BACKGROUND PAPER

Profile of

Health Care Coverage:

The Haves and Have-Nots

MARCH 1979

Congress of the United States

Congressional Budget Office
PROFILE OF HEALTH-CARE COVERAGE:

THE HAVES AND HAVE-NOTS

The Congress of the United States

Congressional Budget Office

For sale by the Superintendent of Documents, U.S. Government Printing Office

Washington, B.C. 20402
NOTE

Much of the analysis in this study is based on the Survey

of Income and Education (SIE) conducted in 1976 by the U.S.

Bureau of the Census. Many of the conclusions, therefore, are

based on 1976 data. Supplementary sources are discussed in

Chapter II.
PREFACE

At the request of the Senate Budget Committee, the Congressional Budget Office prepared this background paper to provide basic information on health-care coverage. In addition to

offering estimates of the size of the uncovered population in

1978, the paper describes the covered and uncovered populations,

discusses the adequacy of health-care coverage, and identifies

policy implications that will be developed in succeeding CBO

papers on issues related to health insurance.

The paper was prepared by Maureen Baltay of CBO's Human

Resources and Community Development Division under the supervision of Robert D. Reischauer and David S. Mundel. The author

gratefully acknowledges the following current and former CBO

staff members who have assisted in the essential computer programming and data manipulations: Deborah Haas, Fay Jan Lim,

John Shiels, Paul Warren, and Toni Wright. Numerous reviewers,

especially the staffs of the Senate and House Budget Committees

and of the Department of Health, Education, and Welfare, contributed constructive comments. The manuscript was edited for

publication by Johanna Zacharias and Robert L. Faherty, assisted

by Brice S. McDaniel. The several drafts were typed by Toni

Wright.

In keeping with CBO's mandate to provide objective analysis,

the study offers no recommendations.

Alice M. Rivlin

Director

March 1979

iii

CONTENTS

Page

PREFACE ill

SUMMARY ix

CHAPTER I. INTRODUCTION 1

Private Coverage 1

Public Coverage 1

CHAPTER II. HOW MANY PERSONS LACK HEALTH-CARE COVERAGE? 4

Sources o f Data 4

Variations in Estimates 5

Eligibility Versus Utilization of Benefits 9

Duplication of Coverage 11

The Size of the Uncovered Population 12

CHAPTER III. WHO ARE THE UNCOVERED? 15

Income and Age 15

Employment Status 19

Family Status of the Uncovered 24

CHAPTER IV. WHO ARE THE COVERED? 27

Income and Age • 27

Employment Status and Coverage 30

CHAPTER V. WHAT IS KNOWN ABOUT THE ADEQUACY

OF COVERAGE? 31

Information Needed to Assess Adequacy 32

The Breadth and Depth of Insurance Coverage 34

Summary • 41

CHAPTER VI. CONCLUSIONS 42

APPENDIX TABLES 45

v

TABLES

TABLE 1. COMPARISON OF SURVEY AND PROGRAM ESTIMATES OF

HEALTH-CARE COVERAGE, 1976 8

TABLE 2. ESTIMATED OVERLAPS OF PUBLIC AND PRIVATE

PROGRAMS, 1976 11

TABLE 3. ESTIMATED NUMBER OF PERSONS WITHOUT

HEALTH-CARE COVERAGE IN 1978 13

TABLE 4. PERCENT OF POPULATION WITHOUT HEALTH-CARE

COVERAGE AND PERCENT DISTRIBUTION OF THE

UNCOVERED BY INCOME, AGE, AND EMPLOYMENT

STATUS, 1976 16

TABLE 5. PERCENT OF THE POPULATION WITHOUT HEALTH-CARE

COVERAGE AND PERCENT DISTRIBUTION OF THE

UNCOVERED BY AGE AND FAMILY INCOME, 1976 18

TABLE 6. PERCENT DISTRIBUTION OF WORKERS WITH HEALTHCARE COVERAGE, BY INDUSTRY AND BY WAITINGPERIOD REQUIREMENT FOR BENEFITS, 1974 21

TABLE 7. PERCENT OF POPULATION WITHOUT HEALTH-CARE

COVERAGE AND PERCENT DISTRIBUTION OF THE

UNCOVERED BY EMPLOYMENT STATUS AND FAMILY

INCOME, 1976 22

TABLE 8. PERCENT DISTRIBUTION OF THE UNCOVERED

BY FAMILY STATUS, AGE, AND EMPLOYMENT

STATUS, 1976 25

TABLE 9. PERCENT OF POPULATION WITH HEALTH-CARE

COVERAGE BY INCOME, AGE, AND EMPLOYMENT

STATUS, 1976 28

TABLE 10. DISTRIBUTION OF THE POPULATION WITH HEALTHCARE COVERAGE BY INCOME, AGE, AND EMPLOYMENT

STATUS AND BY TYPE OF COVERAGE, 1976 29

vii
TABLE 11. PERCENT OF PERSONS WITH PRIVATE HEALTH

INSURANCE BY TYPE OF COVERAGE ACCORDING TO

AGE, INCOME, AND EMPLOYMENT STATUS, 1976 ..

TABLE 12. PERCENT OF COVERED WORKERS AT SPECIFIC

HEALTH PLAN BENEFIT LEVELS IN 1974

AND 1976

TABLE A-l. ESTIMATED OVERLAP OF PUBLIC AND PRIVATE

PROGRAMS, AND DISTRIBUTION BY AGE AND

BY INCOME, 1976

TABLE A-2. EFFECT OF ADJUSTING SIE FOR UNDERREPORTING

OF PUBLIC HEALTH-CARE COVERAGE ON THE

PERCENT DISTRIBUTION OF THE UNCOVERED,

BY INCOME AND EMPLOYMENT STATUS

TABLE A-3. PERCENT OF THE POPULATION WITH HEALTHCARE COVERAGE BY TYPE OF COVERAGE AND

BY AGE AND FAMILY INCOME, 1976

TABLE A-4. PERCENT OF EMPLOYED PERSONS WITH PRIVATE

INSURANCE BY INDUSTRY AND INCOME, 1976 ...

TABLE A-5. PERCENT OF INSURED WORKERS WITH TYPE OF

HEALTH BENEFIT BY INDUSTRY, 1976

TABLE A-6. PERCENT DISTRIBUTION OF BENEFICIARIES

OF EMPLOYER-PROVIDED GROUP COVERAGE

WITH A NUMBER OF BENEFITS BY TYPE OF

BENEFIT, 1976

36

38

46

48

50

53

54

56

vlii
SUMMARY

In 1978, more than 90 percent of all Americans either had

private health insurance or were eligible for public programs

that protect them to some degree from financial losses that

might be associated with medical care. But approximately 5 to

8 percent of all Americans did not have such protection, and

a higher percent of those who were covered had inadequate protection. These gaps are regarded as one reason for enacting

national health insurance.

Knowing the size and character of the uncovered population

is important to evaluating alternative health insurance proposals. The size of the uncovered population largely determines

how much the various proposals would cost. Knowing the characteristics of the uncovered enables one to assess the effectiveness of alternative plans in providing protection to the uncovered .

WHO ARE THE UNCOVERED?

By and large, the uncovered are from lower-income families

(those with incomes below $10,000) and are young. Unemployed

individuals and young adults are more likely than others to

be uncovered (see Summary Table 1).

Lower-Income Persons

Persons from lower-income families are twice as likely to be

without health-care coverage as are those from higher-income

families. Over half of the uncovered population comes from these

lower-income families. Lower-income individuals—whether employed or unemployed—are less likely to be covered. Many of

these lower-income persons are not eligible for medicaid because

they do not have dependent children, are not blind or disabled,

or have incomes that are too high to qualify for the program in

their states. Many do not work for employers who provide group

health insurance coverage and are not able to afford individual

health insurance.

ix
SUMMARY TABLE 1. PERCENT OF POPULATION WITHOUT HEALTH-CARE

COVERAGE AND PERCENT DISTRIBUTION OF THE

UNCOVERED BY INCOME, AGE, AND EMPLOYMENT

STATUS, 1976

Income , Age , and

Employment Status

Income (in Dollars)

Less than 5,000

5,000 to 9,999

10,000 to 14,999

15,000 or more

Age

Less than 6 years

6 to 18 years

19 to 24 years

25 to 44 years

45 to 64 years

65 years and over

Percent of

the Total

Population

13.2

20.0

21.1

45.6

9.0

23.8

10.9

25.6

20.4

10.3

Percent

of the

Uncovered

22.6

32.6

19.1

25.7

12.2

26.2

21.9

23.4

15.3

1.0

Percent of

the Population

Group without

Coverage

17.4

16.6

9.2

5.7

13.9

11.2

20.5

9.3

7.6

1.0

Employment Status

Employed

Full-time

wage earner

Part-time

wage earner

Self-employed

Unemployed

Not in Labor Force

Retired

Other a/

42.8

31.2

7.7

3.9

3.9

5.0

48.3

34.7

19.8

9.1

5.7

10.1

1.0

54.3

8.2

6.5

12.1

14.9

26.8

2.0

11.4

NOTE: Components may not add to 100 percent because of rounding.

SOURCE: SIE 1976, adjusted for underreporting of coverage by

public programs.

a/ Includes housekeepers, pre-school or in-school children,

and other persons unable to work.
Young Adults

Young adults are almost twice as likely as any other age

group to be without coverage and, although they account for only

11 percent of the population, they account for 20 percent of the

uncovered. The number of 19- to 24-year olds without coverage

is disproportionately high for several reasons. First, many

insurance companies do not cover family members over age 18

unless they are in school; consequently, young adults not in

school who are unemployed or in jobs that do not provide insurance are often without coverage. Second, medicaid does not

cover young adults without dependent children, even if they have

low incomes. Finally, people in this age group tend to be more

healthy and thus may not be motivated to purchase their own

insurance.

The Employed

Although less than 10 percent of the employed population

lacks coverage, the employed account for over one-third of the

uncovered. For the most part, the uncovered employed work in

industries with relatively low wages, high proportions of parttime or self-employed workers, and large seasonal fluctuations in

employment, or in firms that have health insurance plans with

long waiting periods before coverage is provided. One-third of

the uncovered full-time wage earners are heads of families. When

an employed family head is without health insurance, the chances

are 4 in 5 that the family is without coverage as well. Onethird of the uncovered family members who are not in the labor

force are dependents of employed family heads who lack coverage.

The Unemployed

In the spring of 1976, when the aggregate unemployment rate

was higher than 8 percent, over one-fourth of the unemployed

were without health coverage. These individuals accounted for

one-tenth of the uncovered population, and over half of them

were aged 16 to 24. During periods of lower unemployment, the

percent of unemployed without coverage would probably be higher

because fewer workers in the ranks of the unemployed would be

on temporary layoffs: many workers on temporary layoffs continue

to be eligible for employment-related health benefits. The

unemployed are not always the principal wage earner, however,

xi
and they may be covered under the policies of family heads who

continue to be employed. When family heads are unemployed, the

coverage of family members not in the labor force may be affected

as well as their own. Fifteen percent of the uncovered unemployed are family heads; 4 percent of the uncovered family

members not in the labor force are dependents of these unemployed and uncovered workers•

Dependents

The overwhelming majority of the uncovered are members of

families rather than single persons. Some family members lack

coverage even though the family head is covered because the

family head with job-related health insurance either waives or

is not offered the opportunity to insure his or her dependents.

