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Committee on the Consequences of Uninsurance Board on Health Care Services THE NATIONAL ACADEMIES PRESS Washington, D.C. www.nap.edu

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THE NATIONAL ACADEMIES PRESS • 500 Fifth Street, N.W. • Washington, DC 20001 NOTICE: The project that is the subject of this report was approved by the Govern- ing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The members of the committee responsible for the report were chosen for their special competences and with regard for appropriate balance. Support for this project was provided by The Robert Wood Johnson Foundation. The views presented in this report are those of the Institute of Medicine Committee on the Consequences of Uninsurance and are not necessarily those of the funding agency. International Standard Book Number 0-309-09105-5 (Book) International Standard Book Number 0-309-52826-7 (PDF) Library of Congress Control Number 2003114736 Additional copies of this report are available for sale from the National Academies Press, 2101 Constitution Avenue, N.W., Box 285, Washington, DC 20055. Call (800) 624-6242 or (202) 334-3313 (in the Washington metropolitan area); Internet, http:// www.nap.edu. For more information about the Institute of Medicine, visit the IOM home page at www.iom.edu. Copyright 2004 by the National Academy of Sciences. All rights reserved. Printed in the United States of America. The serpent has been a symbol of long life, healing, and knowledge among almost all cultures and religions since the beginning of recorded history. The serpent adopted as a logotype by the Institute of Medicine is a relief carving from ancient Greece, now held by the Staatliche Museen in Berlin.

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“Knowing is not enough; we must apply. Willing is not enough; we must do.” —Goethe Shaping the Future for Health

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The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. Upon the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Bruce M. Alberts is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. Wm. A. Wulf is president of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsi- bility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, upon its own initiative, to identify issues of medical care, research, and education. Dr. Harvey V. Fineberg is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy’s purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both Acad- emies and the Institute of Medicine. Dr. Bruce M. Alberts and Dr. Wm. A. Wulf are chair and vice chair, respectively, of the National Research Council. www.national-academies.org

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COMMITTEE ON THE CONSEQUENCES OF UNINSURANCE MARY SUE COLEMAN (Co-chair), President, University of Michigan, Ann Arbor ARTHUR L. KELLERMANN (Co-chair), Professor and Chairman, Department of Emergency Medicine, Director, Center for Injury Control, Emory University, Atlanta, Georgia RONALD M. ANDERSEN, Wasserman Professor in Health Services, Chair, Department of Health Services, Professor of Sociology, University of California, Los Angeles, School of Public Health JOHN Z. AYANIAN, Associate Professor of Medicine and Health Care Policy, Harvard Medical School, Brigham and Women’s Hospital, Boston, Massachusetts ROBERT J. BLENDON,* Professor, Health Policy and Political Analysis, Department of Health Policy and Management, Harvard School of Public Health and Kennedy School of Government, Boston, Massachusetts SHEILA P. DAVIS, Associate Professor, University of Mississippi Medical Center, School of Nursing, Jackson GEORGE C. EADS, Charles River Associates, Washington, DC SANDRA R. HERNÁNDEZ, Chief Executive Officer, San Francisco Foundation, California WILLARD G. MANNING, Professor, Department of Health Studies, The University of Chicago, Illinois JAMES J. MONGAN, President and CEO, Partners HealthCare, Inc., Boston, Massachusetts CHRISTOPHER QUERAM, Chief Executive Officer, Employer Health Care Alliance Cooperative, Madison, Wisconsin SHOSHANNA SOFAER, Robert P. Luciano Professor of Health Care Policy, School of Public Affairs, Baruch College, New York STEPHEN J. TREJO, Associate Professor of Economics, Department of Economics, University of Texas at Austin REED V. TUCKSON, Senior Vice President, Consumer Health and Medical Care Advancement, UnitedHealth Group, Minnetonka, Minnesota EDWARD H. WAGNER, Director, MacColl Institute for Healthcare Innovation, Center for Health Studies, Group Health Cooperative, Seattle, Washington LAWRENCE WALLACK, Director, School of Community Health, College of Urban and Public Affairs, Portland State University, Oregon *Served from September 2000 to December 2002. v

