Recommendations of the Texas Comptroller

Help More Uninsured Texans
Obtain Medical Insurance or Medical Care

Summary

One of every six Americans has no health insurance coverage; one in four Texans lacks health insurance. Texas’ unique geographic, economic, and demographic circumstances have contributed to its high levels of uninsured. To improve this situation, Texas must take steps to make health insurance more affordable, improve the efficiency of government programs that provide insurance, and increase accessibility to health care for medically underserved geographical areas and populations.

Background

The US Census Bureau estimated that 44.3 million people—16.3 percent of the nation’s population—were without health insurance during 1998. In Texas, 4.8 million people—or 24.5 percent—had no health insurance coverage.[1]

Most of the uninsured are under the age of 65.[2] Almost all elderly Americans are covered by public insurance or private plans. Only 1.1 percent of Americans 65 years and over, or about 358,000 Americans, were uninsured in 1998, and about the same percentage—or about 29,000 people—were uninsured in Texas.[3]

Despite an economic boom and major expansions in public insurance programs, the percentage of the total population under 65 who are uninsured has risen at both the national and state levels (Exhibit 1). From 1987 to 1998, the percentage of Americans under 65 without health insurance rose from 14.4 percent, or 30.7 million Americans, to 18.4 percent or 43.9 million. In Texas, the percentage of nonelderly uninsured historically has been much higher than that for the United States as a whole; for the 1987-98 period, the uninsured share of the state’s population rose from 23 percent or 3.5 million Texans to 26.9 percent or 4.9 million Texans.[4]

Young adults, low-income persons and families not covered by public programs, small business workers, the self-employed, workers in certain industries, and non-native US residents are the groups most likely to be uninsured, and at higher rates in Texas than in the United States as a whole. The following statistics provide a snapshot of uninsured Texans:

• About 42 percent of all Texans aged 18 to 24—826,000 persons—are uninsured, compared to 30 percent in the US.[5]

• Nearly half—44.6 percent or 3 million—of nonelderly Texans in households with incomes of $25,000 or less are uninsured, compared to a fourth of Americans at about the same income level.[6]

• Almost one-fourth of working Texans are uninsured, while almost a fifth of working Americans lack insurance.

• Sixty-eight percent of Texas’ uninsured population, or about 2.2 million nonelderly Texans, are working.[7]

• In Texas, 56 percent of all residents who are not US citizens—about 917,000 persons—are uninsured. Nationally, 34.1 percent or about 9 million foreign-born persons lack insurance.[8]

High Costs

Cost is the most common reason why people do not purchase health insurance. Employers sometimes drop health insurance as a benefit because the premiums are too high; or they may be forced to increase the workers’ premium contributions in an effort to control rising costs, causing workers to decline coverage for themselves or their families. And some employees may decline insurance because they prefer higher wages.

The National Coalition on Health Care has cited higher costs, largely borne by employees, as a reason for the declining number of small businesses that offer health insurance. In 1998, workers at small companies paid an average of 44 percent of the premium for family coverage, compared to 28 percent for workers at larger businesses.[9]

In an April 2000 survey by the Kaiser Family Foundation, 74 percent of uninsured adults said they lacked health insurance because it is too expensive. Nearly half said that their job doesn’t offer coverage, and 36 percent said they were unemployed or between jobs.[10]

Source: US Census Bureau.

People choose to purchase other necessities when health care insurance becomes so expensive that it becomes a significant drain on household budgets. In San Benito, Texas, one family has no health insurance because they make too much money to qualify for Medicaid, but too little to pay for private insurance. The mother says, “If you’re going to survive you’ve got to set priorities.” The family puts house payments and water and electric bills first.[11]

Family Members’ Coverage

One fourth of the uninsured respondents in the Kaiser study said that another family member had insurance that did not cover them.[12] Such insurance may be from an employer that does not cover dependents, or from public programs for children that do not cover adults. Some people may get insurance for their children from Medicaid, the joint federal-state health insurance program for the poor, or the new Children’s Health Insurance Program (CHIP) for children who do not qualify for Medicaid.

