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Executive Summary Health care increasingly affects our personal lives and the national economy as its benefits to our health, longevity and quality of life grow. Over the past quarter of a century, clinical medicine has become more sophisticated, technological advances have become more commonplace, and the range of health care interven- tions has been much expanded. Yet over the same period, the numbers of persons without health insurance to help them purchase health services has increased by about one million per year faster than the rate of overall population growth. The total number of uninsured Americans grew even during years of economic pros- perity (Holahan and Kim, 2000~. This report and the five reports that will follow endeavor to present a wide- angle view of health insurance and examine the consequences of being without insurance, not only for persons who are uninsured and their families, but also for the communities in which they live and for society. Health insurance is one of the best-known and most common means used to obtain access to health care. What are the consequences for all of us of having tens of millions of people uninsured? Over the next two years, the Institute of Medicine Committee on the Con- sequences of Uninsurance will evaluate and report what is known about the impacts of being uninsured and how being uninsured affects individuals, families, communities, and society. The Committee will focus on uninsured people, de- fined as persons with no health insurance and no assistance in paying for health care beyond what is available through charity and safety-net institutions. It recog- nizes, however, that many people have insurance that offers incomplete coverage and that being underinsured poses problems as well, though these are generally less severe. While the implications and potentially harmful consequences are greater for those who are uninsured for longer periods, in this report we consider persons 1
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2 CO VERA GE MA TTERS: INSURANCE AND HEALTH CARE who lack insurance for any period of time to be uninsured and at risk for some adverse effects as a result. Many professional societies, private foundations, government agencies, and political and consumer organizations have highlighted detrimental health and financial impacts for individuals and families of being uninsured. Research and information about these impacts are extensive but widely scattered. By constitut- ing and charging this Committee, the Institute of Medicine recognizes both the urgency of the issues surrounding health insurance coverage of the U.S. popula- tion and the need for consolidating and critically appraising evidence regarding the impacts of uninsurance for individuals and communities. In presenting its evalua- tion of the research literature and findings about the health and economic conse- quences of uninsurance, the Committee hopes to add context and depth to the ongoing public dialogue about these issues, by focusing on the connections be- tween the lack of coverage and a variety of documented personal and social outcomes. In this first report, the Committee provides an overview of health insurance in America, looking specifically at how coverage is gained and lost, why so many people have none, and who lacks insurance, as individuals and as members of groups within the general population. In addition, this report introduces the Committee's analytic plan for the entire series of reports and presents the concep- tual framework that will guide the Committee's evaluations of specific impacts of un~nsurance In its su Sequent reports. MYTHS AND REALITIES This report begins by examining pervasive popular ideas about the scope and nature of the problem of uninsurance that frustrate attempts to address this complex issue constructively. Americans persistently underestimate the numbers of uninsured people and hold many misperceptions about their identity, about how one becomes uninsured, and about the economic and health consequences of being uninsured (Fronstin, 1998; Blendon et al., 1999; News- Hour-Kaiser, 2000; Wirthlin Worldwide, 2001~. Myth: People without health insurance get the medical care they need. Reality: The uninsured are much more likely than persons with insurance coverage to go without needed care (Schoen and DesRoches, 2000~. They also receive fewer preventive services and less regular care for chronic conditions than people with insurance (Ayanian et al., 2000; Baker et al., 2000~. Myth: The number of uninsured Americans is not particularly large and has . . . . not been Increasing In recent years. Reality: The number of uninsured people is greater than the com- bined populations of Texas, Florida, and Connecticut. During 1999, the Census Bureau estimated that approximately 42 million people in the United States lacked health insurance coverage (Mills, 2000~. This num- ber represents about 15 percent of a total population of 274 million
