Access to free care for the uninsured and its effect on private health insurance coverage

Much speculation exists about the economic reasons why some people have no health insurance. An analysis of the magnitude, type, and source of free care provided to the uninsured using the 1996 Medical Expenditure Panel Survey reveals that uninsured individuals on average pay out-of-pocket for only one-fourth of the total medical care they receive. Despite its good intentions, access to this “safety net” of free care for the uninsured may make paying for private health insurance less attractive for certain households and thus increase their likelihood of being uninsured. This thesis tests this hypothesized relationship empirically, concentrating on the variation in the availability of free care for the uninsured across the different markets in the 1996–1997 Community Tracking Study Household Survey. An “access to care” measure of the uninsured's cost-related difficulties in obtaining care is used to aggregate across the varying sources of their free care. Models predicting whether or not individual workers obtain employment-based insurance are examined, and strong evidence is found that low-income workers are less likely to obtain insurance in markets with greater access to free care. Furthermore, with the recent phenomenon of uninsured workers declining coverage offered by their employers, an econometric model of a bivariate probit with sample selection is specified to explore the effect of free care on both employers' offerings and employees' take-up decisions. The findings from this more sophisticated model indicate that the availability of free care reduces the likelihood of offerings to low-income workers but not the take-up rate of offered coverage.