The uninsured cost-shift scam

Update, June 18 2009:  What you do not know about the uninsured cost-shift: If you’ve heard from Families USA the uninsured costs families and individuals with commercial insurance big bucks, think again. Check out a critique that debunks it here.


When is it OK for someone to confiscate $400 from you each year, and claim that it’s the moral thing to do, because it saves you $85? Typically such scam artists would end up in prison. But in this case, the perpetrators are Colorado politicians and the backers of Senate Bill 217 (news ). This bill tries to smuggle compulsory insurance into Colorado, hence making it a crime for Coloradans not to buy insurance approved by politicians and the special interest groups they pander to.1

One of the popular justifications of compulsory insurance is the “cost-shift from the uninsured” and that forcing everyone to buy insurance (defined by politicians, of course) would make individuals “responsible .”2 The story is that the uninsured get medical care without paying, which increases premium costs for the insured. So why not simply force everyone to buy insurance?

First off, it’s a non sequitur. As I’ve written before ,

holding people “responsible” would mean punishing freeloaders themselves and allowing providers to prevent freeloading. … What if we applied this rationale to freeloaders who leave restaurants without paying the bill? This certainly increases prices, but forcing all citizens to buy “diner’s insurance” punishes the innocent.

And even worse, how much is this cost shift anyway? And how much is it compared to proposed health care reforms? As the following video shows, it’s just $85 annually per privately-insured resident.3,4 That’s just one percent of an average premium.5 Mandated benefits laws increase premiums by at least 6%, and possibly more than 10%! [Update: An MIT study says a typical mandate adds 0.74% to the cost of a premium, Oct 2010.]

Worse yet, as I write below the video link,6 health care reform plans to remedy this are budgeted to cost each insured Colorado resident at least $400 per year!

The compulsory insurance proposal (with tax-subsidized premiums) by Colorado’s Blue Ribbon Commission on Health Care Reform would cost taxpayers more than $1 billion annually (also Fig. 18 here): $210 million from a tobacco tax, $126 million from a tobacco tax, $41 million from a junk food tax, & $854.4 million from an income tax increase.  That’s $231.4 million.  Per insured resident,4 that’s $399.

Senator Bob Hagedorn’s Senate Bill 217 is similar. It would cost taxpayers $1.23 billion per year, reports the Rocky Mountain News. This tax would exceed $400 per privately-insured Colorado resident.

References :

1 “…once politicians force you to buy something, special-interest groups will constantly fight to include their pet service as part of the forced package, whether you want it or not. The result will be continual pressure to expand the scope of the forced insurance and make it ever more costly.” – Ari Armstrong . For the costs of these mandated benefits, see this post.

2 Examples of using the cost shift argument to support compulsory insurance: Bob Hagedorn (April 9, 2008), Representative Anne McGihon (1:46 in this video ), the Blue Ribbon Commission on Health Care Reform (Final Report , page 67-8)

3 Blue Ribbon Commission figures: Colorado Baseline Coverage and Spending , slide 20. (local copy ), and page 5 of 50 of Lewin Final Report-Cost and Coverage Impacts of Five Proposals to Reform the Colorado Health Care System, page 5/50
4 Number of privately-insured residents of Colorado: about three million .

5 Average insurance premium in Colorado: see this spreadsheet .
6 See also: Linda Gorman and Ari Armstrong, “A Very Costly Health-Care Solution ,” Rocky Mountain News , January 28, 2008.

Update, October 2010:

From the Lewin Final Report-Cost and Coverage Impacts of Five Proposals to Reform the Colorado Health Care System, page 5/50 for year 2007/2008:

“The uninsured account for $1.3 billion in health spending:

  • The uninsured pay for about half of their care out-of-pocket.
  • 20 percent is uncompensated care from providers;
  • 18 percent is provided by safety-net programs;

Total number of insured people in Colorado: 3,083,900. (source: Kaiser Health Facts).
20% of 1.3 billion is the uncompensated care from providers: $260 million.  Per insured person in Colorado, this cost is $84.3.

  • About 12 percent is provided as workers’ compensation or Veterans benefits.”
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    Filed under Colorado health care, mandatory insurance, myths & fallacies

    4 responses to “The uninsured cost-shift scam

    1. Pingback: Independence Institute: Patient Power Now » Blog Archive » Amendment 63 vs. cost-shift hypocrisy

    2. Pingback: Independence Institute: Patient Power Now » Blog Archive » Colorado Amendment 63: refuting the “cost-shift” & other flawed opposition

    3. Pingback: Why We’re ‘Crazy’ About Health Care Choice « Health Care

    4. Pingback: Why we’re “crazy” about health care choice | Independence Institute: Patient Power

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