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EXECUTIVE SUMMARY persons and 17 percent of the population under 65 years of age.i An estimated ten million of the uninsured are children under the age of 18 (about 14 percent of all children), and about 32 million are adults between ages 18 and 65 (about 19 percent of all adults in this group) (Mills, 2000~. The estimate of uninsured people is even larger when coverage is measured over several years. Almost three out of every ten Americans, more than 70 million people, lacked health insurance for at least a month over a 36-month period (Bennefield, 1998a). Estimates of the number of persons who lack insurance vary depending on the survey and range from 32 million to 42 million for those without coverage throughout the year.2 Surveys differ in their size and sampling methods, the ways in which questions are asked about insurance coverage, and the period over which insurance coverage or uninsurance is measured (Lewis et al., 1998; Fronstin, 2000a). The Current Population Survey (CPS), conducted annually by the Census Bureau, is the most widely cited source of estimates of the number of uninsured persons and is used throughout this report as the primary data source. The CPS is particularly useful because it produces yearly estimates in a timely fashion, report- ing the previous year's insurance coverage rates each September, and because information about insurance coverage has been gathered since the mid-1970s, allowing for analysis of coverage trends over time (Figure ES.1~. Although the CPS nominally reports persons uninsured throughout the entire calendar year, some analysts believe that its estimates actually reflect shorter periods of unin- surance, and thus that its estimates of the number uninsured throughout the year are too high (Swartz, 1986~. Whether one uses the estimate of 42 million uninsured, as reported by the CPS, or the lower estimates generated on the basis of other governmentally and privately sponsored surveys, the number of uninsured Americans is substantial. In light ofthe CPS's usefulness and its limitations, this report relies on estimates based on CPS data, with caveats. The Committee finds the variation in estimates among surveys less critical than the order of magnitude of the entire range of estimates that different surveys yield. Myth: Most people who lack health insurance are in families where no one works. Reality: More than 80 percent of uninsured children and adults un- der the age of 65 live in working families. Although working does improve the chances that one and one's family will have insurance, even members of iBecause the federal Medicare program provides nearly universal coverage for persons at least 65 years of age, the Committee's work will focus on uninsured persons under age 65. 2For 1996, the Medical Expenditure Panel Survey (MEPS), conducted by the Agency for Healthcare Research and Quality, generated an estimate of 32 million nonelderly persons uninsured throughout the year. For the same year, the Census Bureau's CPS estimated 41 million uninsured defined the same way (Fronstin, 2000a).
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EXECUTIVE SUMMARY families with two full-time wage earners have almost a one-in-ten chance of being uninsured (Hoffman and Pohl, 2000~. Myth: Growth in the numbers of recent immigrants has been a major source of the increase in the number of uninsured persons. Reality: Although immigrants who have arrived within 4 years have higher-than-average uninsurance rates, they comprise a relatively small proportion of the general population. In fact, between 1994 and 1998, there has been a net decrease in the number of recently arrived immigrants (Holahan et al., 2001~. Overall, noncitizens account for fewer than one in five uninsured persons (Mills, 2000~. Through its work, the Committee hopes to replace misperceptions with facts and in doing so, to lay the groundwork for a more informed public debate about health insurance coverage. RELATING HEALTH INSURANCE TO ACCESS TO HEALTH SERVICES Health insurance serves multiple constituencies and distinct pur- poses. For individuals and families, insurance coverage is one means to promote health and access to care and to protect against exceptional health care costs. Insurance pools the risks and resources of a group of people so that each is protected from financially disruptive medical expenses and each may plan ahead or budget for health care. In contrast with many other insurance products, such as automobile or homeowner's insurance, health insurance has evolved as a mecha- nism for financing routine health care expenses and encouraging the use of pre- ventive services, in addition to protecting against uncommon events and expenses. As the scope and effectiveness of health care interventions have grown, so have consumers' expectations for coverage and benefits through health insurance. Other constituencies also have a stake in our mechanisms for financing health care. Providers of health care benefit from insurance as a reliable source of pay- ment. Employers offer health benefits to attract and retain workers and to maintain a productive workforce. Governments provide health insurance to special popula- tions as a means to secure health care for them. Health insurance is neither necessary nor sufficient to obtain health care, yet coverage remains one of the most important ways to obtain access to health services. The level of out-of-pocket costs for care has been demonstrated to have substantial effects on the use of health services (Newhouse et al., 1993; Zweifel and Manning, 2000~. Uninsured persons may be charged more than patients with coverage, who benefit from discounts negotiated by their insurer (Wielawski, 2000; Kolata, 2001~. In addition, uninsured people face 100 percent cost sharing, although some providers are willing to absorb part of the cost for some of their patients some of the time by negotiating a reduced rate. Even though many publicly supported institutions offer free care or reduced fees and many other providers offer some charity care, people without insurance generally have re-