Free or Low-Cost Care in “Safety-Net” Hospitals

Texas hospitals provide health care to uninsured persons. To estimate this financial impact, the Texas Comptroller’s office studied how much the state spent for uninsured Texans. In its study, the Comptroller’s office estimated that the state spent $4.7 billion on health care for uninsured Texans in 1998. Hospitals spent more than $2.1 billion to provide uninsured or unreimbursed Medicaid services.[13] Of that amount, public hospitals spent about $1.4 billion in 1998; private nonprofit hospitals spent $532 million, while private for-profit hospitals spent $199 million.[14] Physicians also provided an estimated $914 million in charity care.[15]

The “Bullet-Proof” Young

Some individuals, especially the young, may consider health insurance an unnecessary purchase, even if they can afford it, because they are relatively healthy and don’t expect to have high health care expenditures.[16]. Purchasing insurance is a choice, and they choose not to spend their money on insurance. Young, healthy, self-employed adults frequently choose to live without health insurance coverage, hoping they will avoid a catastrophic illness. They pay cash for medical care when they need it.[17] In addition, some families simply do not believe in buying health insurance, considering it a waste of money and preferring to pay their medical bills if and when they arise.

Historical Trends

States with strong historical trends of health insurance coverage tend to have perennially high rates of insurance coverage. Historically, Texas has had a relatively high rate of uninsured persons. Texans have tended, over time, to pay medical bills out of their own funds, rely on families for help, or turn to local public or nonprofit hospitals for medical care.

Most Health Insurance Tied to Jobs

Most people receive health insurance through their jobs, according to 1998 US Census data. Nationally, employment-based insurance covered almost 65.8 percent of nonelderly Americans in 1998. Individuals bought an additional 5.5 percent of policies.[18] A Comptroller’s study confirms that employers and individuals are the leading sources of payments for health care for all ages in Texas. Of the almost $70 billion spent on health care in Texas in fiscal 1998, employer and private health insurance paid for an estimated 35.6 percent of the costs. Consumer-paid (out-of-pocket) costs accounted for another 20 percent.[19]

With today’s low unemployment rates, employers know they must provide health insurance to remain competitive in hiring employees. In a 1996 Gallup poll, 65 percent of workers ranked health insurance as the most important benefit; 18 percent ranked retirement second.[20] The expanding economy of recent years has enabled some businesses to afford health insurance benefits. This economic expansion offsets some of the pressures of medical inflation.

Small Business Insurance Costs

Small businesses bear the brunt of health care cost increases because they are the least able to find or negotiate lower premiums, and yet they remain subject to state and federal insurance requirements, while larger employers can choose to self-insure, thereby qualifying for exemptions.

A 1999 survey of employer health benefits found that about 67 percent of small employers with 3 to 199 employees offered health insurance. Of the small firms that did not offer insurance, about 76 percent cited high premiums as an important reason.[21]

One Texas small business, a family-owned trucking company in Houston, pays for its employees’ health insurance to retain good workers, but has found that its premiums have been rising by about 12 percent a year, even after the adoption of a higher deductible for hospitalizations.[22] The owner of a family woodworking business in Corpus Christi pays half of the cost of insurance for his employees, but had to pass on a 12 percent premium increase for employee coverage and a 26 percent rise for family coverage due to higher rates in 2000.[23] In Fort Worth, Virginia Presnell, vice president of the 75-employee Hayes & Stolz Industrial Manufacturing firm has summed up her feelings: “We’re not controlling the costs. We’re being controlled by the costs.”[24]

Large Employers

Costs also affect larger employers. They have to pass on higher insurance costs to their employees and charge higher prices for their products to pay increasing health insurance claims for employees. A Towers Perin Health Care cost survey of about 230 Fortune 500 companies found that the average rate of increase for employee and retiree health insurance costs would rise 12 percent during 2000. Nearly 60 percent of the firms said they changed their plan design and cost-sharing features.

Employers used a variety of strategies to combat rising insurance costs. Thirty-four percent of the firms attempted to control costs by consolidating health plan options. Thirty-nine percent changed the type of arrangements through which they provide care, and 37 percent changed what their employees contributed. Twenty-three percent improved analysis and management systems.[25]

Health Care and Gross Domestic Product

Between 1970 and 2000, national health care expenditures have grown from 7.1 percent of Gross Domestic Product (GDP)—a measure of the goods and services our economy produces—to an estimated 14.3 percent. The US Census Bureau predicts that health care expenditures will continue to rise, reaching 16.2 percent of GDP in 2008 (Exhibit 3).[26]