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IOM Staff Wilhelmine Miller, Project Co-director Dianne Miller Wolman, Project Co-director Lynne Page Snyder, Program Officer Tracy McKay,* Research Associate Ryan Palugod, Senior Project Assistant Consultant Cheryl Ulmer, Writer *Served until August 2003. vi

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Reviewers This report has been reviewed in draft form by individuals chosen for their diverse perspectives and technical expertise, in accordance with procedures ap- proved by the National Research Council’s Report Review Committee. The purpose of this independent review is to provide candid and critical comments that will assist the institution in making its published report as sound as possible and to ensure that the report meets institutional standards for objectivity, evi- dence, and responsiveness to the study charge. The review comments and draft manuscript remain confidential to protect the integrity of the deliberative process. We wish to thank the following individuals for their review of this report: Sheila Burke, Smithsonian’s Under Secretary for American Museums and National Programs, Smithsonian Institution, Washington, DC. Robert Cunningham, Deputy Editor, Health Affairs, Bethesda, MD. Helen Darling, President, Washington Business Group on Health, Washington, DC. Michael M. E. Johns, Executive Vice President for Health Affairs, Emory University, Atlanta, GA. Charles N. Kahn, III, President, American Federation of Hospitals, Washington, DC. Catherine McLaughlin, Director, Economic Research Initiatives on the Uninsured, University of Michigan, Ann Arbor. Mark Pauly, Bendheim Professor, The Wharton School, University of Pennsylvania, Philadelphia. Trish Riley, Executive Director, National Academy for State Health Policy, Portland, ME. vii

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viii REVIEWERS Diane Rowland, Executive Vice President, Kaiser Family Foundation, Washington, DC. Leonard Schaeffer, Chief Executive Officer, WellPoint Health Networks, Inc., Thousand Oaks, CA. Rosemary Stevens, Stanley I. Sheerr Professor in Arts and Sciences, Emerita, University of Pennsylvania, Philadelphia. Although the reviewers listed above have provided many constructive com- ments and suggestions, they were not asked to endorse the conclusions or recom- mendations nor did they see the final draft of the report before its release. The review of this report was overseen by Hugh H. Tilson, Clinical Professor, School of Public Health, University of North Carolina, Chapel Hill, and Joseph P. Newhouse, John D. MacArthur Professor of Health Policy and Management, Harvard University. Appointed by the National Research Council and Institute of Medicine, they were responsible for making certain that an independent examination of this report was carried out in accordance with institutional procedures and that all review comments were carefully considered. Responsibility for the final content of this report rests entirely with the authoring committee and the institution.

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Foreword Insuring America’s Health: Principles and Recommendations concludes the series of groundbreaking reports by the Institute of Medicine and its Committee on the Consequences of Uninsurance. The previous five Committee reports, issued be- tween October 2001 and June 2003, have established both a broader conceptual framework and a new empirical evidence base with which to assess the implica- tions of our nation’s policies regarding health insurance and of the lack of coverage for one out of every seven Americans. Beginning with Coverage Matters, which dispelled common misconceptions about who lacks health insurance, why, and the access implications of being uninsured, the Committee’s reports examine multiple facets of the problem of uninsurance and systematically address questions relevant for public policy. Care Without Coverage: Too Little, Too Late documents the serious health risks that the lack of coverage poses for adults. Health Insurance Is a Family Matter extends this examination of health outcomes to those of pregnant women and infants and children, and considers the psychosocial and financial impacts that the lack of health insurance for any family member has on the whole family. The Committee’s fourth report, A Shared Destiny: Community Effects of Uninsurance, extends the scope of analysis even further, to conceptualize and determine how the presence of uninsured residents might affect the health, health care, and social and eco- nomic life of neighborhoods, towns, cities, and rural areas. Notably, this report includes an original study of community-level effects of uninsurance on the avail- ability of hospital services and hospital financial margins. In Hidden Costs, Value Lost, its fifth report, the Committee presents an innovative assessment of the economic implications of the lack of health insurance across society. This analysis considers the economic value lost to the nation in terms of the poorer health and ix