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6 CO VERA GE MA TTERS: INSURANCE AND HEALTH CARE duced access to care (Cunningham and Kemper 1998; Cunningham and Whitmore, 1998~. Evidence accumulated over the past several decades of health services research has consistently found that persons without insurance are less likely to have any physician visit within a year, have fewer visits annually, and are less likely to have a regular source of care (Andersen and Aday, 1978; Aday et al., 1984; HaLner- Eaton, 1993; Weissman and Epstein, 1994; Newacheck et al., 1998; Zweifel and Manning, 2000~. Children without insurance are three times as likely as children with Medicaid coverage to have no regular source of care (15 percent of unin- sured children do not have a regular provider compared with just 5 percent of children with Medicaid), and uninsured adults are more than three times as likely as either privately or publicly insured adults to lack a regular source of care (35 percent compared with 11 percent) (Haley and Zuckerman, 2000~. The likeli- hood that those without health insurance lack a regular source of care has in- creased substantially since 1977 (Zuvokas and Weinick, 1999; Weinick et al., 2000~. Uninsured adults are less likely to receive health services, even for certain serious conditions. One nationally representative survey that took into account age, sex, income, and health status found that uninsured people were less than half as likely as those with insurance to receive needed care, as judged by physicians, for a serious medical condition (Baker et al., 2000~. People without insurance are also less likely to receive preventive services and appropriate routine care for chronic conditions than those with insurance, even as the importance of preven- tive care and the prevalence of chronic disease become more prominent elements within health care (HaLner-Eaton, 1993; Burstin et al., 1998; Ayanian et al., 2000; Schoen and DesRoches, 2000; Institute of Medicine, 2001~. To guide its assessment of the relationship between the lack of health insur- ance, access to care, and the consequences of no coverage, the Committee has based its conceptual framework on a widely used behavioral model of access to health services (Figure ES.2) (Andersen, 1995; Andersen and Davidson, 2001~. In this framework the major determinants of insurance coverage are heavily, but not exclusively, economic. The model links these determinants to features of the process of obtaining health services and to morbidity, mortality, and health status. Insurance coverage is thus linked in this model to an array of outcomes through the mediating effect of health care services. The model allows us to track the effects from lack of coverage on individuals and families, in a sizable uninsured population, to the viability of health care providers and institutions at a commu- nity level and the implications for the nation's economy. HOW COVE12AGE IS GAINED AND LOST In the United States, health insurance is a voluntary matter, yet many people are involuntarily without coverage. There is no guarantee for most people under the age of 65 years that they will be eligible for, or able to afford to
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8 CO VERA GE MA TTERS: INSURANCE AND HEALTH CARE purchase or retain, health insurance. The historical tension rooted in American social values, between considering health care as a market commodity and as a social good, has fostered the development of variegated and complex arrange- ments for financing the delivery of health care (Stevens, 1989; Stone, 1993~. Within the private sector, insurance coverage depends on an employer's decision to offer a health benefit plan and an employee's decision to enroll or take up this offer (Figure ES.3~. When workers are not offered the chance to purchase employment-based insurance for themselves and their dependent family members (spouses and minor children), or when they decline to enroll, individual policies and public insurance (Medicaid or the State Children's Health Insurance Program ~SCHIP]) offer limited opportunities for coverage. Poor health status or low income may preclude the purchase of an affordable (or any) individual policy from an insurance company. The combination of strict eligibility requirements and complex enrollment procedures often makes public coverage difficult to obtain and even more difficult to maintain over time. Opportunities to Purchase Coverage Almost seven out of every ten Americans under age 65 years (66 percent) are covered by employment-based health insurance, from either their job or that of their parent or spouse (Fronstin, 2000d). Among workers 76 percent are offered health insurance by their employers, and 83 percent of those offered insurance decide to purchase or take up the offer of coverage (Fronstin, 2001~. The 17 percent of workers that decline an employer's offer include about 13 percent who are covered through a spouse or elsewhere and 4 percent who remain uninsured. The expense and competing demands on family income are the main reasons given for declining the offer of employment-based insurance (Cooper and Schone, 1997; Rowland et al., 1998; Hoffman and Schlobohm, 2000~. Individually purchased policies and public insurance (primarily Medicaid) both fill some of the coverage gaps created by the employment-based system. Together they account for 21 percent of covera~e.3 Self-employed people (about 10 percent of workers) and their families must often rely on individually purchased health insurance. Individual coverage also serves as a stop-gap measure, however, for adult children who lose their coverage as dependents before they can obtain job-based coverage and for retirees under the age of 65 before they become eligible for Medicare. Medicaid coverage also tends to be transitory, with two- thirds of new enrollees losing coverage within the first year (Carrasquillo et al., 1998; Short and Freedman, 1998~. ~ ~ . . O ~ 1 0 Come people report multiple sources of coverage, so employment-based, individual, and public insurance coverage rates total more than the 82 percent of the u.s. population with any coverage during the year.
