In previous posts I have referenced the economic importance to lower (or get rid of) the national uninsured rate. However, I had not taken the time to spell out the full necessity of doing so.

Though some pundits would disagree I firmly believe that the economic impact of the high level of uninsured Americans is both a macro and a micro issues. The macro level is the point at which paying for uncompensated care and treating an unnecessarily sick national population drives per capita spending, gross health related expenditure, etc. The macro effects of having over 15% of Americans uninsured is well documented and cited often enough that I do not feel the need to bore you with another go through.

What I wanted to focus on, though, was the micro level effects. How exactly having such a high national uninsured rate impacts you – your family, your savings, your wallet. We all pay a “hidden health care tax” – a deceptive terminology because its not a tax, but rather the portion of your annual health insurance premiums used to cover uncompensated care rather than you, or your families, health.

In 2008 America spent approximately $116 billion in providing care to the un- and underinsured through emergency rooms, physicians, urgent care centers, hospitals, and other providers. Of this around $56 billion went completely unpaid for – which in the health world is known as uncompensated care. But what does mean to you – as an individual?

Systemically, when providers are forced (either legally or morally) to provide uncompensated care they displace the cost of that care onto other reimbursement vehicles so they get paid in an indirect fashion. Because Medicare and Medicaid have such stringent program rules that prevent physician offices of upwardly adjusting their payments, these uncompensated costs get shifted almost exclusively onto the private insurer plans.

These insurers then shift the cost of providing uncompensated care onto you, the consumer. This usually takes the form of inflated annual insurance premiums. Though there is some disagreement of the exact amount all the groups that have studied the issue agree that the average American does bear some of the burden in this cost shift.

The 2008 Kaiser report estimates that only a small fraction of uncompensated care costs are shifted from the insurance providers onto the patient and models the average annual cost at under $200. The 2009 Families USA report on the other hand assumes that a much larger percentage of uncompensated care expenses are shifted down onto consumers. They estimate that the annual additional expense to an American family is $1,017 per year.

Since nearly everyone agrees that the average family premium for Americans that receive health insurance through their provider is$3,354 annually both figures represent a significant portion of the average premium rate. Families USA posits that hidden health care costs displaced onto American families comprises just under 1/3 of their annual premiums, whereas Kaiser would place the portion roughly at just over 1/16.

This is just the average “hidden health care tax”, in addition to which we also pay actual taxes to support the uninsured. This is because the government reimburses a significant portion of the $116 tab previously mentioned through federal and state programs, and indirectly by providing funding to charity organizations that help defray some of those costs as well. To provide this funding the government makes use of tax dollars.