Medical Cost Increases and Rising Insurance Premiums

Health spending costs started to rise more rapidly than other areas of the economy in the mid–to late 1980s. From 1987 to 1998, the consumer price index grew by an average 3.2 percent a year, but the medical inflation index rose by 5.5 percent annually (Exhibit 4). In the early 1990s, the medical inflation index climbed as high as 9.1 percent, compared to a consumer price index of 5.4 percent.[27]

One 1999 study concluded that:

...the sharp declines in insurance coverage among workers from 1979 to 1995 can be accounted for almost entirely by the fact that per capita health care spending increased much more rapidly than income over this period. ...More workers were uninsured in 1995 than in 1979 because rising health care expenditures made insurance unaffordable for a growing number of workers.[28]

Increased medical costs are driving health insurance premiums upward. Between 1988 and 1996, the average employer premium for family coverage rose 16 percent per year, while the premium for employee-only coverage increased an average of 12 percent per year while consumer prices increased about 4 percent annually.[29]

The US Health Care Financing Administration (HCFA) attributed the nation’s 1998 increase in health care spending to growth in private spending, primarily increases in private health insurance premiums. Benefit costs have risen faster than premiums in previous years, and insurers increased rates to cover higher costs and improve financial performance.[30] HCFA predicts continued increases in health care spending due to a rising share of GDP devoted to health care, changing growth patterns for the private sector, and slower growth for Medicare spending than for private spending.[31]

Employment-Based Coverage

As costs increase for employment-based policies, fewer employers choose to provide health insurance coverage. Similarly, fewer workers sign up for health care benefits when required to pay a larger part of the premium costs. A smaller proportion of workers were covered in 1998 by an employment-based health plan (65.8 percent of Americans) than in 1987, when 66.2 percent were covered.[32] According to a study of declines in employer health coverage from 1989 to 1996, rising employee premium contributions accounted for 76.4 percent of the decline.[33]

Texas has actually expanded its employment-based coverage. Texas employers insured 59.4 percent of Texans at the end of 1998 compared to 58.9 percent in 1987, but Texas still lagged behind the nation. Texas had 6.4 percent fewer people insured by employment-based insurance than in the nation.

Private Insurance

Private insurance that is not linked to employment has experienced the largest reduction in the percent of persons covered. Of all those who are covered by health insurance, the percentage of those purchasing insurance from a source other than their employer declined from 10 percent of the total in the United States in 1987 to 5.5 percent in 1998. Individuals face even more problems than small businesses encounter in purchasing insurance.

In Texas, the percentage of persons who bought from a source other than their employer dropped from 8.9 percent of the total insured population to 4.6 percent. Private insurance includes policies purchased directly by individuals and as part of groups like professional associations or religious groups. [34]

When Private Insurance Is Not Enough

When not covered by insurance, individuals either pay their own medical bills, look for charity care, or seek help from a government safety-net program. Private funds paid for 56 percent of all Texas health care in 1998, while public funding accounted for 44 percent.[35] The federal-state Medicaid program, CHIP, and Texas’ public hospital districts are some of the major government programs that provide medical care for uninsured Texans.

While welfare reform has reduced the number of people receiving financial assistance, a larger portion of the low-income population is covered by Medicaid today than a decade ago. Due to mandated federal expansions, Medicaid coverage rose nationally from 8.4 percent of the population in 1987 to 12.7 percent in 1993, and then dropped to 10.4 percent in 1998.

Medicaid coverage in Texas shows a similar pattern: at 6.2 percent of the population in 1987, its share rose to 12.4 percent in 1994 and then fell back to 9.4 percent in 1998 (Exhibit 7).[36] Medicaid spending, driven by the number of people who are eligible for help, federal requirements, and health care costs, has risen by 248 percent over the last decade.[37]

In Texas, Medicaid has an estimated budget of $23.5 billion for the 2000-01 biennium.[38] Despite expanded enrollment in public programs, however, the number of uninsured Texans has not declined proportionately.

Three Strategies: Affordability, Efficiency, Access

Without affordable insurance and other alternatives, private and public purchasers of insurance cannot overcome barriers to making insurance more widely available.

Changes in how Texas delivers health care services are critical to ensuring that public programs such as Medicaid can operate efficiently. High-cost emergency room care is not an efficient way to deliver minor medical services to the uninsured. Texas’ eligibility determination processes need to be changed to ensure that people who are eligible for Medicaid health insurance are enrolled.