Over half of the uncovered who are not in the labor force are

in families headed by someone with health coverage (see Summary

Table 2). Fifty percent of the unemployed who are uncovered

are members of families in which the head is covered.

WHAT IS KNOWN ABOUT THE ADEQUACY OF COVERAGE?

Policymakers are concerned that the insurance held by people

meet certain standards. To evaluate the adequacy of coverage—

defined as either protection against large absolute health expenditures or expenditures large in relation to income—requires

detailed information on four factors:

o Financial resources of the family;

o Health status of the members and the likelihood of their

incurring health-care expenditures of certain types;

o Family preferences concerning risk and the value placed

by them on health care as compared with other goods;

o Types of coverage available to a family, including

information on the breadth and depth of benefits. _!/

Breadth of coverage refers to the scope of services for which

a person is insured. Depth of coverage refers to the out-ofpocket expenditures for which a person is liable under the

terms of coverage.

xii
SUMMARY TABLE 2. PERCENT DISTRIBUTION OF THE UNCOVERED

BY FAMILY STATUS, AGE, AND EMPLOYMENT

STATUS, 1976

Age and

Employment

Status of

the Uncovered

Family Members

Single

Persons

Family

Heads

With Covered

Head

Private Public

With

Uncovered

Head

Total Uncovered 11.3 14.1 23.9 20.9 29.6

Age

Less Than 18 years

19 to 24 years

25 to 44 years

45 to 64 years

65 years and Over

Employment Status

Full-time wage

earner

Part-time wage

earner

Self-employed

Unemployed

Retired

Other not in

labor force

2.6

17.7

16.0

16.9

11.5

20.9

18.6

14.9

19.5

16.0

4.6

0.4

11.1

28.2

31.2

16.8

32.2

14.

45.

15.0

45.0

3.5

23.8

36.4

18.0

27.4

51.4

21.2

27.1

11.3

33.7

23.6

23.9

26.3

15.2

16.9

22.7

11.1

9.8

17,

11,

16,

11.0

27.7

47.0

19.5

21.0

15.0

9.1

15.8

22.9

16.9

15.5

4.4

40.2

NOTE: Components may not add to 100 percent because of rounding.

SOURCE: SIE 1976, adjusted for underreporting of coverage by

public programs.

No single existing data source provides all the outlined

information. What data are available suggest that, while most

persons with private insurance appear to be protected against

high absolute medical expenditures, at least 15 percent do

not have protection against this sort of catastrophe through

xiii

I ~T
private insurance. It is not known, however, how many of these

persons with shallow private insurance are covered simultaneously

by public programs such as veterans' medical care that would

protect them from financial loss in case of a major illness.

Neither is there an accurate estimate of those who are inadequately insured against income-related catastrophic expenses.

In 1978, roughly 9 percent of all families had out-of-pocket

medical expenses that exceeded 15 percent of their gross income.

There is no way to estimate the additional persons whose expenditures were not large in 1978 but who had open-ended payment

liabilities under the terms of their insurance contracts.

Families incurring high out-of-pocket health expenditures

do have partial recourse through the tax code provision that

permits unreimbursed medical expenses in excess of 3 percent of

adjusted gross income to be deducted from income before calculating taxes. This form of relief, however, is available only to

those who itemize their tax deductions. Furthermore, this provision affords substantial relief only to those families or individuals whose incomes—and marginal tax rates—are fairly high.

POLICY IMPLICATIONS OF THE PATTERNS OF COVERAGE

The uncovered are a varied group, and thus using any single

dimension, such as unemployment, to define the population to be

covered by a national health insurance plan will help only some

of them. Moreover, because many covered individuals have characteristics similar to those of the uncovered, use of any single

dimension is likely to provide assistance to many people who

already have coverage, thus raising the net budgetary cost of

national health insurance if it is publicly financed.

Any plan that relies exclusively on employers to provide

insurance will not encompass all of the uncovered population.

Nevertheless, the extent of health-care coverage could be significantly improved by certain alterations in employer-provided

policies. Such changes might include automatic protection for

all dependents of a covered family head, notwithstanding the age

of dependents. This change alone would reduce the number of

uncovered by 20 percent. Increasing the provision of coverage

during temporary layoffs and reducing the waiting times for jobrelated health insurance coverage are other possible changes

that would reduce the vulnerability of those with job-related

insurance to fluctuations of the economy.

xiv
If all uncovered workers and their dependents had employerprovided coverage, and if all the self-employed were covered,

the number of uncovered would be cut in half. This change would

affect roughly one-fourth of the employed population, but the

financial impact on certain industries could be large. Retail

trade, construction, agriculture, and services would incur the

greatest costs because these industries currently have the

lowest rates of group health coverage.

Changes in existing public programs such as medicaid could

also substantially reduce the uncovered population. For example,

medicaid coverage could be extended to the poor families with

an unemployed head in those 23 states that do not cover them

now; it could also be extended to low-income individuals who are

not members of families with dependent children. Alternatively,

the categorical requirements could be eliminated entirely, and

eligibility could be based only on financial criteria. These

changes would decrease the number of uncovered by perhaps as

much as one-fourth. Medicaid for medically needy, nonwelfare

recipients, now available in 29 states, might also be extended

to every state and eligibility requirements standardized to

eliminate existing uncertainties about program requirements.

Establishing minimum benefit packages that set deductibles

and coinsurance levels as well as covered services would have

a more widespread financial impact on employers than simply

requiring insurance. Despite the fact that most workers have

group health insurance that covers a broad range of services,

the depth of the coverage or dollar liability of the insured

varies considerably. The magnitude of the impact on employers

would of course depend upon what was defined as the minimum

acceptable benefit and cost-sharing package.

xv

"T~T
L. i
CHAPTER I. INTRODUCTION

The great majority of the U.S. population is protected to

varying degrees from high health-care expenses. The sources of

this protection are health insurance sold by private companies

and publicly financed programs. Some people, however, have

inadequate protection against the extreme financial loss healthcare costs can bring about; others have no coverage at all.

This situation has been cited as one of the reasons for enacting

some type of national health insurance.

The number of people without health-care coverage or with

coverage below certain levels will in large measure determine the

cost of health insurance proposals. Furthermore, knowing what

people are uncovered is important to modifying the existing

health care financing system or to devising ways to phase in a

uniform, federal system. This paper, therefore, presents current

information about the size and characteristics of the population

without coverage. It also summarizes what is currently known

about the breadth and depth of private coverage.

PRIVATE COVERAGE

The principal form of health-care coverage is private health

insurance. This protection against the financial loss that can

result from medical care is in most instances acquired by people

as a group, either through their employers or through membership

in an association. Less commonly, private policies are purchased

directly by an individual or family.

PUBLIC COVERAGE

In addition to private insurance, there are public programs

that provide either insurance-type benefits or direct services.

These latter are generally at least as comprehensive as those

financed by private insurance. By financing or providing services, these programs—like private insurance—protect against

the financial losses that can result from medical care. The
most important of the public programs are medicare, medicaid,

veterans' programs, and the Civilian Health and Medical Program

of the United States (GRAMPUS). _!/

Medicare is the federal health insurance program for the

aged and disabled. It pays for a broad range of health services

to most individuals age 65 and over, and to the disabled under 65

who have been entitled to social security for two years or who

are being treated for chronic kidney disease.

Under medicaid, all states except Arizona offer basic health

services to eligible low-income persons. The cost of providing

these services is shared by the federal government, but each

state determines its own eligibility criteria and sets benefits

above the minimum established by federal law. Almost all recipients of cash welfare programs are automatically eligible. In

addition, 29 states extend medicaid to families that satisfy all

but the income requirements for welfare and that either have

incomes which meet state definitions of "medically needy" or

incur medical expenses which lower their incomes to medically

needy levels. The latter requirement is frequently referred to

as the medicaid "spend down."

The Veterans Administration (VA) operates a network of

hospitals, outpatient clinics, and nursing homes to meet the

medical needs of eligible veterans. It also reimburses eligible

veterans for care obtained in nonfederal facilities when federal

facilities are not available. Veterans who are service-disabled,

who are age 65 or over, who receive a VA pension, or who swear

that they are unable to pay for care can receive VA health

services.

The Department of Defense (DoD) provides health care for

active duty personnel, dependents and survivors of active duty

members, and military retirees and their dependents or survivors.

_!/ In this paper, coverage excludes workman's compensation,

disability benefits, accident insurance, and coverage in

public hospitals and clinics, or neighborhood health centers.

The Federal Employees Health Benefits Program is counted as

employer-provided private insurance.
Most of the eligible civilians receive their medical care in the

private sector under CHAMPUS rather than in military hospitals.

GRAMPUS is paid for by DoD but administered by private insurance

companies.

"T~T
CHAPTER II. HOW MANY PERSONS LACK HEALTH-CARE COVERAGE?

Estimating the number of persons with and without healthcare coverage is a difficult task complicated by several factors.

No two sources provide the same estimate of the number of persons

with any single type of health benefit. Different sources often

use different measures of program activity—some record benefit

recipients, others record those eligible or potentially eligible

for a program. Difficulties also arise because many people have

multiple forms of coverage that must be identified before the

remaining uncovered population can be estimated.

Taking into account these difficulties, a reasonable estimate can be set: five to eight percent of the U.S. population

had no health-care coverage in calendar year 1978.

SOURCES OF DATA

Unfortunately, no insurance company or federal agency

collects information on the uninsured per se. As a result,

information about them must be surmised: the noncovered are

the total population minus those people known to have some sort

of coverage. How does one estimate the size of the covered

population?

Two general sources of information about health-care coverage exist—program data and survey data. Program sources,

such as insurance company and public program enrollment figures,

give reasonably accurate counts of the number of insurance

policies issued and the number of beneficiaries of particular

programs. But many people have more than one kind of healthcare coverage, and program data do not, as a rule, provide any

information about such overlaps. So, simply adding the numbers

of beneficiaries of different programs considerably overstates

the total number of persons with coverage.

A figure for covered persons can also be extrapolated from

sample surveys of the population. Surveys can yield estimates

of how much program overlap there is, but they may underestimate
the actual number of insured and eligible. Survey respondents

sometimes are unaware of—or do not remember—their eligibility

for particular benefits; others may be reluctant to reveal it.

Because of these shortcomings, relying exclusively on either

program or survey data is a mistake. Survey data adjusted to

reflect program information, however, are likely to provide a

more accurate picture. This paper, therefore, relies heavily

on such adjusted data. The principal source has been the Survey

of Income and Education (SIE), conducted in 1976 by the U.S.

Bureau of the Census. Other surveys have been used to corroborate information from the SIE. I/

VARIATIONS IN ESTIMATES

Ascertaining the total number of people with some kind of

health-care coverage requires estimating the number with private

insurance and the number eligible for public programs and then

eliminating the overlap that certainly exists. This procedure

is especially difficult because of discrepancies in estimates

of insurance coverage and problems in defining eligibility for

public programs.

Private Insurance

All sources are generally agreed that approximately 13

million elderly have private insurance, but there is wide discrepancy in estimated coverage of the population under 65. In

1976, according to the SIE, 79 percent of persons under age 65

had private health insurance. The Health Interview Survey,

however, estimated that 78 percent of non-aged persons had

insurance; the Center for Health Administration Studies estimated

82 percent; and the Health Insurance Institute estimated 164

I/ These are Center for Health Administration Studies (CHAS),

University of Chicago, 1975-1976; Health Interview Survey,

National Center for Health Statistics, 1976; and Health Plans

Provisions Survey, Bureau of Labor Statistics, 1976.

