The primary rationale offered by supporters of individual mandates is that the uninsured consume services that are paid for by the rest of us. It is, they contend, a "hidden tax" that adds as much as 20% to insurance premiums. This argument is destroyed by a new study in Health Affairs that shows conclusively that the uninsured in California pay a greater percentage of their bills than do people on Medicare and Medicaid, and about the same as people who are privately insured.

The paper, "Hospital Pricing And The Uninsured: Do The Uninsured Pay Higher Prices?" by Glenn Melnick and Katya Fonkych, both associated with the University of Southern California and RAND, examines a massive data set compiled by the state that reports charges and net revenues for different categories of patients at almost all of the hospitals in California. The research examined data from 300 hospitals that provided 80% of the care to the uninsured in that state. For each category of patients it looks at the list prices charged and compares those to the actual revenue collected (net prices). It is able to compare the data from two time periods 2001 and 2005.

The findings are fascinating. The first finding is that the uninsured consume a mere 5.5% of all hospital care – far below their representation in the population (about 20% in California). The next is that in 2001 the uninsured (self-pay) patients paid 39% of the list charges. Commercially insured patients paid 41%, Medicare patients paid 35%, and MediCal patients paid 30%. By 2005, the uninsured were still paying far more than Medicare and MediCal, but 14% less than privately covered. In fact, in 2001 the uninsured paid 18% more than Medicare, but 20% more in 2005.

Interestingly, between 2001 and 2005 the uninsured appeared to move toward using less expensive facilities. The percentage of uninsured treated at hospitals that charged them more than Medicare dropped from 57% to 49%. The use of hospitals that charged the uninsured more than the commercially insured dropped from 41% in 2001 to 27% in 2005. This is precisely the kind of market effect one would expect when people are paying their own bills.

Rather than being a drain on California’s health care system, the uninsured are actually subsidizing the state’s MediCal program.

Greg Scandlen, President

Consumers for Health Care Choices