Free Care, Health Insurance Reforms, and Health-Inclusive Poverty in New York

Until recently, researchers were unable to develop a valid poverty measure that includes a need for health care or insurance and that values health insurance benefits as resources—a health inclusive poverty measure (HIPM) (National Academy of Sciences 1995). Korenman and Remler (2016) showed that with guaranteed issue and community rating regulations, a HIPM is possible. Remler, Korenman and Hyson (2017) estimated the impacts of private and public health insurance, and other anti-poverty programs on HIPM poverty under the ACA. They found, for example, that Medicaid reduced child (health-inclusive) poverty more than all other means-tested programs combined.

Such estimates neglect the care that the uninsured receive without payment or for limited payment. Even under the ACA, uninsured New Yorkers receive an estimated $3 billion per year in uncompensated care (Buettgens et al. 2017). Free care provides a form of implicit insurance that helps meet health care needs.

In this paper, we examine how including the implicit insurance value of free care changes health inclusive poverty rates and gaps, and the estimated impacts of health policies in New York State. We estimate the implicit insurance value of free care using two methods. Our main approach uses the dollar in-flows that fund uncompensated care for the uninsured. We calculate an implicit insurance value by dividing these dollar inflows by the number of uninsured. Our calculations indicate a state-wide explicit insurance value of 40% of the basic silver plan. Our second approach uses the Oregon Medicaid Experiment’s estimate for the free care provided to controls who applied for but who were not extended Medicaid benefits (Finkelstein et al. 2016, 2017), which yields an implicit value of 60% of needs.

Accounting for the free care provided to uninsured New Yorkers reduces the health inclusive poverty rate from 18.8% to 18.0%. The effect is modest because only about 8.6% of the population is uninsured. However, Free Care reduces the poverty of the uninsured by nearly 6% points.

Next, we estimate the poverty impacts of the following proposed policy reforms: (1) An Affordable Care Act Expansion that eliminates all non-income-based restrictions to Medicaid and Marketplace subsidies. (2) New York Health Act (NYHA): universal insurance to all with no out-of-pocket expenses. (3) Medicaid Rollback: Medicaid Expansion rolled back to only cover families with incomes below the FPL. We consider two free care policies under the Rolllback: (a) Rollback1 maintains current levels of per capita spending on free care for the uninsured. (b) Rollback2 maintains total spending on the uninsured, thereby reducing per capita spending on care for the uninsured whose numbers double.

Incorporating the value of free care reduces the impact estimates of the expansion policies from 5.1 to 4.3 percentage points for NYHA, and from 4.1 to 3.3 points for the ACA expansion. Medicaid Rollback causes the uninsured population to double, increasing poverty by 1.9 percentage points, provided free care funding doubles (Rollback 1). If funding is unchanged, the poverty rate increases by 3 percentage points (Rollback 2).