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10 Gaining and Losing Coverage CO VERA GE MA TTERS: INSURANCE AND HEALTH CARE Many normal social and economic transitions can trigger a loss of health insurance coverage for a person or family because income, health status, marital status, and terms of employment affect eligibility for and participation in health insurance. Conversely, many of these transitional events can result in becoming eligible for coverage. Because so many different common events are associated with a change in health insurance status, the chance of being uninsured over the course of a lifetime may be substantial. For example, a young adult (18-24) has a greater-than-even chance of being uninsured for at least one month over a 36- month period (Bennefield, 1998a). For some people, lack of insurance is a temporary or one-time interruption of coverage, while for others, being uninsured is an experience that recurs periodi- cally or may last for several years. Lower income persons tend to remain uninsured for longer than do those with incomes above the federal poverty level (McBride, 1997~. Educational attainment and employment sector are factors that also are related to the length of uninsured periods (Swartz et al., 1993a). Short periods without health insurance are less likely than longer periods to adversely affect access to health services (Ayanian et al., 2000~. Yet even short periods without insurance carry with them the financial risk of extraordinarily high health ex- penses. Limited Coverage Options Insurance industry underwriting practices, the costs of health services, and the patchwork of public policies regarding insurance coverage all contribute to the economic pressures on employers, insurers, and government programs offering health insurance. Small employers frequently face higher group health insurance premium rates than large employers do. Larger firms can cushion themselves from the financial impact of insurance company medical underwriting and restrictions by choosing to self-insure their employees' health benefits. Small employers may receive poorer benefits for premiums comparable to those of large firms, because of both a higher risk premium and higher administrative costs per person, and inadequate resources to evaluate and negotiate good coverage. As a result, some small employers may decline to offer coverage altogether. Among a group of 955 small businesses (fewer than 50 employees) surveyed, the most common and the highest-ranking reason for not offering insurance benefits was the expense of coverage (Fronstin and Helman, 2000~. The expense and competing demands on family income are the main reasons given by individuals for declining an offer of employment-based coverage. Wage- earners who accept or take up an employer's offer of a subsidized health benefit typically pay between one-quarter and one-third of the total cost of their insur- ance premium, in addition to deductibles, copayments, and the costs of health services that are not covered or are covered only in part. For families earning less
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EXECUTIVE SUMMARY 11 than 200 percent of the federal poverty level (FPL), $33,400 for a family of four in 1999, the cost of an unsubsidized insurance premium may exceed 10 percent of annual income (Gabel et al., 1998~. Coverage Trends over Time Since the mid-1970s, growth in the cost of health insurance has outpaced the rise in real income, creating a gap in purchasing ability that has added roughly one million persons to the ranks of the uninsured each year. These cost increases result in part from advances in medical and pharmaceutical technology, an aging popu- lation, and reduced consumer sensitivity to prices through expanded insurance coverage (Healer et al., 2001~. Despite the economic prosperity of recent years, between 1998 and 1999 there was only a slight drop in the number and propor- tion of uninsured Americans. Through the early 1990s the rising uninsurance rate reflected a decline in employment-based coverage. Since the mid-1990s increases in employment-based coverage have been offset by steady or declining rates of public and individually purchased coverage (Fronstin, 2000d). A PORTRAIT OF THE UNINSURED People lack coverage regardless of education, age, or state of residence. Employment and geographic factors are central because private insur- ance is closely tied to employment, and eligibility for public programs is partly determined by work and income criteria. Social and Economic Factors Affect Coverage Full-time, full-year employment offers families the best chance of having health insurance, as does an annual income of at least a moderate level (greater than 200 percent of FPL) (Custer and Ketsche, 2000b). Wage earners in smaller firms, lower-waged firms, nonunionized firms, and nonmanufacturing employ- ment sectors are more likely than average to go without coverage. Members of families without wage earners are more likely to be uninsured than are members of families with wage earners. Two-thirds of all uninsured persons are members of lower-income families (earning less than 200 percent of FPL), and nearly one- third of all members of lower-income families are uninsured. More than one- quarter of all uninsured adults have not earned a high school diploma, and almost four out of every ten adults who have not graduated from high school are unin- sured. Coverage Varies over the Life Cycle The average individual's chances of being uninsured trace a curve across the life span, from a lower-than-average likelihood for minor children and a higher-
