Employers Cut Back on Health Insurance

The number of Americans without health insurance has increased by more than a million people since last year. One reason for the increase: the percentage of American's who get their health insurance from an employer keeps going down.

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The number of Americans without health insurance continued its steady march upwards last year. The annual report from the census bureau says just under 16 percent of Americans did not have any health insurance. The number was up more than a million from the previous year.

As NPR's Julie Rovner reports, analysts still disagree on why the numbers keep going up, and what could make them go down.

JULIE ROVNER reporting:

The new census numbers are pretty clear about the major reason for the increase: the percentage of Americans who get their health insurance from an employer keeps going down - last year to 59.5 percent. But Paul Fronstin of the Employee Benefit Research Institute says there's a new twist in these numbers. For the past several years, an increase in the number of people covered by public programs has offset the decrease in private employer coverage.

Mr. PAUL FRONSTIN (Employee Benefit Research Institute): This year, we're seeing continued erosion in private health insurance coverage. But we're not seeing an increase in Medicaid coverage. There's no offset. So as a result, the uninsured is going up.

ROVNER: Now with a stronger economy, the number of people with employer-provided health insurance should rise as the labor market gets tighter and employers compete for workers. But Fronstin says that's not happening - at least not yet.

Mr. FRONSTIN: I think the economy isn't strong enough to reverse the trend away from employment-based coverage.

ROVNER: And the number of uninsured may well be higher than the 46.6 million counted by the Census Bureau. Those numbers don't include those who lost coverage as a result of Hurricane Katrina or Medicaid cutbacks in Missouri and Tennessee because all those people had insurance for at least part of last year. So they won't show up until next year's report.

But while there's virtually unanimous agreement that the number of uninsured is a serious national problem, there's far less consensus on what to do about it. Kathleen Stoll, of the consumer advocacy group Families USA, says one thing Congress shouldn't be doing is repealing the estate tax.

Ms. KATHLEEN STOLL (Families USA): Which will cost about $62 billion annually in lost revenue, and that only benefits the wealthiest Americans. That kind of money could be used to cover 12 million uninsured.

ROVNER: At the very least, Stoll says, there ought to be a move to cover every child. According to the new report, the number of children without health insurance rose by nearly half a million last year.

Ms. STOLL: It's going to take some resources. It's going to take some money. But it's what we need to do.

ROVNER: But Michael Cannon, of the Libertarian Cato Institute, says expanding programs like Medicaid is exactly the wrong prescription for lowering the number of uninsured.

Mr. MICHAEL CANNON (Cato Institute): Medicaid crowds out private health insurance. So it's not that Medicaid is catching people who fall off the economic ladder. Medicaid's shaking that ladder.

ROVNER: Cannon says just the existence of Medicaid makes employers feel freer not to offer coverage, and low-income workers freer to decline it. He's advocating a policy exactly opposite of what Families USA wants.

Mr. CANNON: One thing that Congress needs to do is it needs to reform Medicaid the way it reformed welfare. Because right now, states only have to come up with half of the money for every Medicaid expansion, and that just encourages them to expand and expand the program at the expense of the private sector.

ROVNER: One thing analysts from both ends of the ideological spectrum do agree on is that having so many uninsured people drives up the cost of the health system in general. Stoll says Families USA has estimated that Americans with health insurance are paying an average of $900 more a year to finance care for those without coverage.

Ms. STOLL: The uninsured do get sick, and they go to hospitals. They may go later than they should. They may be sicker than we'd like them to be. They get the care and the hospitals have to shift the cost of that care to the insurance companies, who then shift it to us - into our premiums.

ROVNER: Most pollsters agree that eventually the growing number of uninsured will become a voting issue again as it was in the early 1990s. Particularly when more and more middle class voters get less generous coverage or lose it altogether.

But recent polls show health insurance still trails the war in Iraq, national security, and even gasoline prices as voters' top concerns.

Julie Rovner, NPR News, Washington.

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