"T~T
million persons or 86 percent. _2_/ The estimate of the Health

Insurance Institute, which uses numbers of policies issued as its

starting point, is considerably higher than those derived from

surveys. There is reason to believe, however, that the survey

estimates may be low. As was mentioned earlier, people sometimes

have difficulty recalling certain benefits or are unaware of them

altogether.

Earlier studies of employment benefits and health insurance

noted underreporting of health insurance on surveys. Certain

employees are more likely to be unaware of health (or other)

benefits they in fact have—for example, new employees, seasonal

workers who may be covered under a multi-employer plan, workers

whose employers pay all the premium costs, or those whose own

contributions are automatically deducted from their paychecks. ^/

That there is some underreporting of private group health

insurance is thus a reasonable assumption. It is not clear,

however, how much underreporting of health insurance has occurred

on the SIE or any other survey, because negative responses from

7j The Health Insurance Institute bases its estimates on gross

enrollment figures reported by insurance companies, Blue

Cross-Blue Shield plans, and other private plans. The enrollment figures are adjusted by duplication factors derived

from a one-day sample of insurance claims in 1973, which have

subsequently been updated to reflect more recent experience.

_3/ Some limited discussion of underreporting of private health

insurance coverage is contained in John Krizay and Andrew

Wilson, The Patient as Consumer (Lexington Books, 1974),

Appendix C; and Walter W. Kolodrubetz, "Group Health Insurance Coverage of Full-Time Employees, 1972," Social Security

Bulletin. April 1974, pp. 17-35. Krizay and Wilson found

that even some participants in the Federal Employees Health

Benefit Program—participation which requires some employee

action—were not certain whether they were insured. Only

one study—Ronald Andersen, Joanna Lion, and Odin Anderson,

Two Decades of Health Services: Social Survey Trends in Use

and Expenditures (1976), Appendix 1—attempted to verify

positive responses to health insurance coverage questions.

It found that some respondents erroneously reported having

private insurance (overreporting), but it did not attempt to

see if people who said they had no insurance in fact did.
employees to questions about coverage have not been verified.

The Health Insurance Institute figures cannot be used as a check

on the accuracy of the survey because they are not adequately

adjusted for duplicate group health insurance coverage possible

in two-earner families.

Because of these uncertainties, a range of estimated private

insurance coverage is used. The upper end of the range (170

million people) is derived from the Health Insurance Institute

(HII) estimate, which has been reduced to take into account more

duplicate coverage than reflected in the HII numbers arising from

the increased employment of married women in jobs that may

provide health benefits, t^l The low end of the range (165

million) was estimated from the average of the health survey

estimates. Table 1 shows discrepancies between the SIE and

program sources of information and the values used to estimate

the number of people with health-care coverage.

Public Programs

A similarly large discrepancy exists between survey estimates and program data with respect to the number of people

eligible for public programs. According to the SIE, 12 million

people were covered by medicaid at the time of the survey, but

program data show considerably more people eligible at that time.

Medicaid eligibility is automatically conferred on almost all

recipients of cash payments under the Aid to Families with

Dependent Children (AFDC) and Supplemental Security Income (SSI)

programs. In addition, more than half of the states cover

the medically needy. During the time of the survey, welfare

recipients alone totaled almost 16 million, 35 percent more

than the number of SIE respondents who said they were covered by

medicaid. 5/

jt_/ Howard Hayghe, "Families and the Rise of Working Wives—An

Overview," Monthly Labor Review, May 1976, pp. 12-19.

_5/ U.S. Department of Health, Education, and Welfare, National

Center for Health Statistics, Public Assistance Statistics

May 1976, (October 1976), and Supplemental Security Income

for the Aged. Blind, and Disabled, Monthly Statistics,

June 1976.

~TTT~T
L

TABLE 1. COMPARISON OF SURVEY AND PROGRAM ESTIMATES OF

HEALTH-CARE COVERAGE, 1976 a/: PERSONS IN MILLIONS

Type of Coverage

Private Insurance

Medicare

Medicaid

VA and CHAMPUS

Unadjusted

SIE b_/

163

22

12

8

Program

Data c_/

177 d./

24 e/

22 fj

21 sJ

Used to

Compute

Coverage

165-170

23

22

21

a/ Coverage figures indicate total enrollment in each program.

b/ SIE 1976 sample of 140,000 households with 440,000 individuals. Although there are other surveys of health coverage,

they cannot be compared in the same fashion because information about coverage under some public programs is not

recorded for all survey respondents.

cj In order to be consistent with the SIE, all program data

exclude to the extent possible recipients in Puerto Rico and

the Virgin Islands and the institutionalized population.

d_/ Health Insurance Institute, Source Book of Health Insurance

Data, 1977-1978.

e_l Noninstitutionalized medicare beneficiaries estimated by CBO

on the basis of medicare budget data and estimates in CBO,

Long-Term Care: Actuarial Cost Estimates (August 1977).

fj CBO estimate of medicaid eligibility based on SIE demographic and income data and data from the Aid to Families with

Dependent Children, Supplemental Security Income, and medicaid programs.

£/ VA 1979 budget estimates 12 million eligible veterans.

CHAMPUS eligibles estimated by DoD.

8
Six percent of aged persons reporting receipt of social

security or railroad retirement income neglected to report

coverage by medicare, even though they are clearly eligible.

One might have expected medicare coverage to have been reported

very accurately since it is a well-publicized program with

straightforward eligibility standards. This again demonstrates

the confusion of people about their benefits.

ELIGIBILITY VERSUS UTILIZATION OF BENEFITS

Part of the difference in estimates of public coverage is

attributable to differences in definition. One source may tabulate the number of persons who actually received benefits;

another may indicate those eligible for benefits whether or not

they actually enrolled or used them. This distinction between

use and eligibility is critical in estimating numbers of medicaid

and VA beneficiaries—especially those beneficiaries whose

eligibility is not automatic (such as military retirees for

CHAMPUS) or contractual (private insurance) but is determined

upon application for benefits.

A person may be covered by either private or public insurance without ever claiming benefits. Thus, the number of claims

may not reflect the number of persons with coverage. Most recipients of cash assistance are automatically eligible for

medicaid, but there is also an eligible group deemed medically

needy that is not easy to identify. Medicaid program data record

only those persons whose bills are paid by medicaid. While welfare data can be used to measure the total number of cash assistance recipients eligible for medicaid, there is no source of

data on the corresponding nonwelfare group eligible for medicaid

from whom monthly medicaid recipients are drawn. In order to

present a more realistic estimate of the average number of

persons eligible for medicaid than comes from the SIE, it is

therefore necessary to estimate the eligible medically needy and

then to simulate total medicaid eligibility using demographic and

income data from the SIE.

Program data show that only 40 percent of eligible welfare

recipients actually received medicaid benefits at the time of

the survey. Because there is some evidence that far fewer

medically needy people actually take advantage of medicaid than

could, a participation rate of 30 percent was selected for the

"TTTT
1:

medically needy population. _6_/ Under this assumption, there

were an estimated 6 million eligible medically needy at the time

of the survey, of whom 2 million actually received medicaid. _?/

The estimated number of eligible medically needy plus the cash

welfare recipients constitute a total medicaid-eligible population of 22 million people. In order to reflect this corrected

estimate on the SIE, all families meeting the categorical requirements for medicaid were identified (that is, aged, disabled,

female-headed with dependent children, families headed by an

unemployed father in states which covered them, and so on). A

low-income screen was set across all states and was gradually

raised until 16 million recipients were identified. Similarly,

in states with medicaid programs for the medically needy, the

income screen was raised further until another 6 million persons

were identified and assigned medicaid coverage. The simulation

thus implicitly corrected for the undercount of eligible welfare recipients and generated an eligible medically needy population, j*/

Only veterans with service-connected disabilities are

recorded as having VA coverage on the SIE. Under the laws

governing eligibility for veterans' medical care, all 29 million

veterans might be eligible for care at some point. Nevertheless,

some veterans are far likelier to use VA care than are others.

While the service-disabled have an absolute entitlement and

j>_/ In a study of the medicaid spend-down done by Urban Systems

Research and Engineering, Inc., for the U.S. Department of

Health, Education, and Welfare, it was estimated that in

1974 the state of Massachusetts was only providing benefits

to 5 percent of the potentially eligible spend-down population. In the five states studied, there was confusion about

program requirements on the part of case workers, public

ignorance of the existence of the program, and discouragement

of spend-down applications.

Tj Of 16 million medicaid-eligible cash assistance recipients,

only 7 million were actually receiving medicaid at the time

of the survey.

_8/ The major effect of this simulation is to raise the percent

of medicaid eligibles with incomes below $5,000 from 52 percent to 61 percent and to reduce the percent with incomes

$10,000 or greater from 17 percent to 10 percent.

10
top priority for VA care, less than one-fourth of VA hospital

admissions are service-disabled veterans. Most admissions are

nondisabled veterans who are over 65 or who state that they are

unable to pay necessary medical expenses. Eligibility for VA

care has therefore been attributed to disabled veterans, those

age 65 or over, and to lower income veterans under 65. This

generates an estimate of eligible veterans that is the same as

that used by the Veterans Administration.

DUPLICATION OF COVERAGE

As was stated earlier, many persons are covered by more

than one program at a time. An estimated 60 percent of medicare

recipients have private insurance, usually a supplementary policy

that covers bills not paid by medicare. (See Table 2 and Appendix Table A-l for greater detail.) Thirty-eight percent of all

medicare recipients are covered by other public programs.

TABLE 2. ESTIMATED OVERLAPS OF PUBLIC AND PRIVATE PROGRAMS,

1976: PERCENT OF PROGRAM ELIGIBLES

Program

Medicare

Medic aid

Veterans Administration

CHAMPUS

Program

Alone

20.4

46.7

16.1

51.0

Program Plus

Other Public

Programs

38.2

35.2

25.4

16.3

Program Plus

Other Private

Programs

59.3

32.1

72.1

39.6

SOURCE: SIE 1976, adjusted for underreporting of coverage by

public programs.

Medicaid distributions show a similar overlap in coverage.

The low-income elderly often receive medicaid as well as medicare. The extent of the overlap between medicare and medicaid

11

TTTTT
reflects the practice of many state medicaid programs to pay

the out-of-pocket costs for the elderly poor who are covered by

medicare.

Thirty-two percent of medicaid eligibles also have private

insurance. Private coverage is evenly split between coverage

under group policies and individually purchased insurance,

although almost twice as many medicaid eligibles with incomes of

less than $5,000 have individual insurance as have group insurance. Almost 40 percent of those with both medicaid and private

coverage are elderly people who also have medicare. The multiple

coverage of the elderly may be explained in part by a desire

of persons with reduced retirement income and substantial health

needs to minimize the risk of high out-of-pocket health costs.

Private insurance among nonelderly medicaid eligibles is

the result of several different factors. A child whose father

is absent technically may have private coverage under an employer's plan of his father and may also have medicaid because

his mother is on welfare. A temporarily unemployed person may

have carryover insurance coverage from his job and at the same

time be eligible for welfare and have medicaid because he has no

current income. A nonwelfare family may be eligible for medicaid

because of high medical expenses not covered by its health

insurance policies.

More than 70 percent of VA eligibles and almost 40 percent

of GRAMPUS eligibles have private coverage as well. Many VA

eligibles have private health insurance either because they are

employed and automatically covered by a group policy or because

they want to provide protection for their dependents who are not

eligible. Many GRAMPUS eligibles retire from the military at a

relatively early age and begin second careers that offer insurance policies as fringe benefits.

