz K. Changes in the 1995 Current Population Survey and estimates of health insurance coverage. Inquiry. 1997;34(1):70 9. Thus, limiting the analysis to adult workers not covered by a public program or as a dependent minimizes the effects of the question wording changes on the results. Starting in 2000, an insurance verification question was added to the CPS, resulting in a decline in the estimated number of uninsured people: Nelson C, Mills R. The March CPS health insurance verification question and its effect on estimates of the uninsured. Washington: U.S. Bureau of the Census; We adjusted the estimates of health insurance coverage in the earlier data to make them consistent with the post-2000 data series. Finally, we adjusted the CPS results from to account for the revision in the editing process implemented by the Census Bureau to correct for errors in allocation of health insurance across family members. We used estimates from Lee and Stern [Lee CH, Stern SM. Health insurance estimates from the U.S. Census Bureau: background for a new historical series. Washington: U.S. Census Bureau; 2007] and multiplied our estimates of uninsured workers not covered asadependentorbyapublicprogrambyratioof the original to the revised estimate, approximately in 1996 and during From 2004 and beyond, we used the correctly edited data. 6. In the regression model, the numerator for our affordability measure was average per capita health spending, and the denominator was individual-level personal income. This is slightly different from our affordability index, which is aver- w May 2009

5 age per capita health spending divided by the median income among workers in each year. 7. The logistic regression is shown in the Appendix, available online at affairs.org/cgi/content/full/hlthaff.28.4.w573/ DC2. The effect of affordability on coverage is jointly identified by variation in average per capita health spending and variation in personal incomes. In any given year, the effect of affordability is uniquely determined by variation in personal incomes (average spending does not vary by year). However, over time, the change in affordability is determined by rising spending relative to income. The year dummy variables capture the residual year-level variation not captured by variations in affordability or other demographic and employment characteristics. 8. Keehan S, Sisko A, Truffer C, Smith S, Cowan C, et al. Health spending projections through Health Aff (Millwood). 2008;27(1):w These projections are in the same format as the historical data we used to estimate per capita health expenditures for insured adults ages 19 64, and we followed identical methods to project per capita spending for nonelderly insured adults in Using these procedures, the CMS data imply annual projected growth rates of 6.3 percent for per capita health spending. 9. The budget and economic outlook: Fiscal years 2009 to 2019 [Internet]. Washington: Congressional Budget Office; 2009 Jan 8 [cited 2009 May 5]. Available from: 99xx/doc9958/01-08-Outlook_Testimony.pdf, provided an estimate of GDP growth in 2008 (4.3 percent nominal and 1.9 percent real) and economic projections for GDP in 2009 (0.2 percent nominal and 1.9 percent real) and 2010 (1.4 percent nominal and 0.4 percent real). Assuming a 1.0 percent increase in population per year (based on national population projections: 2008 national population projections [Internet]. Washington: Census Bureau; [cited 2009 May 5]. Available from: population/www/projections/2008projections.html), per capita nominal GDP is estimated to grow by 3.3 percent in 2008, decrease by 1.0 percent in 2009, and grow by 0.4 percent in We regressed personal income on per capita nominal GDP (controlling for demographic and employment characteristics) for ; we used the estimated regression coefficients and projections for per capita nominal GDP to estimate that personal incomes among workers will increase 2.9 percent in 2008, decrease 1.0 percent in 2009, and increase 0.4 percent in Kronebusch K. Children s Medicaid enrollment: the impacts of mandates, welfare reform, and policy delinking. J Health Polit Policy Law. 2001;26(6): Gilmer T, Kronick R, Rice T. Children welcome, adults need not apply: changes in public program enrollment across states and over time. Med Care Res Rev. 2005;62(1): Sheils J, Hogan P, Manolov N. Paying more and losing ground: how employer cost-shifting is eroding health coverage of working families. Int J Health Serv. 1999;29(3): Impact of premium increases on number of covered individuals is uncertain. Washington: GAO; June. 14. Chernew M, Cutler D, Keenan P. Competition, markets, and insurance. Health Serv Res. 2005;40(4): Sunshine RA. The budget and economic outlook: fiscal years 2009 to Statement before the Committee on the Budget, United States Senate [Internet]. Washington: Congressional Budget Office; 2009 Jan 8 [cited 2009 May 5]. Available from: doc9958/01-08-outlook_testimony.pdf. 16.HolahanJ,GarrettAB.Risingunemployment and the uninsured [Internet]. Menlo Park (CA): Kaiser Family Foundation; 2009 [cited 2009 May 5]. Available from: uninsured/upload/7850.pdf. 17. Gruber J, Levitt L. Rising unemployment and the uninsured. Washington:, Kaiser Family Foundation; 2002 [cited 2009 May 5]. Publication No.: Available from: uninsured/6011-index.cfm. 18. Holahan J, Garrett B. Rising unemployment and Medicaid. Washington: Urban Institute; 2001 [cited 2009 May 5]. Health Policy Online No. 1. Available from: publications/ html. 19. Cawley J, Simon KI. Health insurance coverage and the macroeconomy. J Health Econ March; 24(2): Glied S, Jack K. Macroeconomic conditions, health care costs, and the distribution of health insurance coverage. Cambridge (MA): NBER; 2003(NationalBureauofEconomicResearch Working Paper no. W10029) estimates a much smaller effect of unemployment on the number of uninsured people, but the weight of the evidence suggests an estimate closer to Holahan and Garrett. HEALTH AFFAIRS ~ Web Exclusive w577