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x FOREWORD shorter lives of uninsured Americans relative to the cost of providing health care services to those without coverage comparable to what insured people enjoy. Anyone who has become familiar with the wealth of timely information and the thoughtfully presented analytic discussions in these reports on the conse- quences of uninsurance is in a much better position to join in the national policy debate concerning the extension of health insurance coverage. Once again, after a decade during which the issue was effectively tabled, the debate revolves less around whether or not universal health insurance coverage is a good idea than it does about the best way to accomplish that goal. Insuring America’s Health: Principles and Recommendations, the Committee’s final installment in its series, collects the Committee’s insights developed over the course of this project and demonstrates how this understanding of the virtues and advantages of health insurance can be used to evaluate and make choices among reform strategies. I commend this volume to you as a most useful tool with which to approach the task of reforming American health insurance. Harvey V. Fineberg, M.D., Ph.D. President, Institute of Medicine January 2004

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Preface Insuring America’s Health: Principles and Recommendations is the sixth and last report in a series by the Institute of Medicine Committee on the Consequences of Uninsurance. The Committee began this project three years ago with the intent to consolidate the ever-growing evidence on uninsurance effects and to communi- cate our findings to policy makers, the media, and the public. Our hope was that these reports would stimulate a more informed public debate and a reexamination of the issue of financial access to health care. At the time the Committee began its work in 2000, about 40 million Americans lacked any health insurance coverage, despite the strong economy of the previous decade. Since then, another three million individuals have been added to the rolls of the uninsured. The Committee’s first five reports carefully assess and document the nature and severity of the problems resulting from uninsurance. The clinical literature overwhelmingly shows that uninsured people, children as well as adults, suffer worse health and die sooner than those with insurance. Families with even one member who is uninsured lose peace of mind and can become burdened with enormous medical bills. Uninsurance at the community level is associated with financial instability for health care providers and institutions, reduced hospital services and capacity, and significant cuts in public health programs, which may diminish access to certain types of care for all residents, even those who have coverage. The economic vitality of the nation is limited by productivity lost as a result of the poorer health and premature death or disability of uninsured workers. The Committee has estimated that the economic value lost because of poorer health and earlier deaths among uninsured Americans is between $65 billion and $130 billion annually. Although some of these conclusions from the Committee’s research may seem self-evident to those who regularly study this issue, they counter widely held misperceptions about the personal consequences of uninsurance for tens of mil- lions of Americans. The Committee’s findings about family impacts, community- level consequences, and the societal costs of uninsurance break new ground on xi

