Thread by @anup_malani

Single most under-appreciated chart for understanding health insurance policy in the US.

Uninsured typically pay less than $5k out of pocket for care, regardless of their bill.

So, even without formal health insurance, ppl effectively have a $5000 deductible insurance policy.

The reason is

1/ the govt requires hospitals treat people before billing them (EMTALA)

2/ the threat of bankruptcy (incl exemptions) gives people bargaining power to negotiate down these bills (debts)

You don’t have to go into bankruptcy to do this. Most debts are marked down without bankruptcy. Fair debt collection laws help reduce the burden of this process.

All this means EMTALA + bankruptcy is a substitute for insurance. So demand for & enrollment in insurance is low.

Don’t feel to sorry for the hospitals. Hospitals exaggerate debt by inflating list prices. Plus the govt subsidizes hospitals likely to have a lot of bad debt via DSH payments.

Unsurprisingly, when the govt reduced uncompensated care by hospitals by expanding Medicaid in the ACA, they also cut back DSH payments. They weren’t necessary.

Once you understand this chart and its causes, you can see why the 2 largest health insurance experiments in the US found minimal health benefits from insurance. (RAND found only the very poor benefit, Oregon found only peace of mind effects.)

The chart also helps explain why the ACA had insurance mandates. It wasn’t adverse selection causing people to go without care. It was about financing. The govt wanted low risk (young people) to pay more, rather than existing (high income) tax payers to fund high risk patients.

Chart comes from @nealemahoney

pubs.aeaweb.org/doi/pdfplus/10…

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