Health care coverage for children is important. Without it,
children suffer and society pays. One study reports that 54 percent
of children without coverage have not received any well-child
visits and 31 percent have not seen a doctor in the past year,
compared to only 26 percent and 9 percent, respectively, for
children with insurance coverage.
When an uninsured child does access the health care system, it
is usually in a very inefficient and costly manner, such as getting
care for a preventable condition through a hospital emergency
room. The national cost of uncompensated care--treating those
without coverage--was an estimated $34.6 billion in federal, state,
and local spending in 2004. Thus, this phenomenon does not just
harm children, but impacts taxpayers directly and society as a
Defining the Uninsured
Today's health care system is a mix of private and public
coverage. According to the most recent U.S. Census data, 68 percent
of the population receives their health insurance through the
private sector-- predominately through the place of work--and 27
percent receive their care through the public sector. This
leaves an estimated 15 percent of people without health care
The results for children are similar. Over 60 percent obtain
coverage through the private-sector employer-based system, and 5
percent obtain coverage directly through the private market.  Of the
29.7 percent that obtain care through the public sector, the
overwhelming portion (27 percent) receives care through
Medicaid and the State Children's Health Insurance Program
(SCHIP). The remaining 11 percent of children
are considered uninsured.
While significant, it is important to note that there are a
variety of ways to count the uninsured. The commonly referenced
Census figures reflect an individual's coverage status at a
specific point in time. However, there are other ways to count the
uninsured. For example, besides measuring coverage at a
specific point in time, other typical and useful measures
include the number of people uninsured for the entire year and the
number uninsured at any time during the year.
According to a Congressional Budget Office analysis of the
uninsured, 26.8 percent of children were uninsured "at any time" in
1998, but only 7.3 percent were uninsured "all year."
Moreover, children are more likely to have shorter periods of
uninsurance than adults. The evidence shows that one
of the major problems with the existing health insurance
markets in the various states is that they are unstable for
individuals and families, largely because of the absence of
ownership and portability of health insurance policies.
By Age. Interestingly, by age group, uninsured children
actually have lower uninsurance rates than other age groups. In one
survey, adults between the ages of 18 and 24 ranked the highest
with 31 percent uninsured, followed by those between 25 and 34
with 26 percent uninsured, those between 35 and 44 with 19 percent,
and, finally, those between 45 and 64 percent with 15 percent. As
mentioned, 11 percent of children (below 18 years of age) are
By Family Income. According to estimates by Paul Fronstin
at the Employee Benefit Research Institute, an estimated 32 percent
of uninsured children are in families with income below federal
poverty; 33 percent are in families with incomes between 100
and 200 percent federal poverty; 19 percent are in families with
incomes between 200 and 300 percent federal poverty; and 17 percent
are in families with incomes above 300 percent federal poverty. Of
note, the largest growing segments of uninsured are among
middle and upper-income families.
By Family Work Status. Fronstin's analysis also found
that of children without coverage, 68 percent were in families with
a full-time, full-year worker; 5 percent of uninsured children were
in families with a part-time, full-year worker; 6 percent were in
families with a full-time, part-year worker; and 4
percent were in families with a part-time, part-year worker.
Only 17 percent of uninsured children were in a family with no
Obstacles to Existing Coverage
Obviously, the current patchwork system of public and
private health insurance does not work for everyone, including
Private-Sector Shortfalls. As noted, an overwhelming
percentage of uninsured children are part of working households
where at least one family member has a job. However, having a job
does not guarantee coverage for workers or dependents. An employer
may not offer coverage, as is common in the small-business sector.
A worker may not be eligible for employer coverage due to
waiting periods or work status. Finally, some workers simply choose
not to participate in employer coverage. Of workers who did not
participate in employer coverage, 64 percent cited cost as the
Obtaining family coverage outside the place of work can also be
difficult. The federal tax code discriminates against those
who do not obtain coverage through their places of work.
Unlike under the employer-based system, where the full value of the
health benefit is excluded from a worker's taxable income,
individuals purchasing coverage on their own do not receive such a
tax break and must use after-tax dollars to buy coverage.
Moreover, states regulate the individual market, which directly
affects those who purchase coverage on their own. Well-intentioned
but costly one-size-fits-all state regulations can make coverage
unaffordable, especially for those with limited incomes. The
Council for Affordable Health Insurance estimates that
mandates, for example, can increase the cost of health insurance by
20 to 50 percent, depending on the mandate and state.
Public-Sector Shortfalls. The public sector also has its
share of shortfalls in reaching uninsured children, as
illustrated by the number of children eligible for but not
enrolled in Medicaid and SCHIP. A recent report published by the
Kaiser Family Foundation estimates that 74 percent of
uninsured children are eligible for Medicaid or SCHIP.
It is common knowledge that access troubles these public
programs. The number of doctors who will see new Medicaid patients
continues to decline. In a recent analysis of Medicaid physicians,
15 percent of pediatric physicians were not accepting any new
Medicaid patients. Moreover, limited access to care results
in more Medicaid and SCHIP enrollees showing up at the
emergency room. Research has found that Medicaid and SCHIP ER
visits account for over 80 percent of hospital admissions.
Cost is another factor. Spending on public programs, such
as Medicaid, is consuming a greater share of the state and federal
budgets. According to the National Governors Association, Medicaid
is now the largest state budget item, surpassing educational,
transportation, and other key state functions. At
the federal level, spending on health care is also increasing at an
unmanageable pace. By 2015, health care spending will consume 20
percent of GDP, and the government's share will be one-half.
