Introduction

A large body of research indicates that, at least since 1987, both the number and percentage of U.S. residents who do have health insurance has been on the rise (Fronstin, 1998; Lewis, Ellwood, and Czajka, 1998). In 1999, the Census Bureau reported that nearly one out of six persons in the United States lacked health insurance in 1998, and the total size of the uninsured population now stands at more than 44 million (Campbell, 1999). Health care in general and the problem of the uninsured in particular have become the subject of intense national debate and the discussion over what to do about the uninsured has taken center stage in the current presidential race. Both presidential candidates have made major policy speeches on the subject and proposed significant new initiatives to deal to with the growing problem. Governor Bush has proposed tax credits costing an estimated $34.7 billion over five years to low-income families so that they can afford to purchase insurance. Vice President Gore has also proposed tax credits for the uninsured as well as an expansion of the Medicaid system, with an estimated total cost of $146 billion over 10 years (Mitchell, 2000). As these and other proposals suggest, fixing the problem is likely to be very costly, no matter what solutions are envisioned.

The increase in the size of the uninsured population has grown worse throughout the 1990s, despite a strong economy and the lowest unemployment rate in years. Examinations of the problem have generally focused on broad trends in employment practices, the costs of health care and health insurance, changes in eligibility for Medicaid and other government programs, or the socio-demographic characteristics of the uninsured (Fronstin, 1998; Budetti et al., 1999; Lewin and Altman, 2000; Holahan and Brennan, 2000). To date, however, relatively little effort has been made to evaluate the impact of immigration policy on the size of the uninsured population. This report looks at the composition of persons without health insurance. The findings indicate that nearly one in three persons living in households headed by immigrants (primarily immigrants and their children) have no health insurance and that immigrant households now account for one-fourth of the uninsured. Moreover, newly arrived immigrants and their children account for more than half of the growth in the size of the uninsured population in recent years. Immigration policy has become central to understanding the growing health care insurance problem in the United States.

Trends in Health Insurance. Prior to the Second World War, few Americans had health insurance of any kind. Because of wage controls imposed during the war, employers began to offer non-wage compensation, such as health insurance, in an effort to attract and retain workers (Styring and Jonas, 1999; Health Policy Consensus Group, 1999). Early on, the Internal Revenue Service ruled that such compensation was not taxable. This made and continues to make employer-provided health insurance more favored as a means of insurance purchase than for individuals to buy their own insurance with after-tax dollars. As a result, employers became the primary source for health insurance for most Americans in the workforce. From the 1940s on, health insurance primarily took the form of a fee-for-service coverage system under which health care providers were paid by insurance companies for each treatment given. The lack of cost controls in the fee-for-service system, demand for expensive new technologies and treatments, heavy government spending on health care, and other factors created upward pressure on health care cost in the 1980s that reached double-digit annual increases by 1990. Because of rising costs, many employers turned to managed care to insure employees.

While managed care has been partly successful in stemming the rise in health care costs, insurance remains very expensive. This has made it much more difficult for employers, especially small businesses, to provide coverage. As a result, fewer employers offer health insurance today than in the recent past. Moreover, many employers who do offer health insurance now pass along a larger share of the costs to employees. Because of the limited value of their labor in an economy that increasingly demands educated workers, less-skilled workers in particular are the most likely to hold jobs that do not have health insurance as a fringe benefit or, if insurance is offered, the employee must pay a large share of the costs. Those under the age of 65 whose employers do not provide health insurance, must purchase it for themselves and their children if they are not covered by another family member’s insurance or if they are not eligible for government-provided insurance under the Medicaid or SCHIP systems. Because individually purchased policies, in most cases, are bought with after-tax dollars and are not granted the same full tax deductibility and groups rates available to employers, individual plans can be prohibitively expensive. This, of course, is especially true for low-wage workers and their families, who are the least likely to be in a position to afford private insurance and who may choose not to accept insurance offered by their employers if a large percentage of the costs is borne by the worker (Campbell, 1999; Styring and Jonas, 1999; Health Policy Consensus Group, 1999).

