Health Data I Would Like to See
April 23, 2012 Health Care

In labor economics we measure something called the poverty gap. Why do we do this? Because looking at the poverty rate as a measure of poverty tells an incomplete picture of the question we are worried about. For example if I show you two countries, call them Cowistan and Bullistan and in each of then the poverty rate is 20%, would you confidently assume that the poverty problem is the same in each country?

No. And the reason we’d say no is that a poverty rate merely tells is the share of the identified population that falls below some income cutoff. So, if the poverty line in each country is $20,000 per individual, then all we know is that 1 in 5 people in each country has incomes below it. But what if every single poor person in Cowistan earns $19,000 while every single poor person in Bullistan earns onlt $4,000. And suppose that there are 500 people in each country. Then, in Cowistan, the average poverty gap is $1,000 per person for a total poverty gap if $100,000. But in Bullistan, where the poverty rate is the same, the average poverty gap is $16,000 and the total poverty gap is $160,000. In other words, the poverty gap estimates how serious the poverty problem is in terms of how deeply those in poverty really are.

So what data would I like to see?

The chart above shows how the share of the American population without health insurance fell precipitously from 1940 to 1990, with a slow increase since then. About 16% of Americans currently do not have health insurance at some point during the year. But this measure is akin to the poverty rate. While it gives us a rough understanding of who has to go without health insurance, the measure misses the underlying severity or lack-thereof of the problem. I’d love to see some measure of the Health Insurance Gap that captures how far the typical person is from being “able” to buy health insurance, or generally a measure of overall health access, independent of the amount of health insurance one may have. Of course this is a far more complicated measure to construct than a simply poverty gap measure. But that’s why we economists have PhDs, to go stuff like this. If any of you have seen data that tries to get at such a measure, I’d sure appreciate seeing it.

"2" Comments
  1. WC, what is the health insurance equivalent of NAIRU?

    Yes, in a command economy, such questions are not meaningful, but your curve is asymptotic, suggesting an intuitive result, where young people behave rationally, especially where the insurance industry is forced by the government to price their coverage for young people to pay for the people thirty on up for their visits to the chiropractor.

    We are doomed, though.

  2. With all the variables during WWII, would that curve have been different much? Maybe.

    Health insurance used to be a cheap benefit for those paying the bill, and often disregarded indifferently. Whatever the rules, there still has to be a limit where people choose not to be insured. I bet the actuaries at Aetna have a formula for this, and Wintercow probably knows this already, including a formula for rototiller insurance.

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