Finally, Texas must take steps to increase access to health care services in some geographical areas and for some special groups. Such access can be limited by a person’s ability to pay for care, the availability of services, and other barriers.[39] In the public sector, health care safety net programs such as federally funded community health care centers can help to increase access in medically underserved areas.

The federal, state, and local governments and private businesses all have roles to play in making health insurance more affordable, improving the efficiency of government programs, and increasing access to health care. Strategies involving all of these groups are outlined in the following recommendations.

[1] US Census Bureau, Health Insurance Coverage: 1998 (Washington, DC, 1998), Table 8, “People Covered and Not Covered by Health Insurance by State in Health Insurance Coverage: 1998.”

[2] Because most of the elderly have insurance, most statistics in this analysis will refer to insurance rates for the population below the age of 65.

[3] US Census Bureau, Health Insurance Coverage: 1998, Table 2, “Persons Without Health Insurance for the Entire Year, by Selected Characteristics: 1998” (http://www.census.gov/hhes/hlthins/hlthin98/hi98t2.html); “Health Insurance Historical Tables,” Table 4, “Health Insurance Coverage Status and Type of Coverage by State–All Persons: 1987 to 1998” (http://www.census.gov/hhes/hlthins/historic/hihistt4.html); and Texas Health and Human Services Commission, Demographic Profile of the Texas Population without Health Insurance Coverage (Austin, Texas, May 2000) Table III-3, p. III-8 (http://www.hhsc.state.tx.us/cons_bud/dssi/BRT/BRT.htm). (Internet documents.)

[4] US Census Bureau, “Health Insurance Historical Tables,” Table 6, “Health Insurance Coverage Status and Type of Coverage by State–Persons Under 65: 1987 to 1998.” “Nonelderly” is the population under 65. There were a total of 239.3 million nonelderly Americans in 1998 and 212.7 million in 1987. There were a total of 18 million nonelderly Texans in 1998 and 15.1 million in 1987.

[5] US Census Bureau, Health Insurance Coverage: 1998, Table 2, “Persons Without Health Insurance for the Entire Year, by Selected Characteristics: 1998”; and Texas Health and Human Services Commission, Demographic Profile of the Texas Population without Health Insurance Coverage (Austin, Texas, May 2000), Table III-3, p. III-8 (http://www.hhsc.state.tx.us/cons_bud/dssi/BRT/BRT.htm). (Internet document.)

[6] US Census Bureau, Health Insurance Coverage: 1998, Table 3, “People Without Health Insurance Coverage by Household Income: 1998” (http://www.census.gov/hhes/hlthins/hlthin98/hi98t3.html). (Internet document.) and Texas Health and Human Services Commission, Demographic Profile of the Texas Population without Health Insurance Coverage, Table III-5, p. III-14.

[7] US Census Bureau, Health Insurance Coverage: 1998, Table 2; and Texas Health and Human Services Commission, Demographic Profile of the Texas Population without Health Insurance Coverage, Tables III-20 and III-11.

[8] Texas Health and Human Services Commission, Demographic Profile of the Texas Population without Health Insurance Coverage, Table III-16 and Chart III-17, US Census Bureau Health Insurance Coverage 1998, Table 2.

[9] John Pletz, “Central Texas Small Businesses Find Health Benefits a Necessity,” Austin American-Statesman (September 29, 2000).

[10] The NewsHour with Jim Lehrer/Kaiser Family Foundation, National Survey on the Uninsured (April 2000) (http://www.kff.org/content/2000/3013/NatlSurveyofUninsured.PDF). (Internet document.)

[11] Madeline Baro Diaz, “Uninsured Texans Caught in the Middle,” Associated Press State and Local Wire, October 5, 1999.

[12] The News Hour with Jim Lehrer/Kaiser Family Foundation, National Survey on the Uninsured, April 2000.

[13] Texas Comptroller of Public Accounts, “Texas Estimated Health Care Spending on the Uninsured,” Austin, Texas (http://www.window.state.tx.us/uninsure/). (Internet document.)

[14] Texas Department of Health, “1998 Data Showing Uninsured Cost/Unreimbursed Medicaid Cost” Austin, Texas, June 16, 2000. (Report prepared for reimbursement of Medicaid Disproportionate Share Program.)