Over the last decade the Census Bureau has tracked the size of the uninsured population using the Current Population Survey. In 1987 an estimated 31 million U.S. residents lacked insurance. Since 1987, the size of the uninsured population has grown by more than one million people per year on average. Moreover, the proportion of the population lacking health insurance has increased from 12.9 percent of the population in 1987 to 16.3 in 1998. This increase continued even after the recession of the early 1990s. Between 1992 and 1998, the size of the uninsured population grew by 5.6 million and the proportion of the population without insurance increased by 1.3 percentage points. This increase in the uninsured population has puzzled some health care experts because the generally favorable economic condition for most of the 1990s reduced unemployment and should have created pressure on employers to offer health insurance as a means of attracting and retaining workers in a tight labor market.

Recent Trends in Immigration. Partly as a result of changes made in immigration law in the mid-1960s, as well as subsequent changes, the level of immigration has been rising steadily for the last three decades. At present, between 700,000 and 900,000 legal immigrants and an estimated 420,000 illegal immigrants settle permanently in the country each year (Statistical Yearbook of the Immigration and Naturalization Service, 1997). As a result, the immigrant population has grown rapidly, almost tripling in number from 9.6 million in 1970 to 26.5 million by the beginning of 1999, not including the U.S.-born children of recent immigrants.

As the level of immigration has increased over the last three decades, the education level of each new wave of immigrant has declined in comparison to natives (Borjas 1999; Edmonston and Smith, 1997). Because education has become so central to economic well-being in the modern American economy, this decline has prompted many to worry that immigrants may be falling behind natives in a variety of social measures. One of the most worrisome consequences of declining immigrant skills is that a large percentage may end up in jobs that pay poverty-level wages and provide few non-monetary fringe benefits—including health insurance. Under such circumstances a large share of immigrants and their dependents would not only lack employment-based health coverage, they also would find it difficult to purchase it privately given their limited financial resources.

Purpose of Research. The overriding goal of this paper is to help bridge the gap between health insurance and immigration policy circles. As this paper will make clear, the two issues are much more intimately linked than is commonly supposed. To this end we first examine the direct effect immigration has on the size and growth of the uninsured population at the national level, and where possible at the state and local level, using the latest data available. Second, in order to better understand why immigrants and their children lack insurance, this paper provides detailed information on the socio-demographic characteristics of the uninsured based on whether they reside in a native- or immigrant-headed household. It is our hope that this will help to better inform policymakers, researchers, and others interested in the ongoing debate over health care and immigration.

What Does it Mean to be Uninsured? There are, of course, many different kinds of health insurance. Moreover, tests and procedures covered, drug benefits, ability to choose one’s doctor, deductibles, and total benefit limits vary widely among plans. This paper relies on the definition of insurance used in the Census Bureau publication, Health Insurance Coverage 1998: Current Population Report P60-208. We also use the same data source used in that report, the March 1999 Current Population Survey (CPS) collected by the U.S. Census Bureau. While other data sources are also used, much of the previous research, as well as figures published by the federal government on the uninsured, relies on this definition and data source.¹

A person is considered to have health insurance if he or she responds yes to any of a series of questions that ask whether the person was covered by insurance provided by an employer (including insurance provided to military personnel, veterans, and their families), or whether he or she was covered by a family member’s policy, Medicare, Medicaid,² or insurance purchased by him- or herself during the year prior to the survey. These questions are designed, according to the Census Bureau, to measure whether an individual was without health insurance coverage during the entire calendar year. Based on the March 1999 CPS, persons who responded that they did not have any type of health insurance in the prior year are considered to have been uninsured for all of 1998.

Why Study Immigration’s Impact on the Size of the Uninsured Population?

