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Does extending health insurance coverage to the uninsured improve population health outcomes?

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Applied Health Economics and Health Policy Aims and scope Submit manuscript

Abstract

Background

An ongoing debate exists about whether the US should adopt a universal health insurance programme. Much of the debate has focused on programme implementation and cost, with relatively little attention to benefits for social welfare.

Objective

To estimate the effect on US population health outcomes, measured by mortality, of extending private health insurance to the uninsured, and to obtain a rough estimate of the aggregate economic benefits of extending insurance coverage to the uninsured.

Method

We use state-level panel data for all 50 states for the period 1990–2000 to estimate a health insurance augmented, aggregate health production function for the US. An instrumental variables fixed-effects estimator is used to account for confounding variables and reverse causation from health status to insurance coverage. Several observed factors, such as income, education, unemployment, cigarette and alcohol consumption and population demographic characteristics are included to control for potential confounding variables that vary across both states and time.

Results

The results indicate a negative relationship between private insurance and mortality, thus suggesting that extending insurance to the uninsured population would result in an improvement in population health outcomes. The estimate of the marginal effect of insurance coverage indicates that a 10% increase in the population-insured rate of a state reduces mortality by 1.69–1.92%. Using data for the year 2003, we calculate that extending private insurance coverage to the entire uninsured population in the US would save over 75 000 lives annually and may yield annual net benefits to the nation in excess of $US400 billion.

Conclusion

This analysis suggests that extending health insurance coverage through the private market to the 46 million Americans without health insurance may well produce large social economic benefits for the nation as a whole.

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Table I
Table II
Table III
Table IV

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Notes

  1. 1To obtain separate estimates of the quantity and quality/efficiency effects of private health insurance would require us to estimate equations 1 and 2. Almost all prior studies related to the benefits of extending health insurance to the uninsured estimate some form of health production function (equation 1), not augmented for health insurance, or the medical care utilization equation (2). We believe a major advantage of estimating the quasi reduced-form, aggregate health production function (equation 4) is that it is easier to identify I than to identify H in the medical care utilization equation (2), and particularly M in the structural health production function (1).

  2. 2Estimates of the first-stage coefficients indicate that a 1% increase in firm size and unionization results in increases of 0.05% and 0.04%, respectively, in the percentage of the population with private health insurance coverage. Estimates of the reduced-form coefficients indicate that a 1% increase in firm size and unionization is associated with decreases in mortality of 0.05% and 0.01%, respectively.

  3. 3The r-squared statistic is 0.99 for double log, log-linear and linear specifications, indicating that these three specifications fit the data equally well.

  4. 4It is particularly important to correctly specify the control variables if they are highly correlated with the identifying instruments and mortality. The correlation coefficients for unionization and the control variables are between −0.26 and 0.31, while those for firm size and the control variables are between −0.28 and 0.27. This suggests that the identifying instruments are not strongly correlated with the control variables.

  5. 5We maintain that Medicare and Medicaid coverage are exogenous. Since Medicare is primarily a mandatory health insurance programme for the elderly, most recipients do not choose coverage based on health status, but rather qualify for coverage based on age. Because Medicaid recipients must qualify for coverage based on income, we believe exogeneity is a reasonable approximation.

  6. 6For the sensitivity coefficient estimates presented in table IV, the estimates of lives saved range from 62 784 to 136 789, and social economic benefits from $US423 billion to $US921 billion.

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Acknowledgements

No sources of funding were used to assist in the preparation of this study. The authors have no conflicts of interest that are directly relevant to the content of this study.

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  1. Department of Economics, Eastern Michigan University, 703 Pray-Harrold Hall, Ypsilanti, MI, 48197, USA

    James A. Thornton &  Jennifer L. Rice

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  1. James A. Thornton
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Correspondence to Jennifer L. Rice.

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Thornton, J.A., Rice, J.L. Does extending health insurance coverage to the uninsured improve population health outcomes?. Appl Health Econ Health Policy 6, 217–230 (2008). https://doi.org/10.1007/BF03256135

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