A Project of The Annenberg Public Policy Center

Obama’s Health Care Claims

He says the uninsured cost the rest of U.S. families $1,000 a year.


Summary

We found several claims in Obama’s recent health-care sales pitches that could use some explanation or qualification.

  • He said "the average family pays a thousand dollars in extra premiums to pay for people going to the emergency room who don’t have health insurance." That’s from a recent report by Families USA, a group that lobbies for expanded government coverage. But another study for the authoritative Kaiser Family Foundation thinks that figure is far too high.
  • The president said the estimated $1 trillion cost of his proposals is "less than we are projected to have spent on the war in Iraq." Maybe. But so far, Iraq war costs are around $642 billion.
  • He said that the U.S. spends 50 percent more per capita on health care than the next most expensive country. Not quite. We spend 20 percent more than the second most expensive country, and 50 percent more than the third.

On other points we found the president’s facts checked out. For example, many countries that spend much less on health care nevertheless have higher life expectancy than the U.S. And while we find it doubtful that the uninsured cost other families $1,000 in higher premiums alone, once higher taxes and higher medical costs are factored in, the price tag for the uninsured could well be that high.

Analysis

President Barack Obama has made health care the focus of recent speeches, including one in Green Bay, Wisc., on June 11 and another at the American Medical Association conference in Chicago on June 15. While many of the statistics he cited on the state of health care in the U.S. were correct, we found problems with a few of them.

Shifting Costs

On June 11, Obama said that insurance premiums increase to cover the cost of health care for the uninsured, to the tune of $1,000 per family. The implication, of course, is that providing the uninsured with coverage would save others that much.

Obama, June 11: The average family pays a thousand dollars in extra premiums to pay for people going to the emergency room who don’t have health insurance. So you’re already subsidizing other folks; it’s just you’re subsidizing the most expensive care.

Democratic Sen. Dick Durbin of Illinois repeated these claims on CBS’ "Face the Nation" on June 14:

Durbin, June 14: Well, keep in mind, now, everyone today faces a hidden tax estimated for most families at $1,000 a year that we pay in health insurance premiums that we shouldn’t pay. It’s money that we’re paying to cover those who have no health insurance and to really sustain a bloated system, a system that really needs efficiency.

Do insured families really pay $1,000 in extra premiums to carry the uninsured? The figure doesn’t come from thin air. A 2005 report by health care advocacy group Families USA found that this “cost shifting” amounted to $922 per family or $341 for those insured individually, and a May 2009 update revised those numbers to $1,017 and $368 respectively. The liberal Center for American Progress, also updating the 2005 Families USA estimate, reported in March 2009 that “8 percent of families’ 2009 health care premiums – approximately $1,100 a year – is due to our broken system that fails to cover the uninsured.” These calculations are based on distributing "uncompensated care" – care provided to the uninsured that’s not covered out of pocket or by private or public funds – over the insured population.

But the claim is disputed. A 2008 report conducted by researchers from the Urban Institute for the nonpartisan Kaiser Family Foundation examined the first Families USA study, and found its claims to be unconvincing. They concluded: "[W]e are highly skeptical that the high and growing cost of private insurance is strongly related, if at all, to the amount of uncompensated care delivered by private providers or to the growing number of uninsured people.”

Jack Hadley, the lead researcher on the KFF study, told us that to assume that the insured end up paying for all uncompensated care is "clearly an exaggeration." According to KFF, the amount of uncompensated care that providers could shift to the privately insured is much less, only $8 billion, not the $42.7 billion Families USA said could be passed on to premium payers in 2008. The KFF number is less than 19 percent of Families USA’s, and by our figuring that implies a per-family increase in health insurance premiums of less than $200 a year, not $1,000.

Obama later rephrased his $1,000 claim, and put himself on firmer ground. In his speech to the American Medical Association, Obama said the cost was paid not just in higher premiums but also in "higher taxes" and "higher health care costs."

Obama, June 15: Each time an uninsured American steps foot into an emergency room with no way to reimburse the hospital for care, the cost is handed over to every American family as a bill of about $1,000 that’s reflected in higher taxes, higher premiums and higher health care costs.