THE SIZE OF THE UNCOVERED POPULATION

After reconciling discrepancies in estimates and adjusting

for persons with more than one type of coverage, the number of

persons without health-care coverage in 1976 can be estimated.

Circumstances have changed since 1976, however, so that the

number of uncovered people in 1978 is lower. While the population has grown—which would increase both the number of covered

and of uncovered—the number of employed has grown faster. At

12
the time of the 1976 SIE, the unemployment rate was about 8 percent and the economy was just emerging from a recession. The

unemployment rate had dropped to ahout 6 percent in 1978. Because most people obtain health coverage through their employers,

the increase in the number of employed generates an increase in

the number of people with health insurance. The increase is not

one-for-one, however, because most of the newly employed had been

covered under parents' or spouses' health insurance policies or

under public programs during 1976. Nevertheless, the net increase in coverage accompanying the increase in employment more

than offsets the increase in the number of uncovered due to population growth. This reduces the uncovered by 1 million persons

between 1976 and 1978 and results in an estimate of 11 to 18

million uncovered persons, between 5 and 8 percent of the population. _9_/ Table 3 summarizes the adjustments made to the 1976

SIE to arrive at the estimate of the uninsured for 1978.

TABLE 3. ESTIMATED NUMBER OF PERSONS WITHOUT HEALTH-CARE

COVERAGE IN 1978: IN MILLIONS a/

Uncorrected Number of Persons without Coverage, 1976 26

Adjusted for 1976 undercounts

Medicaid less 2

Other public programs less 3

Private insurance less 2 to 9

Adjusted for net increases between 1976 and 1978

in population and employment-related insurance less 1

Estimated Number of Persons

without Coverage in 1978 11 to 18

Uncovered as a Percent of the Population 5 to 8

a/ Duplicate coverage has been netted out in all adjustments.

_9_/ CBO population, labor force, and employment figures tie to

official population estimates of the Bureau of the Census

( continued)

13
.MIL _

After 1978, unless whole new classes of people acquire

health coverage through extensions of public programs or of

private insurance to new employee groups, the number of uncovered

may be expected to increase. A slight increase might be expected

as the outcome of normal population growth. A somewhat larger

increase may be anticipated should there be a rise in the unemployment rate.

9/ (continued)

as do the estimates generated by the Census Bureau's Survey

of Income and Education. Estimates of the uncovered in 1976

therefore are calculated from a total noninstitutionalized

population of 212 million persons. Statistical experts

believe that an estimated 2.5 percent of the population was

inadvertently missed during the 1970 census, so that all

official census population estimates for succeeding years

are correspondingly low. If this is so, then the probable

actual number of persons at the time of the SIE was 218 million. Were this larger population used instead of official

figures, it would result in a higher estimate of the uncovered population.

Although no one knows the age or income of the people

believed missing, it was assumed that 65 percent of them

have incomes of below $5,000, that 25 percent have incomes

of between $5,000 and $10,000, and that they have the same

distribution of health coverage as the enumerated population

with those incomes. Recalculating the number of covered

and uncovered using the higher population base yields a

1976 estimate of the uncovered of 16 to 19 million persons or

7 to 9 percent of the larger population.

14
CHAPTER III. WHO ARE THE UNCOVERED?

The choice among various health insurance proposals depends

not only on how many people lack health-care coverage but also

on who they are. Because of the range in the estimate of underreporting of private health insurance by SIE respondents, the

1976 SIE information, adjusted only for underestimates in public

coverage, serves as the basis for the following detailed distributional breakdowns. ~\J The characteristics described are

those often used to define eligibility for public programs:

income, age, and employment status.

INCOME AND AGE

People with family incomes below $10,000 are almost twice

as likely to lack health-care coverage as are people with incomes

between $10,000 and $15,000. Compared with those in the $15,000-

and-over income group, they are three times more likely to lack

coverage. 2_l These lower-income persons make up 55 percent of

the uninsured population (see Table 4).

The proportion of the uncovered represented by each age

group is not very different from its proportion of the total

population. But there are two exceptions. The elderly, who

are 10 percent of the population, are only 1 percent of the

uncovered. Those in the 19-to-24 age group have the highest

I/ See Appendix Table A-2 for the effect of public program

adjustments on the distribution of the uncovered by income

and employment status. The major effects of the adjustments

are to reduce the percent of the uncovered with incomes

below $5,000 from 30 percent to 23 percent and to raise the

percent uncovered with incomes of $15,000 or more from 20

percent to 26 percent. Conclusions of the analysis are

unaffected.

"Lj Income has an even larger effect on coverage when age, sex,

race, education, industry of employment, and employment

status of the family head are held constant.

15
._ J__l._LL _

TABLE 4. PERCENT OF POPULATION WITHOUT HEALTH-CARE COVERAGE

AND PERCENT DISTRIBUTION OF THE UNCOVERED BY INCOME,

AGE, AND EMPLOYMENT STATUS, 1976

Income, Age, and

Employment Status

Percent of

the Total

Population

Percent

of the

Uncovered a/

Percent of the

Population

Group without

Coverage

Income (in Dollars)

Less than 5,000

5,000 to 9,999

10,000 to 14,999

15,000 or more

Age

Less than 6 years

6 to 18 years

19 to 24 years

25 to 44 years

45 to 64 years

65 years and over

Employment Status

Employed

Full-time

wage earners

Part-time

wage earners

Self-employed

Unemployed

13.2

20.0

21.1

45.6

9.0

23.8

10.9

25.6

20.4

10.3

42.8

31.2

7.7

3.9

3.9

22.6

32.6

19.1

25.7

12.2

26.2

21.9

23.4

15.3

1.0

34.7

19.8

9.1

5.7

10.1

17.4

16.6

9.2

5.7

13.9

11.2

20.5

9.3

7.6

1.0

8.2

6.5

12.1

14.9

26.8

Not in Labor Force

Retired

Other b/

5.0

48.3

1.0

54.3

2.0

11.4

(continued)

16
TABLE 4. (Continued)

NOTE: Components may not add to 100 percent because of rounding.

SOURCE: SIE, 1976, adjusted for underreporting of coverage by

public programs.

j3/ This distribution is based upon an estimate of 163 million

people with private health insurance. If the estimated

number of privately insured were increased to 168 million on

the assumption that 5 million people erroneously reported

having no private health insurance on the SIE, the number

of uncovered would fall to 16 million and the percent distribution of the uncovered would be as follows:

Income (in Dollars)

Less than 5,000 27.3

5,000 to 9,999 37.2

10,000 to 14,999 18.3

15,000 or more 17.2

Employment Status

Employed 31.4

Unemployed 11.8

Not in Labor Force 56.8

b_/ Includes housekeepers, pre-school or in-school children,

and other persons unable to work.

17

TTTT
proportion with no health-care coverage: while they are 11

percent of the total population, they are 20 percent of the

uncovered. The proportion of uncovered 19- to 24-year-olds is

even higher in the lower income groups—32 percent of those with

incomes of less than $5,000 and 26 percent of those with incomes

between $5,000 and $10,000 are uncovered (see Table 5).

TABLE 5. PERCENT OF THE POPULATION WITHOUT HEALTH-CARE COVERAGE

AND PERCENT DISTRIBUTION OF THE UNCOVERED BY AGE AND

FAMILY INCOME, 1976

Family Income

(in Dollars)

Under

19

19 to

24

25 to

44

45 to

64

65 and

over

Percent of the Population Group

without Coverage

Less than 5,000 21.5 32.0 25.6 20.0 0.4

5,000 to 9,999 22.7 25.6 18.0 12.2 0.8

10,000 to 14,999 11.4 17.2 7.5 6.3 1.2

15,000 or More 5.5 15.2 4.8 3.8 2.3

All Incomes 11.9 20.5 9-3 7.6 1.0

Percent Distribution of the Uncovered

Less than 5,000

5,000 to 9,999

10,000 to 14,999

15,000 or More

All Incomes

7.8

14.1

8.2

8.3

38.4

5.1

6.3

3.7

6.7

21.9

5.0

7.7

4.5

6.2

23.4

4.6

4.3

2.5

3.9

15.3

0.1

0.3

0.2

0.4

1.0

NOTE: Components may not add to 100 percent because of rounding.

SOURCE: SIE 1976, adjusted for underreporting of coverage by

public programs.

The disproportionately high number of 19- to 24-year olds

without coverage could be caused by several factors. Because

many insurance policies do not cover family members over age 18

unless they are in school, those who are not in school are more

18
likely to be uncovered If they are unemployed or in jobs that

do not provide insurance. 3^/ Low-income youths are not eligible

for medicaid in their own right unless they have dependent children, and not many in this age group have dependents. Another

possible reason for the lower health coverage of people in this

age group is that they are among the healthiest and are not motivated to purchase their own insurance. This last reason is suggested by the fact that this age group still tends to have a

lower rate of coverage when employment status, industry of

employment, income, and other variables are held constant.

EMPLOYMENT STATUS

Because much health insurance is provided through employers,

lack of coverage is to a large extent a function of whether one

is employed or unemployed. j4_/ It also depends upon other factors

such as the industry in which one is employed, how long one has

been in a particular job, or how long one has been unemployed.

The Employed

More than one-third of the uncovered are employed. Although

there are many more uncovered full-time wage earners than uncovered part-time wage earners or self-employed persons, fulltime workers are much less likely to lack coverage than either of

the other groups. Only 6.5 percent of full-time wage earners are

without coverage, compared with 12 percent of part-time wage

earners and 15 percent of the self-employed. Insurance coverage

among part-time workers is low because most employers do not provide health insurance or other fringe benefits to part-time

workers. Among the self-employed, insurance coverage is lower

3^f The uncovered 19- to 24-year-olds who are in school may

receive health care in school clinics, which are not considered coverage in this paper. School health policies, on

the other hand, are considered private group coverage.

kj The unemployed are persons in the labor force who are jobless

and are looking for a job. They are different from the group

of persons who are not in the labor force who are composed of

the retired, housekeepers, persons in school or preschool,

and others not looking for work.

19

"IT
because, unless they can obtain group coverage through membership in an association, the self-employed must buy individual

coverage that is more expensive.

The employed uncovered are principally in the agriculture

and forestry, personal services, construction, and retail trade

industries. The lower rate of coverage in these industries

reflects several factors, such as the intermittent or seasonal

nature of employment, the relatively higher proportion of parttime or self-employed workers in these industries, and the relatively lower wages of the workers, which means fewer resources to

be devoted to health insurance.

In addition, many workers in all industries are subject to

waiting periods, minimum weeks of work required before benefits

can be received for the first time or reinstated after a layoff.

In 1974, over one-fourth of the workers with health-care benefits

were in plans with waiting periods of three months or longer

(Table 6).

The Unemployed

Twenty-seven percent of the unemployed are without health

coverage, compared with 8 percent of the employed. As Table 7

shows, the unemployed have the highest proportions without

coverage regardless of income. Lack of coverage is high even

among high-income unemployed. While only 4 percent of all fulltime workers with incomes of $15,000 or more lack coverage,

21 percent of the unemployed with incomes of $15,000 or more

have no coverage.

Although the unemployed have the highest proportion of

people without health-care coverage, the rate of 27 percent may

appear to be very low. The low rate may be explained by two

factors:

o Some unemployed have coverage under policies of other

family members;

o Some unemployed are out of work for only short periods

and have coverage that is extended during layoffs.