In any discussion of immigration’s impact on the size of the uninsured population, it is important to keep in mind that immigration is different from other factors that may have contributed to the problem because immigration is a federal policy. The federal government controls both the number of legal immigrants allowed into the country each year and the selection criteria used for admission. Moreover, the federal government determines the level of resources and the tactics devoted to controlling illegal immigration. Thus, the level of immigration and the composition of the immigrant population stems directly from federal policy — a policy that can be altered at any time. Even if it were desirable, the government cannot legislate a pause in the advance of medical technology or easily reduce the strong demand for health care in an aging and increasingly secular society, two factors which have driven up costs. But it can change immigration policy.

One may still reasonably ask if it matters what proportion of persons in immigrant households, or even in native households for that matter, do not have health insurance. What effect, if any, does a lower national or local rate of health insurance coverage have on the country as a whole or in a particular part of the country, especially for the majority of the population who do have health insurance? In addition to altruism, there are a number of very practical reasons to be concerned about the level of insurance coverage in America and the role that immigration policy may be playing in this growing problem.

Impact on The Uninsured Already Here. Probably the most obvious reason for concern is the impact on the uninsured already here, both native and immigrant. The cost of efforts to provide insurance to those without it or to provide basic care if more comprehensive insurance is not provided, depends in large part on the number of people in need of such assistance. If immigration increases the number of people who require government financed or subsidized health care, then the total cost of such efforts must grow accordingly. Increasing the total cost of efforts to provide insurance and health care to the uninsured can only reduce political support for such efforts. Alternately, if federal, state, and local government outlays on programs for the uninsured remain relatively constant, then the level of services provided to each recipient must be reduced. This, too, is clearly not in the interest of America’s uninsured. A large increase in the size of the uninsured may also strain the resources of non-governmental institutions and charities that provide health care to the uninsured, thereby reducing what they can provide to each individual. A recent report from the Institute of Medicine concluded that the financial viability of institutions that provide health care to the uninsured is more at risk today than in the past; partly because of the rising number of uninsured individuals (Lewin and Altman, 2000). Therefore, if one is concerned about the uninsured already here, significantly increasing the size of the uninsured population is clearly counterproductive. This is likely to be the case no matter what solution is favored to deal with the problem.

Effect on Taxpayers. Probably the most self-interested reason to be concerned about a rise in the uninsured population resulting from immigration is its effect on public coffers. The uninsured still become injured or ill and need medical attention. While their options may be more limited, not having health insurance does not mean that uninsured patients receive no medical care. Rather, they often postpone medical attention until their condition has worsened (Budetti et al., 1999). The uninsured seek treatment from "safety net providers," such as public hospitals, community health clinics, and local health departments (Lewin and Altman, 2000; Gage and Regenstein, 1999). Thus, individuals without insurance do receive care, but often it is the most expensive and least efficient means of obtaining treatment.

In many cases, the cost of providing medical services to the uninsured is paid for by federal, state, and local governments. For many counties and cities, the costs of operating a public hospital and/or clinics, which provide much of their services to the uninsured, account for a sizable portion of their total budget. In addition, health care providers are often reimbursed by the federal government for costs incurred in providing care to the uninsured. The amount of public money that goes to provide health care to the uninsured is substantial. Because of the diversity of funding sources, the complex and decentralized way in which they are administrated, and the limited availability of data, no exact estimate exists for the total public cost of providing care to the uninsured. It is likely, however, between $15 and $30 billion per year is spend on the uninsured by government at all levels.³ These costs do not include the more than $150 billion spend annually by the federal government and states to provide Medicaid coverage to low-income residents. Whatever the cost of providing services to those without insurance, there can be no doubt that an increase in the size of the uninsured population resulting from immigration has significant negative implications for taxpayers.

Higher Premiums and Costs for Those with Insurance. While governments at all levels do compensate health care providers for some of the care given to the uninsured, a significant portion of the care is not compensated and must be simply written off by providers as charity because collecting money from the uninsured can be very difficult given their limited financial resources in most cases. (Lewin and Altman, 2000). Hospitals and other health care providers simply cannot absorb all of the costs of providing such charity care and so they pass at least some of the costs along to paying customers in the form of higher prices for treatment, which in turn creates higher insurance premiums for those with insurance. There is evidence, however, that in the new managed-care environment, cost-shifting has become difficult for health care providers, though it is clear that some cost-shifting continues to occur from those with insurance to those without (Morrisey 1996).

