How Health Insurance Makes You Happy

Now that is finally processing applications, the immense frustration felt by the hundreds of thousands of people trying to sign up has begun to wane. Perhaps it will even be replaced by a warm glow. In fact, that might be the biggest impact of the Affordable Care Act. International experience suggests that extending insurance is likely to play only a limited role in improving the overall health of Americans. But it could have a significant impact on their pocketbooks and contentment.

There’s no question that being uninsured is hazardous. According to a 2009 study by the Cambridge Health Alliance at Harvard University, 44,789 deaths among Americans aged 18 to 64 in 2005 were associated with lack of health insurance. Meanwhile, patients admitted to the hospital with an urgent need for care just before their 65th birthday die at a higher rate than those admitted in the days after they turn 65. The difference: After that birthday, Americans are eligible for Medicare. On the other hand, the results of the recent experience (PDF) in Oregon, where 90,000 poor uninsured people entered a lottery to get Medicaid insurance, suggests there may be limits to the impact of having that insurance on people’s health. After one year, an analysis for the National Bureau of Economic Research could find no significant impact on objective health outcomes.

One explanation is that the expensive hospital treatments that Americans most need insurance for often aren’t the major factor in improving overall health. A huge majority of the variation in health outcomes across countries can be explained by diet and obesity, smoking rates, and access to clean water and sanitation—along with very cheap interventions like vaccination, using aspirin to prevent heart attacks, and parental knowledge of simple interventions, such as what to do when your kid has diarrhea. Health expenditures, the proportion of doctors in the population, the number of hospital beds in a country—these statistics just aren’t associated with major differences in life expectancy or child mortality across countries once other factors have been taken into account. For example, while the U.S. spends $8,608 per person on health care, it has a lower average life expectancy than Chile, where health expenditure is $1,292 per year.

But even if expensive hospital treatments aren’t a major factor in improving overall national health, ill people do still sometimes need them. And if they aren’t insured, they’ll go into debt to get them. Expensive hospital visits can be a significant cause of slipping into poverty worldwide, especially in countries where insurance coverage is limited.  A (PDF) of 59 countries studied catastrophic health expenditure—which they defined as spending more than 40 percent of household income on health after subsistence needs were met. In the U.S., about 1 out of every 200 households faces such expenditures at any given time. In countries such as the U.K. and Germany, which have strong national health systems, the proportion is less than one-tenth that high. At the other end of the distribution, Brazil and Vietnam both saw more than 1 in 10 households facing catastrophic expenditure.

The study suggested, unsurprisingly, that in places where out-of-pocket expenditures constitute a large portion of total health cost—compared to insurance and government financing—more households are burdened by high medical bills. In Brazil and Vietnam, out-of-pocket expenditures account for the considerable majority of total health spending, compared to about one-fifth of spending in the U.S. and less than 10 percent in the U.K. or Germany.

So perhaps it isn’t a surprise that expanding access to health insurance leads to fewer “catastrophic” expenditures—and greater happiness. In Thailand in the year 2000, 31 percent of households in which a member had required inpatient care faced health bills of more than 10 percent of the household’s total yearly consumption. The passage of a universal health insurance policy in 2001 reduced that proportion by half, to 15 percent.  And Patrick Asuming at Columbia University, who studied (PDF) a health insurance scheme in Ghana that covered hospital and clinic visits alongside approved medications, found that offering a random group of recipients subsidies for insurance led to more people getting insurance, better self-reported health (including fewer days feeling ill), and greater levels of contentment. Having such insurance increased the chance that recipients reported themselves happy or very happy by 22 percent.

These global results are echoed in Oregon’s Medicaid experiment: Lottery winners may not have been objectively more healthy, but they were less likely to have medical debts and reported better physical and mental health. And that suggests that though Obamacare may only have a marginal impact on closing the health gap between the U.S. and the rest of the developed world, it may make Americans a little less financially stressed and a little happier.

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