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xii PREFACE topics that previously received little attention. Each of the reports organizes a wealth of information within a unified conceptual framework to clarify the mag- nitude, extent, and impacts of this complex and multifaceted problem. The Com- mittee finds the consistency of the evidence, and the scope and scale of its conse- quences, compelling. Can we afford not to cover the uninsured? Why hasn’t more been done to eliminate uninsurance? Could extension of coverage be achieved through incremental expansions of existing programs or through comprehensive reforms? What should be done? These questions are ex- amined in detail in this, the final report of the series. A historical review shows that numerous attempts have been made to extend coverage in this country, beginning a century ago, but most of these efforts have been thwarted or fallen short of expectations. On the strength of this experience, the Committee concludes that further efforts to gradually expand coverage through incremental reforms are unlikely to succeed. Instead, the Committee proposes a clear and compelling goal—within 6 years, everyone in the United States should have health insurance. Based on the Committee’s evidence and findings in its first five reports, it has crafted a checklist of principles that can be used to assess the adequacy and impact of various models or proposals to cover the uninsured. There are many current proposals for achieving universal coverage; the Committee does not recommend or propound any particular model. However, the Committee’s final report, and the findings of its five previous reports, provides an evidence-based framework to consider the pros and cons of current and future proposals to achieve universal coverage. The Committee urges our national leadership to move forward expedi- tiously. What happens next is up to policy makers, elected officials, and the American public. In light of the many consequences of uninsurance, and the continuing stress it imposes on the very fabric of America’s health care system, this problem can no longer be ignored. Uninsurance can be eliminated, but it will require the support of the public, considerable technical expertise by policy makers, a spirit of compromise among stakeholders, and courage from our elected officials. We firmly believe that universal coverage of the U.S. population is both feasible and imperative. As co-chairs, we thank our fellow Committee members for sharing so gener- ously of their expertise and time. Their commitment over the duration of this long project has been outstanding. Although the term of the Committee will soon end, our dedication to implementing the recommendations of this report will endure. We look forward to a time in the not-too-distant future when studies of uninsurance no longer will be needed because everyone will be covered. Mary Sue Coleman, Ph.D. Co-chair Arthur L. Kellermann, M.D., M.P.H. Co-chair January 2004

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Acknowledgments It is a pleasure to thank the many people who have participated in the development of Insuring America’s Health, as well as those who have contributed to the work of the Committee over its three-year term. The members of the Subcommittee on Strategies and Models for Providing Health Insurance prepared this report for the Committee’s consensus review and issuance. Shoshanna Sofaer chaired the Subcommittee. Members included Patricia Butler, George Eads, Jack Ebeler, Barbara Matula, Len Nichols, Christopher Queram, Reed Tuckson, Edward Wagner, and Alan Weil. Through intense discussions, in person and by e-mail, they guided staff, particularly in the historical analysis and the design and analyses of the coverage models. Their expertise has been invaluable to the Committee. Writer Cheryl Ulmer served as a consultant to the Committee on this report and throughout the project. Herman Beals and Joanna Rios provided Spanish translation services for the brief summaries of each report. Presentations by a number of experts provided a wealth of insights and evidence for consideration by the Committee and Subcommittee, and the Com- mittee thanks them for their contributions of time and expertise. Karen Davis, President of the Commonwealth Fund, reviewed federal efforts and options to expand coverage at a meeting of the full Committee in October 2002. Deborah Chollet, Mathematica Policy Research, Rick Curtis, Institute for Health Policy Solutions, Judy Feder, Georgetown University, Vickie Gates, State Coverage Initiatives, AcademyHealth, and Jack Meyer, Economic and Social Research Institute, discussed issues related to coverage expansions at the local, state, re- gional, and national levels at the Subcommittee’s November 2002 meeting in Washington, DC. Irene Ibarra, Alameda Alliance, and Richard Kronick, Univer- sity of California at San Diego, shared their experiences and research on local expansions at the February 2002 Committee meeting in San Francisco. In addi- xiii