[15] Texas Comptroller of Public Accounts, “Texas Estimated Health Care Spending on the Uninsured.”

[16] Agency for Health Care Policy and Research, “Health Insurance Status of the Civilian Noninstitutionalized Population: 1996,” by Jessica P. Vistnes and Alan C. Monheit (http://www.meps.ahrq.gov/papers/97-0030/97-0030.htm)(Internet document.)

[17] Caitlin Rother, “Young, Healthy, Well Often Forgo Health Insurance,” The San Diego Union-Tribune (October 8, 1999) p. A-1.

[18] US Census Bureau, “Health Insurance Historical Tables,” Table 6, “Health Insurance Coverage Status and Type of Coverage by State– Persons Under 65: 1987 to 1998” (http://www.census.gov/hhes/hlthins/historic/hihistt6.html). (Internet document.)

[19] Texas Comptroller of Public Accounts, Texas Health Care Spending Study, November 2000, (Draft Report), p. 6.

[20] Employee Benefit Research Institute, EBRI Health Benefits Data Book, by Ken McDonnell and Paul Fronstin (Washington, D.C., 1999), p. 30.

[21] The Kaiser Family Foundation and the Health Research and Educational Trust, Employer Health Benefits: 2000 Survey (Menlo Park, California, October 1999), p. 32.

[22] Rebecca Mowbray, “Health Benefits in Serious Condition: It Takes Creativity to Fight High Costs of Insurance Plan for Employees,” The Houston Chronicle, (July 23, 2000), p. 6.

[23] “Patchwork System Makes Health Insurance Solution Elusive,” by Charles Ornstein, The Dallas Morning News, (April 2, 2000).

[24] Charles Ornstein, “Drowning in Expenses: Employers Struggle to Meet Costs of Health-Care Plans While Workers Demand Top Coverage,” The Dallas Morning News (May 14, 2000), p. 1J.

[25] “Employers Encounter Surging Health Care Costs,” Towers Perrin Monitor (January 2000), pp. 1-5.

[26] US Census Bureau, Health Insurance Coverage: 1998, Table 1 (http://www.hcfa.gov/stats/nhe-proj/proj1998/tables/table1.htm). (Internet document.)

[27] Based on US Bureau of Labor Statistics data at (http://146.142.4.24/cgi-bin/surveymost?cu). (Internet document.)

[28] Richard Kronick and Todd Gilmer, “The Decline in Insurance Coverage,” Health Affairs (March/April 1999), p. 45.

[29] The Kaiser Commission on Medicaid and the Uninsured, Employment-Based Health Insurance Coverage and Its Decline: The Growing Plight of Low-Wage Workers, by Ellen O’Brien and Judith Feder, Institute for Health Care Research and Policy, Georgetown University (Washington, DC, May 1999), p. 17.

[30] Katharine Levit, Cathy Cowan, Helen Lazenby, Arthur Sensenig, Patricia McDonnell, Jean Stiller, Anne Martin, and the Health Accounts Team, “Health Spending in 1998: Signals of Change,” Health Affairs (January-February 2000), p.124.

[31] Sheila Smith, Stephen Heffler, Mark Freeland, and the National Health Care Expenditures Projection Team, “The Next Decade of Health Spending: A New Outlook,” Health Affairs (July-August 1999), p. 86.

[32] US Census Bureau, “Health Insurance Historical Tables,” Table 6.

[33] AFL-CIO, “Paying More and Losing Ground: How Employer Cost-Shifting is Eroding Health Coverage of Working Families,” by Lewin Group, Inc. (Washington, DC, 1998) pp. 3 and 8.

[34] US Census Bureau, “Health Insurance Historical Tables,” Table 6.

[35] Texas Comptroller of Public Accounts, Texas Health Care Spending Study, November 2000, p. 6. (Draft report.)

[36] US Census Bureau, “Health Insurance Historical Tables,” Table 6.

[37] Calculations based on Texas Department of Human Services, “Texas Medicaid Expenditures Information,” Submission to the Federal Health Care Financing Administration, Austin, Texas, August 15, 2000.

[38] Texas Department of Human Services, “Texas Medicaid Expenditures Information.”

[39] The Access Project, “Defining the Issue” (http://www.accessproject.org/about/problem.htm). (Internet document).

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