Healthcare Insurance in the United States

The commentary was initially written at EconoFact by Mark Shepard. I took liberties with this commentary to emphasize the many points the author presents and to make it an easier read. I also added an introduction and some history on the ACA.

There is much here to absorb. I felt breaking the commentary out further than what was presented would allow the reader to pick up on the facts and points the original author is making.

Some Introduction . . .

We are at a turning point in America. There is a flow of threats coming from the newly elected and the appointees coming to office in 2025. It could just be puffery on their part. It will be interesting whether Congress mostly stands-in-the-way of a rogue administration very much like John McCain did and Edward Kennedy faced. Or maybe it is just a few who will not loot the country.

It was on June 9th, Kennedy submits the Affordable Health Choices Act. Although Kennedy is sidelined fighting his cancer and not able to participate, the measure passes in his Senate Health, Education, Labor and Pensions Committee as part of the larger Capitol Hill effort on health reform.

While Edward Kennedy was instrumental in writing and passing the ACA, John McCain was the one vote blocking the repeal of the ACA. July 28, 2017. John McCain . . .

It was the middle of the night when Brooke Buchanan’s phone rang. It was McCain. She no longer worked for the senator, but the two still talked almost daily.

“Get up,” he said. “Turn on your TV. We’re going to be making some news.”

The US Senate was considering whether to repeal portions of the Affordable Care Act, a comprehensive health-insurance regulation law that was Obama’s signature legislative achievement.

The fate of the bill hung in the balance, as only one more “no” vote would kill the legislation and McCain was one of the few remaining undecideds. It was almost 1:30 in the morning.

As Buchanan watched on her television, McCain walked out on to the Senate floor and turned to the clerk tabulating votes. He held out his right arm – the one that hadn’t been repeatedly broken in Vietnam – and gave a quick thumbs-down.

“No,” McCain said quietly, then sat down at his desk in the Senate chamber, as Republicans gasped and Democrats erupted in cheers. McCain – who had flown back from Arizona for the vote after undergoing emergency surgery for his recently diagnosed brain tumor – had bucked his party’s leadership one last time.

He had defied President Trump, the man who had stunned Washington when he questioned McCain’s heroism as a prisoner of war.

Are there anymore Edward Kennedys and John McCains who will defy?

The State of Health Insurance in America, EconoFact

The Issue

Universal access to affordable health insurance is a longstanding U.S. policy goal and was central to the Affordable Care Act (ACA, or “Obamacare”). The ACA was one of the largest social reforms of the 21st century.

In the decade since it took effect in 2014, the share of Americans without health insurance has fallen sharply and now stands near an all-time low. But almost 26 million people in the United States continue to lack coverage, a far higher share than in peer nations who nearly all have universal coverage.

Moreover, progress on expanding insurance coverage among the non-elderly has largely stalled since 2016. Meanwhile, economists’ understanding of health insurance has advanced considerably, with a decade of new research elucidating both the clear benefits of insurance but also its surprising tradeoffs that show the thorny challenge of getting to universal coverage within the U.S.’s current system.

The Facts:

Makeup of the Uninsured

– In total, over 26 million people living in the United States lacked formal health insurance as of 2023, the latest year for which data is available. Because nearly all (99%) elderly Americans age 65+ have coverage (usually through Medicare), analysts often focus on the uninsured rate among those aged 0-64. The non-elderly uninsured rate was 9.4% in 2023, or 25.7 million people (see chart). 

– The uninsured in America are more likely to be lower-income and members of racial minorities. 

In 2023, 23.6% of Hispanic adults aged 19 to 64 were uninsured. This is about double the rate for Black adults (11.1%) and much higher than the rates for non-Hispanic White adults (7.0%), and for Asian adults (6.8%), according to the latest Census figures. 

Children under the age of 19 have additional coverage options, including access to the Children’s Health Insurance Program (CHIP). For this reason, uninsured rates for children tend to be lower than for working-age adults, though differences by race and ethnicity persist.

The highest uninsured rates are for noncitizens (32.9%), who are often poorer and ineligible for subsidized public programs (Census, Figure 5). Non-elderly uninsured rates vary substantially by state, from a low of 3% in Massachusetts to a high of 18.7% in Texas, according to data from the American Community Survey. While partly due to demographic differences in the population composition of the states, this variation also comes from several states’ decisions not to expand Medicaid to low-income families, as allowed by the Affordable Care Act. Among these “non-expansion” states, 32.5% of poor families are uninsured vs. 18.7% in expansion states (see Figure 6)

– The Affordable Care Act (ACA) better known as “Obamacare,” sought to give all Americans access to affordable health insurance. 