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2 CO VERA GE MA TTERS: INSURANCE AND HEALTH CARE than-average likelihood for young adults to a gradual decline in probability with advancing age and increasing connection to the labor force. People 65 and older have a minimal likelihood of being uninsured because Medicare provides virtually universal coverage to that age group. Marriage and the rearing of infants and young children both decrease the chances, on average, that an adult will be uninsured. Sources of coverage and health status, as well as participation in the work force, also affect one's chances of lacking coverage. Demographic Disparities in Coverage o Higher uninsured rates among members of racial and ethnic minority groups and among recent immigrants reflect their lower rates of employment-based cov- erage and lower family incomes, on average, compared to non-Hispanic whites and U.S.-born residents. African Americans are twice as likely as non-Hispanic whites to be uninsured, and Hispanics are three times as likely to be uninsured, although more than half of all uninsured persons are non-Hispanic whites. For- eign-born residents are almost three times as likely to be uninsured as are those born in the United States, and among the foreign born, noncitizens are more than twice as likely as citizens to be uninsured (Mills, 2000~. In addition, there are gender disparities in coverage, reflecting the different experiences of adult men and women in the workplace and with public policies. Although men are more likely than women to be uninsured, women have a lower rate of employment-based coverage. Because women are more likely to obtain coverage through individual policies and public programs, their insurance status tends to be less stable, with more opportunities for gaps in coverage (Miles and Parker, 1997; Fronstin, 2000b). Geographic Differences Affect Coverage The decentralized labor and health services markets of the United States and . . the distinctive public policies of each state and locality together create unique contexts for the patterns of insurance coverage for individuals, families, and popu- lation groups. Differences among the states with respect to population character- istics, industrial economic base, eligibility for public insurance, and relative purchasing power of family income shape the geographic disparities in insur- ance coverage rates (Figure ES.4) (Marsteller et al., 1998; Brown et al., 2000b; Cunningham and Ginsburg, 2001~. Residents of the South and West are more likely than average to be uninsured. Reflecting the predominantly urban location of the general population, most uninsured persons live in urban areas, although rural and urban residents are about equally likely to be uninsured. Factors Influencing Uninsured Rates The Committee conducted a multivariate statistical analysis to estimate the
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14 COVERAGE MATTERS: INSURANCE AND HEALTH CAM relative influence of a number of measured socioeconomic, demographic, and geographic characteristics. Bivariate analyses are also reported for these character- istics. According to this multivariate analysis, the variation in estimated uninsured rates among population groups diminishes substantially when income, occupation, employment sector and firm size, education, health status, age, gender, race and ethnicity, citizenship, and geography are included. This more elaborate statistical analysis confirms the qualitative impact found by simpler analyses of rates of uninsurance along single dimensions. It also supports the finding that employ- ment-related factors, such as income, education, and economic sector, underlie much of the variation in uninsured rates among different population groups. ANALYTIC PLAN FOR THE COMMITTEE In future reports the Committee will look at an array of conse- quences of uninsurance and address its distinctive effects on successively larger and more complex entities. The conceptual framework developed in this report will guide the analyses in each of the subsequent reports, which will include examina- tions of health outcomes, financial impacts, and changes in the quality of life that result from the lack of health insurance. Report 2: Health Consequences for Individuals We know that insurance