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June 24, 2009

Insurance is Healthy Economics

Catherine New
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As the debate over the revamped health care system intensifies this week, one of the central arguments on both sides of the aisle is about cost. New research from Professor Frank Lichtenberg suggests that increasing health insurance coverage could be key in lowering rates of health spending. That underscores a central premise of Obama’s healthcare plan to expand coverage while reducing costs.

“It is almost a presumption in the debate that uninsured Americans are not getting medical care and therefore their health outcomes are compromised,” says Lichtenberg.

“But there is a lot of evidence that people who lack health insurance still get medical care, albeit in a costly and inefficient matter. They go to the emergency room instead of seeing a doctor on a regular basis,” he says. “Therefore, it is more costly for people to be uninsured.”

Data from Lichtenberg’s research, published by the National Bureau of Economic Research, focused on the reasons Americans are living longer. Using state-level data, he found that higher quality of medical care, newer drugs and better diagnostics are the principal factors for increased life expectancy. However, he also found a correlation between increased health insurance coverage and a slower growth in per capita health spending.

“States where health coverage is expanding faster actually have lower rates of growth for health expenditure,” he says.

“I think that is part of the reform pitch Obama is making, that we can’t afford not to have a much higher rate of coverage and my results are consistent with that,” says Lichtenberg. “It’s not that people are going to live longer, but they won’t live any less long, and it will actually save the system money.”

Photo credit: Tim Hoffman