Why don't more Americans use their free health insurance?

Health and medicine explained.
Dec. 14 2010 1:57 PM

Dead Giveaway

Why don't more Americans use their free health insurance?

People standing in line for a black friday sale. Click image to expand.
People stand in line for retail bargains. Why not free health care?

A thousand people gathered at a California Gucci outlet in the wee morning hours a few weeks ago, eager for Black Friday retail bargains. Seven times as many waited at the doors of the Macy's flagship store in New York City, and a modern-day shantytown was erected on Thanksgiving night in an Oakland Best Buy parking lot. One can only imagine the frenzy that would have broken out if someone had started handing out high-quality, free health insurance worth as much as a dozen wide-screen televisions.

And yet the bargain outlets giving away health insurance this season are eerily quiet. As Benjamin Sommers and Arnold Epstein recently reported in the New England Journal of Medicine, 40 percent of people who qualify for free coverage through the government's Medicaid program don't sign up. In the worst-performing states, like Oregon, Florida, Georgia, and Texas, more than half the eligible people aren't enrolled. Using adjusted estimates from the U.S. Census Bureau, tens of millions of Americans don't take the freebie, and tens of billions of dollars' worth of coverage are left on the table.

That's a huge problem for the architects of health reform, whose central aim is helping the 50 million Americans now without insurance. Much attention has been paid to the "individual mandate" in the landmark bill passed earlier this year, which has now been ruled unconstitutional by a Virginia federal court. But previous experience suggests that provision's impact on rates would be trivial. The real driver of expanded coverage is a planned extension of free health care to anybody with an income below 133 percent of the poverty line—or 15 million Americans, according to an estimate from the Congressional Budget Office. This entitlement is the biggest new federal giveaway of health care since the creation of Medicare and Medicaid in 1965.

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Unfortunately, people might not show up for the bargains. Consider what happened the last time we tried to give away more health care. In the late 1990s, the State Children's Health Insurance Program made it easier for children to get Medicaid-style insurance, and by 2002, almost half of all American kids qualified for free coverage. As a result, the number of uninsured dropped from 12 million to 10 million, which was great news. But consider the missed opportunity: Among the 10 million children who still lacked coverage, 60 percent were eligible for free care but never signed up.

So why on earth would people camp out overnight to buy a discounted toy, while they ignore a windfall like free doctor visits for their kids?

Some of them may have their priorities wrong, but many don't. The real problem is that state governments are trying to save money by keeping eligible people off the insurance rolls. In 2007, Health Affairs reported that fully one-third of all eligible but uninsured children had been booted out of Medicaid or SCHIP for no good reason, after being enrolled in the prior year. Some states make people file yearly or twice-yearly applications in order to stay covered, with in-person interviews and demands for a birth certificate. (Imagine being asked to retake your driver's test twice every year.) Make an error on your paperwork or forget an appointment and your kid automatically loses coverage.

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