coverage facilitates access to health services, but what effects does the lack of health insurance have on health? In its second report the Committee will assess published evidence about how being uninsured affects many aspects of health for adults, including overall health status, disease-specific morbidity, avoidable hospitalizations, and mortality. Report 3: Health and Economic Consequences for Families When even one member of a family goes without health insurance, what consequences are shared by the entire family? Because children depend on their parents or other adults to obtain health care for them, their parents' experiences with the health care system, beliefs about health care, financial resources, and ability to negotiate that system on their children's behalf are important for childrens' health care. Each of these elements is affected, in turn, by a parent's or child's lack of insurance coverage. In its third report the Committee will assess the evidence about how family patterns of health insurance coverage affect both children's health and well-being and families' economic stability and security. Report 4: Consequences for Communities What are the health and economic consequences for communities of having large uninsured populations? In its fourth report the Committee will consider how
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EXECUTIVE SUMMARY 15 the health of and access to health services of communities are affected by the presence of substantial numbers of uninsured residents. The institutional and economic impacts of sizable uninsured populations will be examined for particular kinds of communities (e.g., urban and rural, and with specific industrial bases). Report 5: Economic Consequences Nationally How much does it cost us as a nation to have roughly one out of every six or seven Americans uninsured? Who picks up the tab? Before policy makers can estimate what it may cost to change our current set of health financing arrange- ments, they will need a basis for comparison. In its fifth report the Committee will evaluate the costs of sustaining an uninsured population, both directly in terms of the health care provided them and indirectly in terms of their increased burden of disease and disability. Report 6: Models and Strategies Addressing the Consequences of Uninsurance How can communities and public and private agencies solve the problems caused by lack of coverage? In its sixth report the Committee will consider selected programs and proposals involving insurance-based strategies to expand coverage. Such strategies and models may be undertaken nationally, by states and localities, by government agencies, and by private businesses. The Committee will identify policy criteria for use in assessing the features of alternative reform strate- g~es. SUMMARY Most Americans expect and receive health services when they and their families need care, but for the approximately 40 million people who have no health insurance, this is not always the reality. Health insurance is a key factor affecting whether an individual or family obtains health care. Uninsured Americans are not able to realize the benefits of American health care because they cannot obtain certain services or the services they do receive are not timely, appropriate, or well coordinated. The most apparent deficits in care experienced by those without insurance are for chronic conditions and in preventive and screening services (HaLner-Eaton, 1993; Ayanian et al., 2000; Baker et al., 2000; Schoen and DesRoches, 2000~. Far too often, key aspects of quality health care, regular care and communication with a provider to prevent and manage chronic health conditions (Institute of Medi- cine, 2001), are beyond the reach of uninsured persons. As a society, we have tolerated substantial populations of uninsured persons as a residual of employment-based and public coverage since the introduction of
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6 COVERAGE MATTERS: INSURANCE AND HEALTH CARE Medicare and Medicaid more than three and a half decades ago. Regardless of whether this result is by design or default, the consequences of our policy choices are becoming more apparent and cannot be ignored. Current public policies and insurance practices will sustain a large uninsured population under a range of projected scenarios for the national economy (Custer and Ketsche, 2000a; Fronstin, 2001~. The decline in the number of uninsured people between 1997 and 1999 is not expected to continue if the economy remains slow and health care costs and insurance premiums continue to rise rapidly. By clarifying the dynamics of health insurance coverage and identifying underlying factors that contribute to unin- surance, this report and those that follow should help inform ongoing discussions about how to remedy this long-standing social problem.
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Representative terms from entire chapter: