What Does It Mean to Be ‘Insured’

by Reihan Salam

In debates over coverage expansion, we tend to think of insurance as binary — you’re either insured or you’re not. But the truth is that there is a spectrum. Because emergency rooms are required to offer coverage to the indigent, virtually all individuals have a very crude kind of insurance against acute emergencies. Neale Mahoney has explored how bankruptcy serves as a kind of implicit health insurance, the “generosity” of which varies across states:

Exploiting cross-state and within-state variation in asset exemption law, I show that uninsured households with greater seizable assets make higher out-of-pocket medical payments, conditional on the amount of care received. In turn, I find that households with greater wealth-at-risk are more likely to hold health insurance.

So the debate over universal coverage is in a sense not really over universal coverage at all. Rather, it is about the kind of universal coverage we should have, and how generous that coverage should be. It should be clear that emergency rooms and bankruptcy don’t make for particularly attractive kinds of insurance, and both involve a great deal of buck-passing, e.g., with those who choose to forego health coverage yet who file bankruptcy when faced with catastrophic medical expenditures imposing a “tax” on those who do not. 

Eugene Steuerle argues that we should be very clear about what we mean when we talk about expanding coverage:

Almost any government health insurance policy is partial in care and cost. If Republicans want to claim that emergency room care is a type of insurance, then they should also acknowledge what is not insured through that mechanism and the implicit taxes on those who end up covering the emergency room cost. If Democrats want to claim that vouchers provide less insurance than a more regulated system, then they, too, should specify just what additional insurance they claim will be covered, at what cost to whom. Both parties should also make coverage comparisons for systems that are equally cost constrained.

It’s not a coincidence that the U.S. has more generous bankruptcy laws that most European market democracies, yet most Europe market democracies have more generous social safety nets than the U.S. These are, in a sense, two ways of attacking the same problem of managing the downside risks one incurs in the course of a working life.