Length of layoff protection and waiting requirements

20
TABLE 6. PERCENT DISTRIBUTION OF WORKERS WITH HEALTH-CARE

COVERAGE, BY INDUSTRY AND BY WAITING-PERIOD

REQUIREMENT FOR BENEFITS, 1974: IN MONTHS

Industry

Total

Manufacturing

Construction

Mining

Transportation

None

38

42

8

85

28

One

28

30

26

6

36

Two

8

9

2

—

14

Three

16

14

11

2

9

Four or

More

11

5

53

7

14

Total

100

100

100

100

100

Communications and

Public Utilities 50 27 6 9 8 100

Wholesale and

Retail Trade 32 22 6 23 17 100

Finance, Insurance,

and Real Estate 39 19 8 31 3 100

Services 27 38 7 15 13 100

Other (Farming,

Forestry) 50 15 2 30 4 100

NOTE: Components may not add to 100 percent because of rounding.

SOURCE: Andrea Novotny, "Private Industry Health Insurance Plans:

Employment Requirements for Coverage in 1974," Social

Security Bulletin, March 1977, pp. 28-33.

21

"TTT
TABLE 7. PERCENT OF POPULATION WITHOUT HEALTH-CARE COVERAGE AND

PERCENT DISTRIBUTION OF THE UNCOVERED BY EMPLOYMENT STATUS

AND FAMILY INCOME, 1976

IS5

to

Other

Full-Time Part-Time Not in

Family Income Wage Wage Self— Labor

(in Dollars) Earners Earners Employed Unemployed Retired Force

Percent of the Population

Less than 5,000

5,000 to 9,999

10,000 to 14,999

15,000 or More

All Incomes

Less than 5,000

5,000 to 9,999

10,000 to 14,999

15,000 or More

All Incomes

24.2

12.6

5.2

3.5

6.5

4.0

6.2

3.6

6.1

19.8

27.2

20.3

17.1

6.4

12.1

Percent

2.5

2.6

1.5

2.5

9.1

25.1

19.4

12.3

10.6

14.9

Distribution

1.4

1.6

0.9

1.8

5.7

Group without Coverage

34.7

32.3

23.4

21.3

26.8

of the

2.5

2.8

1.8

3.0

10.1

1.7

1.5

1.8

3.5

2.0

Uncovered

0.2

0.2

0.1

0.4

1.0

15.5

18.8

10.9

6.1

11.4

12.2

19.1

11.4

11.9

54.3

SOURCE: SIE 1976, adjusted for underreporting of coverage by public programs.
for reinstated or new coverage create a situation in

which the period of loss of health insurance does not

always coincide with the period of loss of employment.

Duration of Unemployment. The degree to which the unemployed lack health insurance depends on the status of the economy.

During recession years, many temporary and expected layoffs

augment the ranks of the unemployed. These short-term unemployed

usually have good work histories. Many also have layoff protection—that is, benefits extended during layoff periods—and are

eventually rehired. _5_/ Therefore, covered workers experiencing

short periods of unemployment are unlikely to lose their health

insurance at all.

In nonrecession years, one would expect to see a higher

proportion of the unemployed without coverage. During such

periods, the unemployed are more heavily represented by new

entrants into the labor force and by people who have been

out of work for a long time. A U.S. Department of Labor survey

of recipients of Federal Supplemental Unemployment Benefits

(FSB) tends to support the notion that more long-term unemployed lack health insurance. 6_/ FSB recipients were unemployed

for an average of one year, compared with 16 weeks for all unemployed. Some 75 to 85 percent of all FSB recipients were without

coverage.' _7/

5/ In 1974, 40 percent of all workers with employer-provided

health plans had layoff protection. Of these, over half had

protection for three or more months, 19 percent had protection of less than three months, and 22 percent had protection

that varied by length of employment. See Daniel N. Price,

"Health Benefits for Laidoff Workers," Social Security

Bulletin, February 1976, pp. 40-45.

_6_/ Federal Supplemental Benefits provided unemployment benefits

to workers during their 39th to 65th weeks of unemployment.

The program ended in March 1978.

]_/ Unpublished data from "Study of Recipients of Federal Supplemental Benefits and Special Unemployment Assistance," prepared under contract for the U.S. Department of Labor by

Mathematica Policy Research, Inc., January 1977.

23

'IT"
Work Requirements. The number of weeks required to obtain

health insurance for the first time, to reinstate lost coverage,

and to maintain eligibility for coverage varies. There are also

differences in the period beyond the date of a layoff or termination of employment during which a worker can retain his coverage.

The complex interaction of these variables will have different

outcomes depending upon whether a worker returns to his original

employer or gets a job elsewhere. The net effect, however, is

that the period of unemployment may not coincide with the period

of lost coverage. _8/

FAMILY STATUS OF THE UNCOVERED

An individual's coverage status depends both on his own

situation and the extent and type of coverage of other members

of his family. For example, an unemployed worker may have coverage as a result of a spouse's or parent's work-related insurance although his own insurance has lapsed. Knowing the family

status of uncovered persons provides some additional insight into

why they lack coverage and how best the federal government could

channel assistance toward them.

More than half of the uncovered are persons who are not in

the labor force. But 90 percent of this group are dependents

in families. It is possible for family members to lack coverage

although the family head has coverage, reflecting in part the

fact that some employed heads with job-related coverage either

waive or are not offered the opportunity to insure the dependents. More than half of the uncovered not in the labor force

are in families headed by someone with health-care coverage

(see Table 8). In half of these cases, the head has private

8/ For a thorough analysis of these phenomena, see Kenneth

McCafree, Suresh Malhotra, and Gerald Glandon, The Impact

of Rising Unemployment on the Loss of Job-Related Health

Insurance Coverage, Batelle Human Affairs Research Center,

December 1977. This report was prepared under contract for

the National Center for Health Services Research (No. HRA230-75-0139) and studied the loss of job-related health

insurance coverage among 10 million workers in jointly

administered health and welfare funds during the 1974-1975

recession.

24
coverage. This suggests that insuring a family rather than a

single individual would appreciably reduce the uncovered population.

TABLE 8. PERCENT DISTRIBUTION OF THE UNCOVERED BY FAMILY STATUS,

AGE, AND EMPLOYMENT STATUS, 1976

Age and

Employment

Status of

the Uncovered

Single

Persons

Family

Heads

Family Members

With Covered With

Head Uncovered

Private Public Head

2.5

17.7

16.0

16.9

11.5

0.4

11.1

28.2

31.2

16.8

23.8

36.4

18.0

14.0

51.4

26.3

15.2

16.9

22.7

11.1

47.0

19.5

21.0

15.0

9.1

Total Uncovered 11.3 14.1 23.9 20.9 29.6

Age

Less Than 18

19 to 24

25 to 44

45 to 64

65 and Over

Employment Status

Full-time wage

earner 20.9 32.2 21.2 9.8 15.8

Part-time wage

earner

Self-employed

Unemployed

Retired

Other not in

labor force 4.6 3.5 23.9 27.7 40.2

18.6

14.9

19.5

16.0

14.2

45.5

15.0

45.0

27.1

11.3

33.7

23.6

17.2

11.3

16.1

11.0

22.9

16.9

15.5

4.4

NOTE: Components may not add to 100 percent because of rounding.

SOURCE: SIE 1976, adjusted for underreporting of coverage by

public programs.

25
A second large group of uncovered persons are employed;

full- and part-time wage earners and the self-employed make up

more than one-third of the uncovered. Fifty-three percent of

uncovered full-time wage earners and 60 percent of the uncovered

self-employed are either single persons or heads of families.

In contrast, two-thirds of uncovered part-time wage earners are

members of families headed by someone else and in most of these

cases the head of the family is covered. In four out of five

cases when an employed family head lacks coverage, his family is

without coverage as well. Therefore, lack of insurance coverage

among this group has ramifications for a much larger group of

people. One-third of the uncovered dependents not in the labor

force are dependents of these employed family heads.

Earlier in this study, two groups with disproportionately

high chances of being uncovered were identified: persons aged

19 to 24 and the unemployed. Among uncovered 19- to 24-yearolds, over 70 percent are family members (not heads) and threefourths of these are in families in which the head is covered.

This reinforces the notion that the lack of coverage for this

age group is at least partly the result of insurance stipulations

to cover only dependents under age 19. Sixty-five percent of

the uncovered unemployed are members of families—not heads.

Fifty percent are members of families in which the head is

covered and 57 percent of the uncovered unemployed are aged 16

to 24. This leads to the conclusion that many of the uncovered

unemployed are in fact young people, excluded from parents'

insurance policies, who are either looking for a first job or

who have been laid off one that did not provide insurance with

layoff protection.

Although the unemployed have been a legitimate focus of

concern in past discussions of national health insurance, it

appears from these data that lack of health insurance among the

employed has even greater ramifications: not only are they a

larger proportion of the uncovered, but more of them are family

heads. Only 15 percent of the uncovered unemployed are family

heads, compared with 32 percent of uncovered full-time wage

earners. Moreover, the uncovered employed have eight times as

many uncovered dependents as do the uncovered unemployed.

26
CHAPTER IV. WHO ARE THE COVERED?

More than nine-tenths of the population have some sort

of health coverage. One fourth of the population have more than

one source of coverage. The type of protection the covered

population has is of importance to discussions about national

health insurance.

INCOME AND AGE

Health-care coverage increases with income. About 83 percent of the population with incomes below $10,000 have coverage,

while 93 percent of those with incomes above $10,000 have coverage (see Table 9). The type of coverage varies considerably by

income group, however. More than three-fourths of the covered

population with incomes below $5,000 have some public coverage;

half have only public coverage (see Table 10). In contrast,

almost three-fourths of persons with incomes between $5,000 and

$10,000 have private coverage; one-half have private coverage

only. Ninety-two percent of all persons with incomes between

$10,000 and $15,000 have private insurance, and 96 percent of

those with incomes above $15,000 have private insurance. (Tables

9 and 10 show the percent of the population with health-care

coverage by type of coverage and socioeconomic characteristics.

A more detailed tabulation of coverage by age and income is

contained in Appendix Table A-3.)

As was discussed earlier, health-care coverage increases

slightly with age (with the exception of the 19- to 24-year age

group, whose rate of coverage is 10 percent lower than the

average for all ages). The elderly have the greatest coverage

in total and within each income group.

Public coverage is concentrated in the oldest age group.

Ninety-eight percent of the elderly have public coverage; 38

percent have public coverage only. Among the elderly with

incomes below $5,000, more than half have only public coverage,

whereas 70 percent of those with incomes above $5,000 have both

public and private coverage. In all other age groups, private

coverage predominates.

27

T~"T
TABLE 9. PERCENT OF POPULATION WITH HEALTH-CARE COVERAGE

BY INCOME, AGE, AND EMPLOYMENT STATUS, 1976

Income, Age, and

Employment Status

Income (in Dollars)

Less than 5,000

5,000 to 9,999

10,000 to 14,999

15,000 or More

Age

Less than 6 years

6 to 18 years

19 to 24 years

25 to 44 years

45 to 64 years

65 years and over

Employment Status

Employed

Full-time wage earner

Part-time wage earner

Sel f-employed

Unemployed

Not in labor force

Retired

Other a./

Percent of

the Total

Population

13.4

20.0

21.1

45.6

9.0

23.8

10.9

25.6

20.4

10.3

42.8

31.2

7.7

3.9

3.9

5.0

48.3

Percent of

the Population

Group with

Coverage

82.6

83.5

90.8

94.3

86.2

88.8

79.5

90.7

92.4

99.0

91.8

93.5

87.9

85.1

73.2

98.0

88.6

NOTE: Components may not add to 100 percent because of rounding.