For workers whose employers pay for all or almost all of their health care premiums, these costs remain largely hidden (Castro, 1994). But in the long run, the rising costs associated with providing care to the uninsured must make employers increasingly reluctant to offer it or to require employees to pay an ever larger share of the premiums. The higher costs caused by the uninsured may also force some employers with limited financial resources, who wish to continue to provide coverage, to offer smaller wage increases or curtail other fringe benefits so that they can continue to afford higher insurance payments. The situation is even worse for Americans who must purchase their own insurance without the aid of an employer, because they will be forced to bear the costs of higher premiums directly, without an employer to share part of the increase.

In this way a growing uninsured population creates its own momentum by making it more likely that employers will shift the costs of insurance to their employees and by pushing the costs of insurance out of reach for Americans with moderate incomes who must purchase insurance on their own. There can be little doubt that increases in the cost of health insurance can only make it more difficult for employers and low-income Americans to afford health insurance. Thus, while it may appear at first glance that the growth in the uninsured population is of little concern to those who have insurance, this is clearly not the case.
In modern America, at least some services will always be provided to those without insurance, even if the costs of doing so are high. Thus, the size of the uninsured population should be of concern to all members of society because all members will have to pay for these costs through higher taxes, higher premiums, or some combination of the two.

Increasing the Risk for the Spread of Communicable Diseases.In addition to monetary concerns over the costs of the uninsured, there are also very real public health issues associated with a large uninsured population. Because they often do not receive routine preventive care and often seek out medical attention only when their condition is more serious, the uninsured may unintentionally extend the period of time the public is exposed to communicable deceases. This problem is likely to be of particular concern among immigrants because most come from developing countries where communicable diseases are more common. For example, tuberculosis in the United States is disproportionately concentrated in the immigrant population. In 1998, about 42 percent of the 18,361 known cases in the United States were among immigrants (Sachs, 2000). The resurgence of TB, especially strains of the disease that are drug resistant, constitutes a growing health care threat. If many immigrants are uninsured, this may represent a significant impediment to dealing with this problem. At the very least, it is clear that a lack of health insurance among immigrants has important implications for the health of the entire society.

Implications for Immigrant and Immigration Policy.In addition to the impact on native-born Americans, looking at insurance among immigrants and their children is also important because it is one way of evaluating the consequences of current immigration policy. Perhaps most important, it also gives us a good idea of how immigrants admitted in the future are likely to do in the United States if immigration policy remains unchanged. Having health insurance and access to health care is one measure of incorporation and integration in the economic and social mainstream. Low rates of coverage imply that, for whatever reason, a significant proportion of immigrants have not successfully adapted to life in the new country, at least with regard to health insurance. This is particularly important because, without a change in immigration policy, 10 million new immigrants will likely settle permanently in the United States in just the next decade. If current trends continue, immigration may add an additional three to four million people to the ranks of the uninsured over just the next 10 years. Of course, the extent to which persons in immigrant households have health insurance today does not tell us exactly how those admitted in the future will fare. Looking at past immigrants, however, is probably the best means we have of predicting how tomorrow’s immigrants will do if the same selection criteria for admission continue to be used.

In addition to immigration policy, which is concerned with who may come and how many, there is immigrant policy, which deals with how we treat the foreign-born living in United States. Looking at health insurance coverage among immigrants is important because if a large percentage of immigrants and their children already here lack insurance, we need to deal with this problem in a constructive manner, whatever immigration policy is adopted in the future. Such things as tax incentives to employers so that they will provide coverage for employees, increasing immigrant use of government-provided health insurance for which they are eligible but do not use, and efforts to improve the labor market skills of immigrants so that they find jobs that offer insurance may all need to be designed with the intent of addressing the particular needs of immigrants. At the very least, if immigrants and their children now comprise a large share of the uninsured, our efforts to deal with this problem, as well as research on health insurance coverage, must take this new reality into account.