NEWS TO USE

Taking a Gamble
On Health

BY JON BROCK

The strong economy of the 1990s has led many Americans to believe that "happy days are here again." With sustained economic growth, high employment, low interest rates and what some have called the greatest peacetime expansion of the 20th century, America seems to be taking good care of itself.

Not exactly, says William Custer, associate professor in Risk Management and Insurance. In a recent study of health insurance coverage, he found that even with this unparalleled growth, more Americans are falling through the cracks and losing their health insurance.

"Although this may seem paradoxical at first, as the economy has grown, more people have found jobs and been removed from Medicaid roles. Much of the employment growth has come from smaller firms that cannot afford increasing health insurance costs for their employees," Custer says.

Two key factors are related to the decision by many Americans not to purchase health insurance: income and risk. Just as health care coverage costs have risen for companies, costs as a percentage of an individual's income have risen as well. And more people, especially those just starting out, are deciding insurance is not worth the price. Younger, healthier individuals may decide not to purchase health insurance coverage based on their self-assessed level of risk.

Differences in coverage exist among states as well. Wisconsin, Hawaii, and Minnesota have relatively more people insured than southern states, including Georgia, Texas and Arizona.

"This can be attributed to demographic differences between areas of the country. States with high levels of uninsured have a larger percentage of their population living at or near the poverty level," Custer explains. "Plus in the southern states, more workers toil in agriculture and small organizations that do not provide insurance."

Understanding the reasons behind the drop in coverage requires an understanding of demographics, risk and other variables. Any attempt to develop solutions to the health care coverage question requires a careful study of interconnected variables as well.

In a nonvoluntary system (where everyone is covered), solutions range from universal care to state-mandated coverage to a public payment/private delivery system. Yet while each of these would provide care, universal coverage has negatives as well as positives.

According to Custer, "Providing nonvoluntary coverage would require a shift in the way Americans think about health care. In countries with 'universal' coverage, the assumption prevails that the average American today receives too much coverage."

A voluntary system of health care (where individuals could choose to participate or not participate) might increase the percentage of those covered, yet would not guarantee 100% coverage. When the decision is left up to the individual, she or he may reject coverage depending on the cost and her or his perceived risk levels.

"Insurance is like a hedge against the likelihood that an individual or family will need health care services. As long as health care coverage is voluntary, there will be some people who will rationally not choose to buy coverage," Custer says.

Income. Risk. Demographics. These just scratch the surface of the health care coverage question.

"People must realize that there are no simple answers. You cannot look at one segment of the population and craft a solution that would not affect other segments of the population. Similarly, you cannot change one aspect of health care without changing other aspects of the health care system. It will require a gradual approach. The answers aren't in yet," says Custer.



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