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xiv ACKNOWLEDGMENTS tion, the Committee would like to thank Senator Rosalyn Baker of Hawaii, Toni Beddingfield, Dennis Chu, Jeffrey Lazenby, Nina Maruyama, and Karl Polzer for their insights about the experiences of states and localities with coverage expan- sions. The depth and comprehensiveness of this project was possible because of a rich research base and a widely published body of literature. Research and analysis of issues related to uninsurance has been facilitated by the support of three key foundations: the Commonwealth Fund, the Kaiser Family Foundation, and The Robert Wood Johnson Foundation. We are grateful for their longstanding and ongoing support of intellectual inquiry on the topic of the uninsured. The Committee would like to thank the Institute of Medicine (IOM) project staff for their skilled work on Insuring America’s Health. Project co-director Dianne Wolman served as principal staff to the Subcommittee and coordinated the draft- ing of the report. Project co-director Wilhelmine Miller advised on and edited multiple drafts. Program officer Lynne Snyder assisted in drafting and editing, particularly Chapter 3. Research associate Tracy McKay conducted literature searches. Senior project assistant Ryan Palugod maintained the project’s research database, prepared the manuscript for publication, and managed the logistics of the Committee’s travel and meetings. The wholehearted commitment of the entire project team has made possible this three-year project, as well as the high quality of the Committee’s products. The IOM Board on Health Care Services, directed by Janet Corrigan, sponsors and provides overall guidance to the Committee. Over the course of the Committee’s work, staff at the IOM and the National Academies have ably and generously supported the production, public release, and dissemination of the Committee’s six reports. IOM President Harvey Fineberg, Past President Kenneth Shine, and Executive Officer Susanne Stoiber encouraged and advised the Committee. The Committee also thanks Clyde Behney, Jennifer Bitticks, Jennifer Otten, and Bronwyn Schrecker at the Office of Reports and Communication; Craig Hicks, Bill Kearney, Lauren Morello, Barbara Rice, Bill Skane, and Christine Stencel at the Office of News and Public Affairs; Jim Jensen and Sandra McDermin at the Office of Government and Congressional Affairs; Dorothy Lewis, Rachel Marcus, Will Mason, Ann Merchant, Estelle Miller, Lynn Murphy, Dan Parham, and Sally Stanfield at the National Academies Press; Jenni- fer Cangco, Teresa Redd, and Gary Walker at the Office of Finance and Admin- istration; Linda Kilroy at the Office of Contracts and Grants; Bill McLeod of the George Brown Library; and Tony Burton and Ann Greiner of the Board on Health Care Services. The Committee would like to thank The Robert Wood Johnson Foundation for its generous and continued support of the project on the consequences of uninsurance and especially acknowledges The Foundation’s president, Risa Lavizzo-Mourey, this project’s program officer Anne Weiss, and Linda Bilheimer, David Colby, and Stuart Schear for their interest and assistance with this project. Finally, the Committee thanks co-chairs Mary Sue Coleman and Arthur Kellermann for their leadership and commitment over the three-year course of the Committee’s term.

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Contents EXECUTIVE SUMMARY 1 1 INTRODUCTION 15 Purpose of the Project and This Report, 17 Findings and Conclusions from Previous Committee Reports, 18 A Comparison of the United States and Other Developed Countries, 22 Health Care Reform and Health Insurance Reform, 26 Organization of This Report, 27 2 LESSONS FROM PREVIOUS REPORTS 30 Understanding the Scope of Uninsurance and Sources of Coverage, 31 Assessing the Effects of Health Insurance on Health-Related Outcomes, 38 Family and Community Effects of Uninsurance, 48 Current Costs and Societal Costs Attributable to Uninsurance, 56 Effects of the Structure of Insurance, 60 Summary, 64 3 ELIMINATING UNINSURANCE: LESSONS FROM THE PAST AND PRESENT 66 National Efforts to Broaden Coverage, 1916–1984, 66 Federal Initiatives to Extend Coverage Since 1984, 78 State Initiatives to Extend Coverage, 91 Local Initiatives to Extend Coverage, 103 Summary, 107 xv

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xvi CONTENTS 4 PRINCIPLES TO GUIDE THE EXTENSION OF COVERAGE 110 Vision Statement, 111 Principles, 112 5 PROTOTYPES TO EXTEND COVERAGE: DESCRIPTIONS AND ASSESSMENTS 118 Design Issues, 119 Selection of Prototypes, 124 Description of Prototypes for Extending Coverage, 126 Assessment of Prototypes for Extending Coverage, 132 Summary, 147 6 CONCLUSIONS AND RECOMMENDATIONS 153 Principles to Guide the Extension of Coverage, 155 APPENDIXES A Data Tables 161 B Glossary and Acronyms 172 C Biographical Sketches 179 REFERENCES 188

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