The U.S. does not have universal health coverage but rather a patchwork system of both private and public providers (see here). Over 50% of Americans receive health coverage through employment-based private health insurance. Since not everyone is eligible to receive health insurance through their jobs, the ACA sought to increase access to health insurance with a three-pronged strategy.

First, it expanded eligibility for Medicaid — the country’s public health insurance for low-income Americans — to those with incomes up to 138% of the federal poverty level. 

Second, it created new subsidies for private insurance to make private coverage more affordable for middle-income people (100-400% of poverty).

Finally, it required people to obtain health insurance or pay a tax penalty — what was known as the “individual mandate” and which was repealed as of 2019. 

– The number and share of Americans without health insurance fell sharply after the enactment of Obamacare’s main coverage provisions in 2014 but then reached a plateau. 

In 2013, 44 million non-elderly Americans lacked coverage (a 16.8% rate), and that had fallen by one-third to 26.7 million (10.0%) by 2016 (see chart). Researchers have studied the extent to which the different provisions of the ACA contributed to lowering the share of Americans lacking health insurance. 

The 2012 Supreme Court decision allowed states the option not to expand Medicaid made it possible for researchers to compare outcomes in states that expanded Medicaid against those that did not. Using this natural experiment, a large number of studies find strong evidence the Medicaid expansion reduces uninsurance. Other work finds evidence that larger subsidies also increase private insurance take-up and reduce uninsurance.

Finally, there is evidence the “individual mandate” tax penalty increased coverage. The effect was more modest than anticipated. 

– Since 2016, the uninsured rate has been largely steady, despite swings in policy.

The uninsured rate rose slightly from 2016-2019 as the Trump administration weakened certain ACA provisions. For instance, cutting funding for enrollment assistance and zeroing out the tax penalty on uninsurance as of 2019. A 2017 attempt to “repeal and replace” the ACA itself narrowly failed, with the late Sen. John McCain casting a dramatic late-night “no” vote to decide the outcome.

The uninsured rate fell from 2020-2023 – a departure from the usual pattern of rising uninsurance during recessions and in spite of the pandemic and associated economic upheaval.

A major reason for this were policy changes enacted in response to the pandemic, particularly the expanded generosity of insurance subsidies starting in 2021 and the suspension of regular Medicaid beneficiary eligibility redeterminations that was in place until 2023. 

Since the provision to suspend Medicaid redeterminations expired in 2023, more than 25 million people have exited Medicaid. At the same time, there has also been growth in ACA insurance marketplace enrollment (which as of 2024 covers 21 million people. (This is almost double the enrollment in 2021).

– There is robust evidence the expansion of health insurance coverage in the U.S. saves lives and protects people from financial risk. 

Over the past decade there has been substantial research adding to economists’ understanding of the causal effects of health insurance coverage. The impact of which helped the poor. Newer research from a randomized experiment and the ACA’s Medicaid expansions, finds the expansion of health insurance coverage significantly reduces mortality. These results are in line with the findings from earlier studies using variation in state policies  and the 1960s-70s introduction of Medicaid. 

For non-mortality outcomes, the Oregon Health Insurance Experiment found increased improvements in mental health but no impacts on physical health. 

– Increasing coverage leads to higher medical care use and costs. 

New evidence confirms findings of people incurring higher medical spending across the board when insured, a phenomenon called “moral hazard.” Consistent with this, the share of GDP spent on health care jumped noticeably around the ACA’s enactment (from 16.9% of GDP in 2013 to 17.6% of GDP in 2016).  The debate is, how much of this additional spending is wasteful vs. valuable care the uninsured could not previously afford.

– Most of the remaining uninsured (about 60%, or 15 million people) appear to qualify for either free or subsidized insurance via the ACA. About 40% likely qualify for completely free coverage.

However, the main reason cited for uninsurance (by two-thirds of the uninsured) is that “coverage is not affordable.” This suggests that non-price barriers to coverage – like lack of knowledge and the hassles and burden of enrolling in public programs –are the key remaining barrier to coverage expansions.

What this Means:

Despite large and rapid gains in insurance coverage following the implementation of the Affordable Care Act in 2014, about 26 million people remain without health insurance in the United States. Experience from the past decade illustrates the difficult challenge of getting to universal coverage within a complex and voluntary health insurance system.

The uninsured rate has remained remarkably stable since 2016 despite marked changes in policy and despite wide availability of heavily subsidized coverage. But the stakes are high. Research from the previous decade has solidified evidence that expanding health care coverage reduces mortality and protects people from financial risk.

If policymakers wish to get meaningful further coverage gains? The evidence suggests reducing non-price barriers to getting insurance, such as information and enrollment hassles, is essential.