Adding in taxes and health care costs changes the story. According to Hadley, "The savings that will accrue from covering the uninsured will be primarily in the form of lower taxes to pay for government-funded uncompensated care, not lower premiums for private insurance. These savings are a legitimate potential source of funding to help pay for expanded insurance coverage." The Kaiser study found that insured adults "spend about $350 per person through taxes, donations, and payments for private health care and private insurance to subsidize care received by the uninsured." That’s close to Families USA’s estimate of the average cost to insured singles. Kaiser didn’t give a per-family estimate, but a $350 per person cost is generally consistent with a cost of $1,000 per family.

Comparison Shopping

In his speech to the AMA on June 15, Obama tried to put the cost of revamping the nation’s health care system into perspective: 

Obama: Making health care affordable for all Americans will cost somewhere on the order of $1 trillion over the next 10 years. That’s real money, even in Washington. But remember, that’s less than we are projected to have spent on the war in Iraq.

Iraq war spending may very well reach that point, but it hasn’t yet. Funding for the war totaled $642 billion through the first part of fiscal year 2009, according to the nonpartisan Congressional Research Service. CRS estimated that by the end of September, when the fiscal year ends, the total will reach $684 billion if Congress passed a supplemental appropriation requested by the administration. (The House passed it June 16, and it moved to the Senate for debate. Update, June 18: After we posted this article, the Senate passed the war spending bill as well.)

Beyond 2009, the Congressional Budget Office estimates that the U.S. will spend from $388 billion to $867 billion on war funding in the next 10 years, depending on how fast troops come home. CBO’s numbers include money spent in Afghanistan and for enhanced security at military bases. So far, about 73 percent of total war funding has gone to Iraq.

Finally, we should note that Obama’s health care estimate is just that – an estimate. And Washington estimates are often lower than what the true costs turn out to be in reality. It’s worth remembering that the Bush administration once estimated that the Iraq war would cost only $50 billion to $60 billion, a small fraction of what the actual price is turning out to be.

Measuring Up 

In both the Green Bay speech and the AMA speech, Obama said that the U.S. spends 50 percent more per person on health care than the next most expensive nation. Actually, data from the Organisation for Economic Co-operation and Development, which compares the health care of 30 industrialized nations, shows that we spend about 20 percent more per capita than Luxembourg, the next most expensive nation in 2006. The U.S. does spend 50 percent more per capita on health care than Switzerland, the next most expensive after that.

 

 

 

 

 

In the AMA speech, Obama went on to say that this spending didn’t have a positive effect on our national health:

Obama: And yet, as I think many of you are aware, for all of this spending, more of our citizens are uninsured, the quality of our care is often lower, and we aren’t any healthier. In fact, citizens in some countries that spend substantially less than we do are actually living longer than we do.

He’s right on this one. The OECD countries with the highest life expectancy (Japan, Iceland, Switzerland, Sweden and Australia) spent, on average, half as much per capita on health care as the United States. According to the World Health Organization, Japan’s average life expectancy is 83 years, compared to 78 for the United States, and OECD data shows that Japan spends 60 percent less per capita than the U.S. does. A 2000 WHO report ranked the United States No. 1 in per capita health expenditures, No. 37 on overall health system performance and No. 72 on level of health.

Update, Oct. 21: The WHO report ranking the U.S. as 37th has been questioned as out of date, ill-conceived and not always based on reliable data. See our Wire post on the criticisms for more.

– by Jess Henig and Lori Robertson

Sources

Soraghan, Mike and Walter Alarkon. “House approves war supplemental.” The Hill 18 Jun 2009.

Herszenhorn, David M. “Estimates of Iraq War Cost Were Not Close to Ballpark.” The New York Times 19 Mar 2008.

Belasco, Amy. “The Cost of Iraq, Afghanistan, and Other Global War on Terror Operations Since 9/11.” Congressional Research Service 15 May 2009.

World Health Organization.  World Health Report 2000.  "Annex Table 1, Health system attainment and performance in all Member States, ranked by eight measures, estimates for 1997." 2000.

Organisation for Economic Co-operation and Development. "OECD Health Data 2006: How Does the United States Compare."

Hadley, Jack et al. "Covering the Uninsured in 2008: A Detailed Examination of Current Costs and Sources of Payment, and Incremental Costs of Expanding Coverage." Kaiser Commission on Medicaid and the Uninsured. Aug. 2008.

Families USA. "Paying a Premium: The Added Cost of Care for the Uninsured." Jun. 2005.

Families USA. "Hidden Health Tax: Americans Pay a Premium." May 2009