SOURCE: SIE 1976, adjusted for underreporting of coverage by

public programs.

a_/ Includes housekeepers, pre-school or in-school children, and

other persons unable to work.

28
TABLE 10. DISTRIBUTION OF THE POPULATION WITH HEALTH-CARE

COVERAGE BY INCOME, AGE, AND EMPLOYMENT STATUS AND

BY TYPE OF COVERAGE, 1976

Income, Age, and

Employment Status

Total Population

Income (in Dollars)

Less than 5,000

5,000 to 9,999

10,000 to 14,999

15,000 or More

Age

Less than 6 years

6 to 18 years

19 to 24 years

25 to 44 years

45 to 64 years

65 years and Over

Employment Status

Employed

Full-time wage earner

Part— time wage earner

Self-employed

Unemployed

Not in labor force

Retired

Other a./

Private

Coverage

Only

70.6

22.9

49.8

71.8

90.2

78.4

80.6

85.0

79.4

75.7

1.5

81.1

82.9

79.4

67.9

65.8

9.4

67.9

Public

Coverage

Only

14.2

51.8

24.0

8.1

3.7

16.7

13.1

10.3

9.2

9.5

38.1

4.8

3.2

8.8

11.2

24.4

34.7

19.8

Private

and Public

Coverage

15.1

25.2

26.1

20.1

6.1

4.7

6.1

4.3

11.4

14.6

60.4

13.9

13.7

11.5

20.8

9.4

55.9

12.2

NOTE: Components may not add to 100 percent because of rounding.

SOURCE: SIE 1976, adjusted for underreporting of coverage by

public programs.

aj Includes housekeepers, pre-school or in-school children, and

other persons unable to work.

~T~T
1:1,!

EMPLOYMENT STATUS AND COVERAGE

Employment status affects both the extent and the kind of

health coverage. Of all employed persons, 92 percent have some

coverage. Among the employed, full-time wage earners have the

highest degree of coverage (94 percent) and the self-employed

the lowest (85 percent). Only 73 percent of the unemployed have

health-care coverage. Nine-tenths of all retirees have public

coverage through medicare, VA, or CHAMPUS; 56 percent have both

public and private protection. Private insurance is the major

form of coverage in all other groups, although a relatively

large proportion of the unemployed and persons not in the labor

force rely on public coverage alone-—24 percent as opposed to

3 to 11 percent for the employed groups.

Whether one has private insurance as health-care coverage

depends to some extent on the industry in which one is employed.

While 87 percent of the employed have private insurance, more

than 90 percent of workers in such major industrial categories

as mining, manufacturing, and transportation have insurance (see

Appendix Table A-4). Lower-than-average private coverage of

workers is found in agriculture, forestry and fisheries, construction, retail trade, personal services, and entertainment.

Private insurance among the employed also varies significantly with income. Only 57 percent of the employed with incomes

below $5,000 have private insurance, whereas 94 percent of the

employed with incomes of $15,000 or more have private insurance.

The increase in insurance with income is not affected by whether

employment is full time or part time. The increase in private

coverage as income increases also occurs within industry groups,

although the relative levels of workers covered still vary among

industries.

30
CHAPTER V. WHAT IS KNOWN ABOUT THE ADEQUACY OF COVERAGE?

Policymakers are not only concerned with the number of

persons who lack health-care coverage but also with the number

who lack adequate coverage. While all would agree that the

health insurance held by people should meet certain standards,

the standards themselves are the subject of debate. Most believe

that insurance should at least protect against large absolute

expenditures resulting from hospitalization and related services.

Protection against out-of-pocket expenditures that are large

relative to income is another measure of adequacy used by some.

While the first form of protection is available to most of the

insured, the second type is available to a more limited number.

Persons whose insurance policies set a limit on out-of-pocket

expenditures, those with multiple forms of coverage, and those

who, by itemizing their income tax deductions, can deduct out-ofpocket health expenses in excess of 3 percent of income may be

protected against income-related catastrophic expenses. JL/

A less traditional view of adequate insurance is that

coverage should create incentives for the insured to utilize

certain "desirable" medical services, such as family planning and

preventive medicine, even though these services are not particularly expensive. According to this view, coverage that restricts

reimbursement for these services or that requires the insured

to pay some initial expenses directly (the deductible) is inadequate. Ironically, lowering deductibles or using other means to

reduce a person's liability for noncatastrophic expenses may

also inflate health-care costs.

Even if there were agreement on what constitutes adequate

health coverage, information detailed enough to permit a calculation of the number of people with adequate coverage is unavailable. Many factors go into1 making such a judgment. This

I/ Catastrophic expenses are discussed in the Congressional

Budget Office, Catastrophic Health Insurance, Budget Issue

Paper (January 1977). Tax provisions related to health care

are analyzed in a forthcoming CBO paper, "Tax Subsidies for

Medical Care."

31

'TTTT
11JL...L1-

chapter explores these factors and summarizes what information

is now available on them.

INFORMATION NEEDED TO ASSESS ADEQUACY

To evaluate the adequacy of coverage, one must assess the

coverage available to each family on the basis of that family's

particular situation. This assessment requires detailed information on the following four factors:

o Financial resources of the family, not just the individual;

o Health status of the family members and the likelihood of

their incurring health-care expenditures of certain

types;

o Family preferences concerning risk and the value placed

by the family on health care as compared with other

goods and services; and

o Each type of coverage available to the family, including information on the breadth and depth of benefits.

(Breadth of coverage refers to the scope of services

for which a person is insured. Depth of coverage refers

to the out-of-pocket expenditures for which a person is

liable under the terms of coverage.)

Financial Resources

When determining a family's ability to pay for its health

care, one has to look beyond the family's earned income. Unearned income and assets such as savings accounts, investments,

and property holdings should also be taken into account.

Health Status

All other considerations aside, lack of insurance coverage

or of coverage for particular services is of greatest consequence to persons most likely to need those services. Thus, for

example, coverage for costly long-term care is more important

to the elderly than it is to younger persons; persons under 65

are far less likely to need nursing home care of any duration.

32
Preference

Most workers with health insurance provided by their employers have little choice about the breadth or depth of health

insurance they receive. For those persons who do have a choice,

the policies chosen reflect their attitudes toward insurance as

well as their financial situation and health-care needs. Some

view insurance as protection against the slight risk of an

unforeseen large health expense. High-income people, or young

people with normal health expectations, may deliberately choose

a low-premium policy with large copayments and deductibles.

This may be because it is to their advantage to divert their

resources to other purposes and meet a large share of normal

medical expenses with out-of-pocket expenditures. 2_l Other

persons might prefer to pay a higher but known premium for insurance coverage of even low levels of expenditure, rather than

budget for unforeseeable health expenses. In contrast, persons

with low income are likely to buy limited coverage because they

can afford neither the underlying medical care nor the premium

cost associated with more comprehensive coverage.

Type of Coverage

Information on all sources of coverage is necessary. One

form of coverage may complement another: for example, an individual private policy or medicaid may pay expenses not covered

by medicare, or VA may cover long-term care costs not reimbursed

by private insurance. Even within private health insurance,

people may have multiple policies that overlap or complement

each other. There are also substantial ranges of both the

breadth and depth of private coverage.

2] "Normal" refers to the level of expenditure. It does not

necessarily follow that all of the outlays are predictable.

For example, a family may anticipate a certain number of

doctor visits based on past experience. An event such as

breaking an arm may not be foreseen but the expenses associated with treating it are not very large.

33
THE BREADTH AND DEPTH OF INSURANCE COVERAGE

No single existing data source provides all the information

outlined above. The SIE provides information on family income

and multiple sources of coverage; it contains no data on family

assets, preferences, health status, or provisions of private

insurance policies. Other sources are superior to the SIE in

some respects, but deficient in others. The most recent detailed

information on private group insurance is obtained from employer

and union reports to the Department of Labor under the Welfare

and Pension Plan Disclosure Act of 1959. The reports provide

good information on plan characteristics, but they contain no

information on the characteristics of the enrollees. Moreover,

reporting institutions exclude government and not-for-profit

firms, and single establishments with fewer than 25 employees

unless they are part of a multi-establishment association with

a health plan. _3/

The omission of small plans is unfortunate. It is known

that small firms are less likely to provide employment benefits

such as group health insurance, k^l It is not known whether those

small firms with health plans have benefits like those of the

larger firms or whether they are below average. Nevertheless,

the data do represent the type of coverage available to roughly

three-fourths of wage and salary workers and is used for the

following discussion.

_3/ Unpublished report by Leon Fraser, "BLS Health Plan Computerized Data," U.S. Department of Labor (January 1978).

fj_/ The SIE does not have information on the size of the firm;

however, in a 1972 survey of full-time workers in private

industry and government, it was estimated that small establishments are less likely to provide such benefits as group

health insurance. The survey showed that only half the

workers in establishments with fewer than 25 employees were

in group health plans, whereas 90 percent of those in businesses with 100 or more employees were in health plans.

Walter W. Kolodrubetz, "Group Health Insurance Coverage of

Full-Time Employees, 1972," Social Security Bulletin, April

1974, pp. 17-35.

34
Group Insurance

More than 80 percent of the people with private coverage are

members of group health plans (see Table 11). The great majority

of workers with group health plans are covered for hospital

inpatient and outpatient care, surgery, X-ray, post-hospital home

health care, medical equipment, prescription drugs, psychiatric

care, and family planning. Far fewer have coverage for posthospital skilled nursing care (SNF), children's dental care or

eyeglasses, and preventive care. The list below ranks services

covered:

Percent of Insured Workers,

by Type of Health Benefit

Hospital inpatient, outpatient, and

surgery 100 percent

Drugs and X-ray 99

Psychiatric inpatient 97

Durable equipment and post-hospital

home health care 94

Family planning 91

Outpatient mental health services 88

Post-hospital skilled nursing care 37

Children's dental care 32

Children's eyeglasses 14

Preventive care 9

SOURCE: Bureau of Labor Statistics, Office of Wages and

Industrial Relations, Health Plan Provisions

Analysis (January 1976).

The pattern of benefits provided varies across industries.

For example, only 6 percent of transportation workers with health

plans are covered for preventive services, but 44 percent of

35

~TTTT
.]_ 1 -1-1-

TABLE 11. PERCENT OF PERSONS WITH PRIVATE HEALTH INSURANCE BY TYPE OF COVERAGE

ACCORDING TO AGE, INCOME, AND EMPLOYMENT STATUS, 1976

Type of Coverage

Private Only

Percent of

Population

with Some

Age, Family Income, Private

and Employment Status Insurance

Total with Private

Health Insurance

Age

Less than 19 years

19 to 24 years

25 to 44 years

45 to 64 years

65 years and over

Family Income (in Dollars)

Less than 5,000

5,000 to 9,999

10,000 to 14,999

15,000 or more

Employment Status

Full-time wage earner

Part-time wage earner

Self-employed

Unemployed

Retired

Other not in labor force

77.0

75.6

71.0

82.3

83.5

61.3

73.1

63.3

83.4

90.8

90.4

80.0

75.4

55.1

64.0

71.0

Group

Plan

Only

65.6

76.7

72.6

71.5

61.5

1.4

23.8

47.2

64.1

77.0

72.2

67.3

32.0

62.9

9.4

67.6

Individual

Plan

Only

9.8

9.6

13.9

8.3

13.3

0.9

18.7

13.2

8.6

8.2

5.5

12.4

34.5

17.9

4.2

10.8

Both

Group

and Individual

Plan

5.8

5.1

5.8

6.7

7.8

0.2

2.5

4.6

5.4

6.8

7.7

5.6

5.8

5.2

1.1

4.8

Private and Public

Group

and

Public

9.0

4.7

3.3

9.6

10.5

28.3

15.9

16.9

14.6

3.5

11.5

6.1

6.0

7.3

30.5

6.2

Individual

and

Public

6.7

1.4

0.9

1.7

3.8

62.1

32.6

14.4

4.9

1.9

1.3

5.1

14.5

3.9

48.4

7.5

Other

3.0

2.5

3.5

2.2

3.1

7.0

6.6

3.7

2.4

2.6

1.9

3.4

7.2

2.7

6.5

3.2

NOTE: Components may not add to 100 percent because of rounding.

