Why Insurance?: Part 1 - Health

Health insurance is not the same as health care which is not the same as health. When we talk about “health care reform,” the changes we are addressing relate to how health care is paid for—who does the paying, and how do providers receive those payments. As I discussed in my first post, Obamacare is based on the idea that every individual should have health insurance. This ideal begs the question: What are the benefits of being insured? Over a series of three articles, I will examine the relationships between health insurance and the three key issues of health, access to care, and financial protection.

The question of whether having health insurance will make you healthier is a surprisingly tough one to answer. That is because people who have health insurance differ from those who don’t in several other ways—they might have higher income, be generally more health-conscious, or have other lifestyle factors that keep them healthy whether or not they have insurance. Setting up tests to control for such differences poses logistical as well as ethical challenges, but at least two major studies in the last thirty years managed to do just that.

From 1971 to 1982, the RAND Corporation ran an experiment in which people were randomly assigned to receive either completely free health care, or one of three plans in which they had to pay varying proportions of the cost of the care they received (called “cost sharing”). In this case, everybody had at least some kind of health insurance—the question was whether and how much you had to pay for it—and because they were randomly assigned, there was no concern about systematic differences between groups.

The study tested several hypotheses, one of which was whether people who had to pay for care would be less healthy than those who received care for free (the study also published findings on access to care which we’ll explore in Part 2 of this series). The short answer is no: Generally speaking, there was no negative impact on health when patients had to pay for part or even most of their care. There are, however, some important caveats to that answer which are worth examining. Among the very poorest six percent of patients, having free care did improve outcomes for those with hypertension, those in need of vision or dental care, and those who experienced serious health events such as chest pain, bleeding, or severe weight loss. In other words, there are some scenarios where affordable insurance makes a difference in health outcomes, if only for certain groups with certain conditions.

A more recent study focused on the effects of providing Medicaid, a public insurance program, to low-income individuals. In 2008, Oregon was able to offer a limited number of uninsured adults Medicaid, and decided to fill those slots by drawing names at random from a wait list. This created a natural experiment: Two sets of adults, all with income within a set range, were assigned to a treatment (insured) or control (uninsured) group, allowing for comparisons of the health status of the two groups in the years following the lottery.

Like the RAND study, the Oregon experiment asked questions about both health and use of health services. Also like the RAND study, this experiment found no effects on general health, but important effects for people with certain conditions. Medicaid patients were significantly more likely to be diagnosed with and receive medication for diabetes, although the study was not able to demonstrate that this resulted in individuals being more likely to have their diabetes under control. Perhaps the single largest finding came in the field of mental health: The group that received Medicaid had a thirty percent reduction in the rate of depression compared to the control group.

So what can these two studies tell us about the effect of health insurance on health? Not everything. Each study has its own limitations—the Oregon study has a limited geographic and temporal scope (and, Avik Roy points out, other shortcomings in the study’s design), while the RAND study could only compare individuals with different levels of insurance, not those who lacked coverage altogether. Importantly, both were studies of adults, and cannot reveal whether having coverage as a child might impact an individual’s health down the road.

What we can see is that having insurance is not a cure-all for health problems.  While it does appear to make some difference for people suffering from certain types of illnesses—among them, the seventh leading cause of death in the US—the average individual who becomes insured can’t expect a sudden improvement in their health. It is important to understand this as we debate health care reform: Even if Obamacare succeeded in providing every single American with insurance, it would likely do little to improve the overall health of the country. Achieving that end would require broader, systematic changes in lifestyle factors which insurance alone can’t address.

Why bother with health insurance then? Depending on your personal situation, getting coverage might have less to do with health and more to do with protection from financial risk. Being healthy might not require insurance, but regaining health after illness or injury can require care, and that care is costly. In the weeks to come, we’ll examine how insurance impacts access to health care services as well as financial security. As we do, perhaps the thing to remember is this: Health care does not exist in a vacuum. The ways in which we achieve, recover, and maintain health, and the resources we expend to do so, have real ramifications for our ability to provide for ourselves, both as individuals and as a country.

This article is Part 1 of a three-part series by Anna Stapleton called "Why Insurance?" 

Article Series: Why Insurance?

Part 1 - Health

Part 2 - Access

Part 3 - Cost of Care