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Date: June 17, 2003
Contacts: Christine Stencel, Media Relations Officer
Heather McDonald, Media Relations Assistant
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U.S. Loses up to $130 Billion Annually as Result of Poor Health, Early Death Due to Lack of Insurance

WASHINGTON -- The value of what the United States loses because of the poorer health and earlier death experienced by the 41 million Americans who lack health insurance is estimated to be $65 billion to $130 billion every year, according to a first-ever economic analysis of the costs of uninsurance for society overall. This lost value is a hidden cost that could be recouped by extending health coverage to all, says a new report from the Institute of Medicine of the National Academies.

"By identifying and, where possible, quantifying the economic inefficiencies and losses that stem from having 41 million Americans without health insurance, this report looks at our national health policy within a cost-benefit framework," said Mary Sue Coleman, co-chair of the committee that wrote the report and president, University of Michigan, Ann Arbor. "Our findings are based on the same approach that federal agencies use to determine whether the benefits of reducing a particular risk or harm justify the costs to society. As policy-makers weigh the costs and benefits of expanding coverage, they should factor in the estimated $65 billion to $130 billion value of improved health that could be realized each year through continuous coverage."

The societal costs of maintaining an uninsured population usually are thought of only in terms of the public costs of free or reduced-price care used by uninsured individuals. To capture the hidden costs of uninsurance's effects, the committee employed the concept of "health capital" to estimate the value that would be gained if health insurance were extended to all. Health capital represents, in monetary terms, the value of an individual's health over future years of life, and includes the subjective value of being alive and healthy, earning potential, and children's physical and mental development. The differences in health status and life spans between the uninsured and otherwise similar people with coverage represents the value of health capital lost due to being uninsured.

The estimated value of improved health that an uninsured individual would gain with each year of coverage ranges between $1,645 and $3,280 annually. The aggregate value that could be realized for the entire population – $65 billion to $130 billion – likely exceeds the estimated costs – $34 billion to $69 billion – to provide the uninsured with the additional health services that they would use if they gained coverage and used the same amount and kind of services as the insured. It is important to note that the committee did not attempt to project the full costs of a plan to cover everyone.

The report also examines evidence that there are other costs related to lack of health coverage beyond the $65 billion to $130 billion estimate that cannot be calculated with current data. These costs include reduced availability of health care services for both the uninsured and the insured in communities with high rates of uninsurance, and higher costs for public programs. "Providing health care coverage to those who lack it is likely to be a cost-effective strategy that pays not only in lives saved and better health, but also in economic dividends," said committee co-chair Arthur Kellermann, professor and chair of emergency medicine at Emory University School of Medicine, Atlanta.

The value of providing coverage to those who are now uninsured accrues over the lifespan of the individuals and to society as a whole. One challenge is that employers may not individually derive enough value to make it worth their while to offer insurance to their workers. At the same time, studies have demonstrated that impaired health – which is more common among those without health insurance – is related to absenteeism and reduced productivity. Almost one-fifth of the working-age population lacks health coverage.

With the publication of this report, the fifth in a series on the consequences of uninsurance, the Institute of Medicine offers the most complete evidence-based picture of the coverage issue and its effects on individuals, families, communities, and the nation as a whole. The series is designed to lay the groundwork for a more informed public debate about health care coverage. The committee's sixth and final report will identify promising strategies for addressing the problem of uninsurance.

The series is sponsored by the Robert Wood Johnson Foundation. The Institute of Medicine is a private, nonprofit institution that provides health policy advice under a congressional charter granted to the National Academy of Sciences. A committee roster follows.

Read the full text of Hidden Costs, Value Lost: Uninsurance in America for free on the Web, as well as 2,800 other publications from the National Academies Press; tel. (202) 334-3313 or 1-800-624-6242 or on the Internet at Reporters may obtain a pre-publication copy from the Office of News and Public Information (contacts listed above).

Board on Health Care Services

Committee on the Consequences of Uninsurance

Mary Sue Coleman, Ph.D.
University of Michigan
Ann Arbor

Arthur L. Kellermann, M.D., M.P.H. (co-chair)
Professor and Chairman
Department of Emergency Medicine, and
Center for Injury Control
Emory University

Ronald M. Andersen, Ph.D.
Wasserman Professor in Health Services;
Chair, Department of Health Services; and
Professor of Sociology
School of Public Health
University of California
Los Angeles

John Z. Ayanian, M.D., M.P.P.
Associate Professor of Medicine and Health Care Policy
Harvard Medical School
Brigham and Women's Hospital

Robert J. Blendon, M.B.A., Sc.D.*
Health Policy and Political Analysis
Department of Health Policy and Management
Harvard School of Public Health and Kennedy School of Government

Sheila P. Davis, B.S.N., M.S.N., Ph.D.
Associate Professor
School of Nursing
University of Mississippi Medical Center

George C. Eads, Ph.D.
Vice President
Charles River Associates
Washington, D.C.

Sandra R. Hernández, M.D.
Chief Executive Officer
San Francisco Foundation
San Francisco

Willard G. Manning, Ph.D.
Department of Health Studies
University of Chicago

James J. Mongan, M.D.
President and Chief Executive Officer
Partners HealthCare Inc.

Christopher Queram, M.A.
Chief Executive Officer
Employer Health Care Alliance Cooperative
Madison, Wis.

Shoshanna Sofaer, Dr.P.H
Robert P. Luciano Professor of Health Care Policy
School of Public Affairs
Baruch College
New York City

Stephen J. Trejo, Ph.D.
Associate Professor of Economics
Department of Economics
University of Texas

Reed V. Tuckson, M.D.
Senior Vice President
Consumer Health and Medical Care
UnitedHealth Group
Minnetonka, Minn.

Edward H. Wagner, M.D., M.P.H., F.A.C.P.
MacColl Institute for Healthcare Innovation
Center for Health Studies
Group Health Cooperative

Lawrence Wallack, Dr.P.H.
School of Community Health
College of Urban and Public Affairs
Portland State University
Portland, Ore.


Wilhelmine Miller, M.S., Ph.D.
Study Co-Director

Dianne Miller Wolman, M.G.A.
Study Co-Director

*Committee member from September 2000 to December 2002