SOURCE: SIE 1976, adjusted for underreporting of coverage by public programs.

36
workers in mining have this coverage. Forty-two percent of

covered transportation workers, however, have coverage for

children's eyeglasses and only 1 percent of miners do. (Appendix Tables A-5 and A-6 show more of such details.)

Of the services that are not extensively covered by group

policies, only skilled nursing care could be expected to result

in high expenses for a family. Because these benefits are more

likely used by the elderly and are covered under medicare, it

is not unreasonable to find them absent from many employmentrelated policies. Generally, group policies cover the services

that make up the major portion of health expenditures and that

could create financial hardship. How well they actually protect

an enrollee from financial hardship is a function of other elements of insurance plans, such as major medical expense coverage,

amount of deductible, limits on number of hospital days, and

whether or not there is a cap on out-of-pocket expenditures (that

is, depth of coverage).

Over the past several years, basic hospital and surgical

coverage has been supplemented increasingly with "major medical"

coverage. J5/ As a result, in 1976, 90 percent of the workers

in plans reported to the Department of Labor had comprehensive

or supplemental major medical benefits (see Table 12). Seventyeight percent of workers in plans are covered for the full

cost of hospital room and board. Another shift has been from

scheduled cash benefits for surgery to payment of "reasonable and

customary" charges. This system automatically reflects changes

in charges and has become the payment method for almost 40

percent of all covered workers.

More workers' major medical policies have a variable coinsurance feature. This shift, from uniform to variable coinsurance, means that workers have coverage that puts a limit on

their out-of-pocket expenditures. Instead of a fixed coinsurance

liability of, for example, 20 percent, the worker's out-ofpocket liability may be reduced to zero after his health-care

_5_/ Major medical insurance is characterized by large benefits

ranging up to $250,000 or no limit. The insurance—above

an initial deductible—reimburses, in addition to hospital

charges, the major part of all charges for out-of-hospital

treatment, drugs, and medicine. The insured person as coinsurer pays the remainder.

37
TABLE 12. PERCENT OF COVERED WORKERS AT SPECIFIC HEALTH

PLAN BENEFIT LEVELS IN 1974 AND 1976

Type and Level of Benefit (in Dollars)

Hospital Benefits

Daily room and board benefits

Less than 40

40 to 59

60 or more

Full cost of semiprivate room

Other

Duration (in days)

Less than 70

70

71-119

120

121-364

365

366-729

730 and over

Determined by dollar amount

Other

Surgical Benefits

Maximum for most expensive procedure

Less than 400

400 to 599

600 to 999

1,000 or more

Reasonable and customary charge

Service benefit /no maximum

Not determinable

Comprehensive Major Medical Benefits

Maximum lifetime benefit b/

1 to 30,000

30,001 to 50,000

50,001 to 100,000

100,001 and over

Unlimited

1974

10

9

6

73

2

12

17

2

26

2

25

2

4

10

a/

15

24

13

12

27

6

3

24

10

20

33

0

1976

3

9

9

78

2

10

14

2

25

2

30

a/

6

11

1

7

16

15

19

39

3

0

4

11

18

56

4

(continued)
TABLE 12. (Continued)

Type and Level of Benefit (in Dollars) 1974 1976

Coinsurance feature cj

Uniform 61 52

Variable 39 47

Supplemental Major Medical Benefits

Maximum lifetime benefit b/

1 to 10,000 12 3

10,001 to 20,000 23 12

20,001 to 30,000 17 11

30,001 to 50,000 14 14

50,001 to 100,000 5 14

100,001 and over 3 24

Unlimited 6 9

Coinsurance feature cj

Uniform 93 80

Variable 7 20

Amount of Deductible AJ

1 to 50 22 e/

51 to 100 47 e/

101 or more 6 e/

No major medical or unknown deductible 25 e/

SOURCES: Dorothy R. Kittner, "Changes in Health Plans Reflect

Broader Benefit Coverage," Monthly Labor Review, September 1978; and Daniel Price, "Private Industry Health

Insurance Plans: Type of Administration and Insurer in

1974," Social Security Bulletin. May 1977. Both articles based on reports to the U.S. Department of Labor

required by the Welfare and Pension Plan Disclosure Act

of 1959.

aj Less than 1 percent.

!>/ May not add to 100 percent because some major medical policies (not shown here) may have maximum benefits per benefit

period or per disability instead of per lifetime.

_c/ Coinsurance is a provision by which both the insured person

and the insurer share in a specified ratio, commonly 20:80,

of the cost of services covered under a policy.

d/ The deductible is the amount of covered expenses which must

first be incurred by the insured after which the insurer

begins to pay a share.

e

/ ., .,

~ 1976 figures not available.
_L. 1 JJL

expenditures have passed a certain dollar threshold. A cap on

out-of-pocket expenditures is one type of protection against

catastrophic expenses. _6/

Individual Insurance

Some persons do not belong to groups that offer insurance

plans. To compensate, some of these people purchase individual

insurance policies (provided they are not prohibited by health or

age restrictions set by insurance companies). Twenty-two percent

of all persons with private insurance have individual policies;

10 percent have only individual insurance (see Table 11). A

higher proportion of persons with incomes below $10,000 have

individual insurance as their only source of health coverage. As

might be expected, more of the self-employed have individual

coverage than have group coverage and one-third of them have only

individual coverage.

Individual policies tend to be more expensive than group

insurance. This is because of their higher selling costs (they

are sold to individuals and families rather than companies and

unions) and because of the adverse selection of enrollees.

Persons with poor health are more likely to buy health insurance

than persons with average or good health if insurance is not

provided by their employer. Therefore, the expected higher

use of health services by these people is reflected in higher

premiums. Because of the high costs of premiums associated with

individual coverage, some people without group policies forego

health insurance altogether; or, if they purchase it, probably

obtain an individual policy with less comprehensive coverage

or higher cost-sharing to lower their premiums. The latter

point is necessarily conjecture, however, because there has

been no systematic evaluation of the provisions of individual

insurance policies.

£>/ The Health Insurance Institute estimates that 88 percent

of all insured under age 65 have catastrophic protection

defined as benefit levels of $10,000 or more, Source Book

of Health Insurance Data, 1977-1978.

40
SUMMARY

In summary, while most persons with private insurance appear

to be protected against high absolute medical expenditures,

at least 15 percent do not have this sort of catastrophic protection through private insurance. It is not known, however,

how many of these persons with shallow private insurance are

covered simultaneously by public programs such as VA that would

protect them from financial loss in case of a major illness.

It is equally difficult to measure the number of insured

persons with insufficient protection against out-of-pocket health

expenditures that are high relative to income. An estimated

9 percent of all families had out-of-pocket expenses for medical

care in 1978 that exceeded 15 percent of their gross income. ]_/

This figure is not an accurate estimate of the number who may

be inadequately insured against income-related catastrophic

expenses because it includes families without any insurance and

it excludes all persons whose expenditures were not large in 1978

but who had open-ended payment liabilities under the terms of

their insurance contracts.

Families incurring high out-of-pocket health expenditures

do have some limited recourse through the tax code provision that

permits unreimbursed medical expenses in excess of 3 percent of

income to be deducted from income before calculating taxes. This

form of relief," however, is available only to those who itemize

their tax deductions. Furthermore, this provision affords substantial relief only to those families or individuals whose

incomes—and marginal tax rates—are fairly high.

7/ Congressional Budget Office, Catastrophic Health Insurance,

Budget Issue Paper (January 1977).

41

"T"
CHAPTER VI. CONCLUSIONS

Several findings in this paper have implications for the

design of any program that would extend health-care protection to

persons now without it, or that would set minimum national

standards for services covered but privately financed.

The uncovered are a varied group. Because of this diversity, using any single factor—such as unemployment—to define a

population toward which to target assistance would help only some

of the uncovered. Moreover, it would assist many persons who

already have coverage. The result of such duplication would

raise the net budget cost of national health insurance.

Because only 30 percent of the uncovered are actually

employed by others, any plan that relied exclusively on employers

to provide coverage could not encompass the entire uncovered

population. Nevertheless, certain alterations in employerprovided policies could significantly improve the extent of

coverage. One such change could be to make the coverage of

any family head extend automatically to his or her dependents,

regardless of their ages. This change alone would lower the

number of uncovered by 20 percent. Standardized layoff protection and shortened waiting times for job-related health insurance

are other possible changes. For people with job-related insurance, either of these approaches would lessen their vulnerability to the fluctuations of the economy.

If the self-employed were all covered, and if employerprovided coverage was extended to currently uncovered workers

and their dependents, the number of persons now uncovered would

be cut in half. These steps together with automatic dependent

coverage would reduce the uncovered by 65 percent. While less

than one-fourth of the employed population would be affected, the

financial impact on certain industries could be large. Retail

trade, construction, agriculture, and services would experience

the greatest impact, because they currently have the lowest rates

of group health coverage.

42
Establishing minimum benefit packages that set deductibles

and coinsurance levels as well as covered services would have a

more widespread impact on employers than simply requiring insurance. Despite the fact that most workers have group health

insurance that covers a broad range of services, the depth of

the coverage or dollar liability of the insured varies considerably and in many cases could be judged inadequate. How

great the impact would be would of course depend on what was

defined as the minimum acceptable benefit and cost-sharing

package.

Finally, despite the existence of public programs—medicaid

in particular—that should provide coverage to people who cannot

afford private insurance or are ineligible for VA, medicare, or

CHAMPUS, over 20 percent of the population without coverage have

incomes lower than $5,000. Fifty-five percent have incomes

below $10,000. Changes in medicaid could substantially reduce

this uncovered population. For example, medicaid coverage could

be extended to unemployed fathers in those 24 states that do not

at present cover them. Medicaid could also be extended to lowincome individuals who are not members of families with dependent children. Alternatively, the categorical requirements could

be eliminated entirely and eligibility could be based only on

financial criteria. These changes would decrease the number of

uncovered persons by perhaps as much as one-fourth. The medicaid

spend-down program might also be extended to every state, and

eligibility requirements might be standardized to eliminate

existing uncertainties about program requirements.