Finally, public program expansions also affect the stability of
private coverage. Research has shown a direct correlation between
the expansion of government public programs and the decline in
private health insurance. Most recently, Jonathan Gruber and Kosali
Simon found that "the number of privately insured falls by
about 60 percent as much as the number of publicly insured
rises." Gruber and Simon also concluded that the
"crowd out" phenomenon is far more dramatic when considering
the entire family. Thus, expansions reduce private insurance
options for family members more rapidly.
New Strategies for Addressing the
Shortfalls of the Current System
Policymakers should focus on solutions to improve the function
of the private and public sectors that will help families
obtain coverage and control their health care decisions.
A Private-Sector Strategy.Policymakers need to fix the
major shortfalls in the private, commercial insurance market that
undermine continuity of coverage for children as well as
adults. They should take the following steps:
- Fix the tax treatment of health insurance. One of the
primary roles of the federal government is the federal tax
code. President George W. Bush has recently put forth a bold policy
initiative to remove the distortion of the tax code with regard to
the tax treatment of health insurance. Federal policymakers should
seize this unique opportunity and build on the President's
proposal by adopting refundable, advanceable tax credits. These tax
credits could be designed to assist families in enrolling their
children in dependent coverage through the place of work or the
- Promote an alternative to employer-based coverage. As
noted, not all families fit into the employer-based system.
Although insurance reform is primarily the responsibility of state
policymakers, there are some federal tools that can expand
individual access to affordable coverage. Federal policymakers
should look for ways to encourage individuals to obtain health care
coverage of their own choice and help to facilitate a more robust
non-employer marketplace. Such policies could encourage
innovative approaches that preserve the benefits of pooling
but promote more personal and portable coverage.
A Public-Sector Strategy. Existing public programs are
not working well for enrollees, including children. Policymakers
should take the following steps:
- Add greater personal choice for enrollees. The
traditional public health care design depends on a
one-size-fits-all approach. Balancing financing and design can
be difficult and undoubtedly results in coverage that does not meet
everyone's needs. The Deficit Reduction Act increased
flexibility for states to tailor health care services to enrollees.
Federal policymakers should build on this first step by giving
enrollees more choices from competing networks and insurers
for the delivery of their care. Moreover, individual enrollees
should have the freedom to use their existing public program
allocation and purchase private coverage through the
marketplace, which would help many low-income children to
mainstream into the private market with their families.
- Adopt more patient-centered models. Due to the
bureaucratic structure of the public programs, enrollees have
little say in the types of services or the way services are
delivered, and many are promised a set of benefits but do not
always receive them. The Cash and Counseling initiative in Medicaid
is a successful example of creating a more patient-centered
approach to care in Medicaid. Federal policymakers should use this
model throughout all public programs to give enrollees greater
control in determining the care and services they receive and from
whom they receive them.
A Federal-State Strategy. Federal policymakers should
consider ways to partner with the states to address these health
care issues by adopting the following approach:
- Promote Creative Federalism.There are numerous
opportunities to pursue state-based innovations. In light of the
federal gridlock on health care policy, many states have begun to
take the lead on health care reform. In some respects, this makes
sense. There is great diversity at the state level, and
blanket federal policies can have varying impacts and outcomes
depending on the state. Thus, federal policymakers should
encourage state innovation and consider providing federal tools to
assist states in addressing their own unique needs.
Addressing the lack of health insurance among children is
important, as it is for all uninsured. The focus of policy for
children should be family-oriented, and one of the best ways
to begin to tackle reform is to address the shortfalls in the
overall health care system. Policy initiatives should focus on
changes in the private and public health care system that increase
coverage options and personal control. Such policy solutions will
not only address the needs of children, but also improve the health
of the system for all Americans.
is Senior Health Policy Analyst in the Center for Health Policy
Studies at The Heritage Foundation. This lecture is based on
testimony delivered before the Subcommittee on Health of the House
Committee on Energy and Commerce on February 15, 2007.
Carmen DeNavas-Walt, Bernadette D. Proctor, and
Cheryl Hill Lee, "Income, Poverty, and Health Insurance Coverage in
the United States: 2005," U.S. Department of Commerce, U.S. Census
Bureau, August 2006, p. 21, at
DeNavas-Walt et al., "Income, Poverty,
and Health Insurance Coverage in the United States: 2005," p.
Paul Fronstin, "Sources of Health Insurance
and Characteristics of the Uninsured: Analysis of the March 2006
Current Population Survey," Employee Benefit Research
Institute Issue Brief No. 298, October 2006, p. 23, at www.ebri.org/pdf/briefspdf/EBRI_IB_10a-20061.pdf.
Devon Herrick, "Crisis of the Uninsured: 2006
Update," National Center for Policy Analysis Brief Analysis
No. 568, September 6, 2006, at www.ncpa.org/pub/ba/ba568.
Fronstin, "Sources of Health Insurance and
Characteristics of the Uninsured," p. 24.
John Holahan, Allison Cook, and Lisa Dubay,
"Characteristics of the Uninsured: Who Is Eligible for Public
Coverage and Who Needs Help Affording Coverage?" Kaiser Commission
on Medicaid and the Uninsured, February 2007, p. 4, at www.kff.org/uninsured/upload/7613.pdf.
John S. O'Shea, M.D., "The Crisis in Hospital
Emergency Departments: The Burden of Federal Regulation," Heritage
Foundation Backgrounder, forthcoming.
Jonathan Gruber and Kosali Simon, "Crowd-Out
Ten Years Later: Have Recent Public Insurance Expansions Crowded
Out Private Heath Insurance?" National Bureau of Economic Research
Working Paper No. 12858, January 2007, p. 2, at www.nber.org/papers/w12858.