Insuring undocumented immigrants could save money. Why won't Obama do it?

How to fix health policy.
July 30 2009 6:29 PM

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The economic case for insuring undocumented immigrants.

Woman in hospital.
How do illegal immigrants impact the health care system?

One of President Obama's favorite arguments for health care reform has been economic: If it saves money, do it. Except when it comes to covering undocumented immigrants.

Obama reiterated Thursday that a health care bill will not cover illegal immigrants. "Undocumented workers who are here illegally—we want to create comprehensive immigration reform so they can get on a path to citizenship," he told Univision. "Until they do, we can't reward them with some of the benefits which quite frankly cost us a lot of money." That was after some conservative commentators claimed that some versions of the bill would insure the undocumented, ignoring language in the bill that limits access to "an individual who is lawfully present in a State in the United States."

Adding the immigration debate to the health care debate isn't likely to make either one simpler or less emotional. Still, the reasoning is pretty straightforward: If you think insuring the uninsured makes economic sense, then so does insuring undocumented immigrants. But neither side in the health care debate seems eager to make this point.

The case for insuring illegals is simple. Society already pays the price for treating them. But it pays in the least efficient way. When someone who doesn't have insurance shows up at a hospital with a bronchial infection, doctors are required by federal law to treat him or her. The hospital then passes on those costs to the rest of us in the form of higher prices for other patients, which leads to higher insurance premiums and, in the cases of Medicaid and Medicare, higher taxes. Better to insure those patients so that they can go to a doctor at the first signs of illness—not when they start coughing up blood.

Insuring illegals would also help address the unequal burden borne by hospitals. Right now, urban hospitals treat more low-income uninsured people than their suburban and rural counterparts. To compensate for the imbalance, hospitals that treat fewer uninsured patients pay into a fund, which then gets redistributed accordingly. As a result, all hospitals bear the cost of treating the uninsured.

A better solution, say reform advocates, would be to lift the burden entirely. That was part of the rationale for universal health care in Massachusetts—to move people away from an ad hoc, E.R.-dependent system into managed care. "We think that model should extend to undocumented immigrants," says Brian Rosman of Health Care for All, a Massachusetts group dedicated to achieving universal health care. (He emphasized, however, that giving illegal immigrants health care is not on the docket for Massachusetts.)

Some immigrant advocates argue that insuring immigrants, undocumented or otherwise, makes even more economic sense than insuring other low-income Americans. Just look at the demographics. Immigrants tend to be disproportionately young and healthy, compared with the rest of the U.S. population, says Eric Rodriguez of the National Council of La Raza. If they paid into the health care system but didn't use a lot of its services, it  would actually strengthen the system. (Of course, many illegals would qualify for Medicaid, which would create a burden no matter what their age.)

How much would all this save? The exact numbers are murky, because, well, they don't exist. The CBO doesn't include undocumented immigrants in its scoring. Even the number of illegal immigrants in the United States is unclear. (One immigration research group estimates there are about 11 million.) However, the Employee Benefit Research Institute provided a ballpark estimate that insuring undocumented immigrants would save about $11 billion a year. That's assuming there are about 6 million uninsured undocumented immigrants and that we spend an average of $1,900 per person per year on uncompensated care.

But that does not include the cost of actually insuring them. "In the short term, there's no question it does cost more to give someone insurance than [it saves]," says Rossman. That's what Obama means when he says insuring illegal immigrants would "cost us a lot of money." In the long run, however, there would be savings from increased prevention, at least according to the administration's rationale. (Not everyone agrees.) Plus, there would be savings from the increased productivity of illegal immigrants who are healthy rather than sick.

Of course, another way to save money would be to clamp down on illegal immigration to begin with. But some workers would inevitably make it across the border—and the obstacles for insuring them would be numerous. Even finding illegal immigrants is difficult, since they tend to lie low. They would have to be convinced that enrolling in an insurance plan wouldn't bring ICE knocking on their doors. At the same time, an insurance plan would not have to spend money on eligibility screenings and background checks to determine if someone is a citizen.

Politically, insuring illegals would be disastrous. That's why no one in Congress or the White House is proposing it. Even the Center for American Progress, which generally agrees with the administration on health care issues, argues that health care reform and immigration reform should be separate: First get illegal immigrants documented, then insure them. But if Obama wants to make the purely economic case for health care reform, it seems odd to reject a potential source of savings.

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