43

TTT
.LI. I.J..L.
APPENDIX TABLES

T~T
TABLE A-l. ESTIMATED OVERLAP OF PUBLIC AND PRIVATE PROGRAMS, AND DISTRIBUTION BY AGE

AND BY INCOME, 1976

Age and Income

Percent of Program

Eligibles with: a/

Age

Less than 6 years

6 to 18 years

19 to 24 years

25 to 44 years

45 to 64 years

65 years and over

Income (in Dollars)

Less than 5,000

5,000 to 9,999

10,000 to 14,999

15,000 or more

Medicare

Only

20.4

32.2

33.1

49.2

28.4

21.9

19.7

16.4

21.0

22.9

24.8

Medicare

Medicare

and Other

Public

38.2

60.3

54.6

34.8

48.6

46.8

37.0

65.5

30.9

17.0

14.7

Medicare

and

Private

59.3

14.1

17.2

21.8

34.2

46.8

61.9

43.9

64.4

70.9

71.4

Medicaid

Only

46.7

74.3

65.3

80.2

60.4

47.2

3.9

46.4

47.6

43.8

51.5

Medicaid

Medicaid

and Other

Public

35.2

5.1

5.6

6.1

12.4

32.0

95.1

41.6

27.4

16.0

9.0

Medicaid

and

Private

32.1

21.1

29.7

14.8

30.0

30.1

43.7

27.8

37.3

46.6

42.2

(continued)
TABLE A-l. (Continued)

Veterans Administration

Age and Income

Percent of Program

Eligibles with: a./

Age

Less than 6 years

6 to 19 years

19 to 24 years

25 to 44 years

45 to 64 years

65 years and over

Income

Less than 5,000

5,000 to 9,999

10,000 to 14,999

15,000 or more

VA

Only

16.1

—43.5

39.0

19.0

16.0

1.5

30.2

20.1

10.1

6.3

VA and

Other

Public

25.4

—35.9

12.1

6.9

17.0

94.8

45.2

28.5

11.0

56.9

VA and

Private

72.1

—29.4

54.3

76.9

74.1

62.4

37.9

66.2

85.9

77.8

GRAMPUS

Only

51.0

68.9

55.2

68.5

56.0

32.0

0.8

34.5

63.6

57.9

44.1

GRAMPUS

GRAMPUS

and Other

Public

16.3

7.5

9.3

7.9

12.5

20.1

98.9

55.7

20.6

18.1

7.4

GRAMPUS

and

Private

39.6

24.7

37.3

27.5

37.3

56.3

55.1

22.9

23.2

33.8

53.0

SOURCE: SIE 1976, adjusted for underreporting of coverage by public programs.

a_l Percents total to more than 100 percent of program eligibles because some persons

have combinations of three types of coverage—the program plus other public plus

private—and these have not been separately tabulated here.
Li.LL

TABLE A-2. EFFECT OF ADJUSTING SIE FOR UNDERREPORTING OF PUBLIC

HEALTH-CARE COVERAGE ON THE PERCENT DISTRIBUTION OF

THE UNCOVERED, BY INCOME AND EMPLOYMENT STATUS

Percent Distribution of

Income and

Employment

Status

Income (in Dollars)

Less than 5,000

5,000 to 9,999

10,000 to 14,999

15,000 or more

the Uncovered

Adjustments for

Underreporting of:

Unadjusted

SIE

30.1

33.4

17.5

19.6

Medic aid

23.7

33.7

19.8

23.3

Other Public

Programs

22.6

32.6

19.1

25.7

Employment Status

Employed

For wages

Self-employed

Unemployed

Not in labor force

Retired

Other a/

33.9

27.9

6.0

10.3

6.0

49.7

36.8

30.2

6.6

10.5

5.9

46.8

34.7

28.9

5.7

10.1

1.0

54.3

NOTE: Components may not add to 100 percent because of rounding.

a/ Includes housekeepers, pre-school or in-school children, and

other persons unable to work.

48
"TiTTT
TABLE A-3. PERCENT OF THE POPULATION WITH HEALTH-CARE COVERAGE

BY TYPE OF COVERAGE AND BY AGE AND FAMILY INCOME, 1976

I

I

Family Income (

and Age (

Total Population

Less than $5,000

All ages

Less than 6 years

6 to 18 years

19 to 24 years

25 to 44 years

45 to 64 years

65 years and over

$5,000 to $9,999

All ages

Less than 6 years

6 to 18 years

19 to 24 years

25 to 44 years

45 to 64 years

65 years and over

$10,000 to $14,999

All ages

Less than 6 years

6 to 18 years

19 to 24 years

25 to 44 years

45 to 64 years

65 years and over

'ercent of

'opulation

Jroup

Covered

89.8

82.6

79.0

78.2

68.0

74.4

80.0

99.6

83.5

76.1

77.9

74.4

82.0

87.8

99.2

90.8

88.0

89.0

82.8

92.5

93.7

98.8

Total

Covered a/

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

Type of CoPrivate

' Only

70.6

22.9

16.8

24.2

60.0

32.8

38.7

0.1

49.8

64.8

56.5

74.5

59.3

60.9

1.0

71.8

91.2

87.6

87.4

69.4

64.3

2.7

verage

Public

Only

14.2

51.8

68.0

60.0

32.7

49.6

42.4

54.3

24.0

27.0

29.1

18.4

20.2

15.8

32.4

8.1

5.8

7.3

6.4

7.0

6.0

26.2

Private

and

Public

15.1

25.2

14.8

15.4

6.6

17.5

18.7

45.6

26.1

8.1

14.2

7.1

20.3

23.1

66.6

20.1

2.3

5.0

5.9

23.5

29.6

71.0

(continued)

50
TABLE A-3. (Continued)

Type of Coverage

Percent of

Population

Family Income Group

and Age Covered

$15,000 or more

All ages

Less than 6 years

6 to 18 years

19 to 24 years

25 to 44 years

45 to 64 years

65 years and over

All Incomes

All ages

Less than 6 years

6 to 18 years

19 to 24 years

25 to 44 years

45 to 64 years

65 years and over

94.3

93.6

94.8

84.8

95.2

96.2

97.8

89.8

86.2

88.8

79.5

90.7

92.4

99.0

Total

Covered

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

Private

Only

90.2

95.9

94.4

96.3

95.0

91.4

4.3

70.6

78.4

80.6

85.0

79.4

75.7

1.5

Public

Only

3.7

2.5

2.8

1.7

2.3

2.8

26.2

14.2

16.7

13.1

10.3

9.2

9.5

38.1

Private

and

Public

6.1

1.6

2.6

1.5

2.6

5.7

69.5

15.1

4.7

6.1

4.3

11.4

14.6

60.4

NOTE: Components may not add to 100 percent because of rounding.

SOURCE: SIE 1976, adjusted for underreporting of coverage by public

programs.

a/ Includes a small number of persons with unknown type of coverage.

51

'ITTT

TABLE A-4. PERCENT OF EMPLOYED PERSONS WITH PRIVATE INSURANCE BY INDUSTRY

AND INCOME, 1976

All

Industry Incomes

Total Employed

Agriculture, Forestry,

Fisheries

Mining

Construction

Durable Manufacturing

Nondurable Manufacturing

Transportation ,

Communications ,

Public Utility

Wholesale Trade

Retail Trade

Finance, Insurance,

Real Estate,

Business, Repair

Personal Services

Entertainment

Professional Services

Public Administration

87

72

93

80

94

93

92

92

83

87

74

81

92

93

Less

than

$3,000

53

52

63

46

56

67

50

62

53

53

46

55

68

62

$3,000-

$4,999

60

56

68

48

69

68

57

74

60

59

52

52

74

58

$5,000-

$6,999

68

58

71

55

80

81

72

74

67

71

55

65

76

66

$7,000-

$9,999

80

69

92

69

88

89

83

81

75

78

70

77

87

89

$10,000-

$14,999

89

77

93

83

95

94

92

92

85

88

83

85

93

93

$15,000

or more

94

86

96

89

97

97

96

96

91

93

88

88

95

96

SOURCE: SIE 1976, adjusted for underreporting of coverage by public programs.
TABLE A-5. PERCENT OF INSURED WORKERS WITH TYPE OF HEALTH BENEFIT BY

INDUSTRY, 1976 a/

Industry

Minimum Prescription

Package b/ Drugs

Psychiatric Durable

X-ray Inpatient Equipment

Total 100 99 99 97 94

Manufacturing

Mining

Construction

Transportation

Communications

Trade

Financial

Services

Other

100

100

100

100

100

100

100

100

100

99

100

100

99

100

100

100

98

100

99

100

100

99

100

98

100

99

88

98

100

94

97

99

98

100

91

100

92

100

92

99

99

94

100

96

89

(continued)

SOURCE: Bureau of Labor Statistics, Office of Wages and Industrial Relations, Health Plan Provisions Analysis, January 1976.

54
TABLE A-5. (Continued)

PostHospital

Home Health

Family

Planning

Outpatient

Mental

PostHospital

Skilled

Nursing

Facility

Dental Eyeglasses Prefor for ventive

Children Children Care

94 91 88 37 32 14

92

100

94

96

100

96

99

92

99

94

100

93

97

91

89

84

88

57

90

100

74

87

92

86

93

88

81

44

60

22

14

21

47

39

24

8

27

31

61

78

54

27

27

14

1

9

1

54

42

2

18

4

11

—

6

44

18

6

5

15

4

_19_

aj Excludes government, agriculture, self-employed, not-for-profit firms, and

firms with fewer than 25 employees unless part of a multi-establishment

association that has a health plan.

b/ Inpatient, outpatient, and surgery.

55

T~T
[..I ill .

TABLE A-6. PERCENT DISTRIBUTION OF BENEFICIARIES OF EMPLOYER-PROVIDED GROUP

COVERAGE WITH A NUMBER OF BENEFITS BY TYPE OF BENEFIT, 1976 a/

Number of

Benefits

Percent of

Workers

with Number

of Benefits

Minimum

Package W

Prescription

Drugs

Psychiatric

X-ray Inpatient

Durable

Equipment

PostHospital

Home Health

Fewer

than 6

6

7

8

9

10

11

12

13

14

15

Percent of

Workers with

a Particular

Benefit

2

2

8

39

31

14

4

c/

100

100

100

100

100

100

100

100

100

100

100

100

0

100

70

87

100

100

100

100

98

100

100

99

0

10

26

65

94

100

100

100

100

100

100

99

0

20

44

71

79

96

98

99

99

99

100

97

0

0

50

21

65

89

94

99

100

100

100

94

0

27

37

48

61

92

92

99

99

100

100

94

(continued)

56
TABLE A-6. (Continued)

Percent of

Workers

Number of with Number

Benefits of

Fewer

than 6

6

7

8

9

10

11

12

13

14

15

Percent of

Workers with

a Particular

Benefit

Benefits

0

c/

c/

2

2

8

39

31

14

4

c/

Family

Planning

0

44

72

99

68

40

93

97

100

100

100

91

Outpatient

Mental

0

0 '

0

0

5

59

95

95

94

99

100

88

PostHospital

Skilled

Nursing

Facility

0

0

0

0

0

12

12

56

75

69

100

37

Dental

for

Children

0

0

0

6

1

8

7

41

79

97

100

32

Eyeglasses

for

Children

0

0

0

3

16

2

4

10

34

81

100

14

Preventive

Care

0

0

0

0

12

2

4

4

22

55

100

9

SOURCE: Bureau of Labor Statistics, Office of Wages and Industrial Relations, Health

Plan Provisions Analysis, January 1976.

a_l Excludes government, agriculture, self-employed, not-for-profit firms, and firms

with fewer than 25 employees unless part of a multi-establishment association that

has a health plan.

W Inpatient, outpatient, and surgery.

_c/ Less than 1 percent.

o

57