By Leah Zallman and Danny McCormick
Health Affairs blog, May 29, 2013
Politicians on Capitol Hill are currently engaged in policy disputes about two thorny issues that many see as closely linked: immigration reform and controlling runaway health care costs. The pervasive wisdom is that immigrants, many of whom are low-income, unauthorized and uninsured, rely on uncompensated care and Medicaid and drain medical resources that are predominantly contributed by native-born Americans though taxes. Curbing immigration, the argument goes, will reduce reliance on government-funded health services and help our nation reduce its healthcare spending.
This argument makes intuitive sense, but it fails to account for two key factors: immigrants contribute to health care financing — sometimes heavily — and they spend less — a lot less.
Our study, published today as a Health Affairs Web First article, examines these variables as they relate to the Medicare program and finds evidence that contradicts the pervasive wisdom. We calculated the total dollars contributed to and received from the Medicare Hospital Insurance Trust Fund (“Trust Fund”), which pays primarily for inpatient care, for both immigrants and U.S. born citizens. We found that between 2002 and 2009, immigrants contributed $115.2 billion in excess of what they utilized. During this same time frame, US born persons withdrew $28.1 billion more than they contributed. Although we could not measure the contributions to the Supplementary Medical Insurance Trust Fund (which primarily pays for outpatient care), we examined average expenditures by immigrants and US-born persons to this fund and found that immigrants spent less than US born persons: $175 per year less on average.
Immigrants generate a surplus for the Medicare Trust Fund primarily because many of them are working-age adults likely to participate in the labor force, a combination that generates large payroll tax payments. Immigrants with legal status contribute to the Medicare Trust Fund through payroll taxes under valid Social Security numbers. In addition, undocumented immigrants often contribute payroll taxes under Social Security numbers tied to invented names or belonging to someone else, because employers must report, but needn’t verify, a Social Security number for all employees. In spite of these contributions, many immigrants never receive services under Medicare, either because they are ineligible for Medicare since they did not work the required 40 quarters, or because they return to their country of origin before reaching the age of Medicare eligibility, 65.
Policy Implications
Our findings have implications for immigration reform policy. First, it is clear that policies that reduce immigration would almost certainly weaken Medicare’s financial health. The Medicare Trustees estimate that the Trust Fund will be exhausted within a decade. This has already led to drastic cost-cutting measures. Further weakening of Medicare’s finances through restriction of immigration could result in new taxes or government borrowing, restrictions on covered services, or increased cost sharing for patients with Medicare. The consequences of these latter two changes would almost certainly result in worse access to timely and effective care for millions of Medicare recipients.
Second, providing a path to citizenship for the estimated 11 million undocumented immigrants would affect Medicare’s finances in several ways. In the long term, it would likely increase the number of Medicare-eligible immigrants, and thus outlays on their behalf. On the other hand, it would probably increase immigrants’ payroll tax payments by reducing “off the books” employment and reducing barriers to higher paying jobs. However, these impacts are likely dwarfed by the age structure of the immigrant population. That is, encouraging a steady flow of young immigrants would help offset the health care financing challenges resulting from the aging of the US population.
The assumption that immigrants are a net drain on the health care economy has not only been used to argue for stricter limits on immigration, but also to deny access to medical care through government sponsored programs. For example, low-income immigrants who have legally been in the country for less than five years are banned from receiving Medicaid, even as they pay taxes. Many of these low-income immigrants find private insurance unaffordable, remain uninsured, and consequently forgo needed care. The fact that immigrants substantially subsidize the Medicare Trust Fund, which is responsible for 22 percent of all US health care spending, should cause us to rethink the prevailing descriptions of immigrants as net takers of health care resources and should, on grounds of fairness, prompt us to be less quick to deny access to care for immigrants through other public programs.
Leah Zallman, MD, MPH is a Junior Scientist at the Institute for Community Health at the Cambridge Health Alliance and an Instructor of Medicine at the Harvard Medical School.
Danny McCormick, MD, MPH is an Assistant Professor of Medicine at Harvard Medical School, Director of the Division of Social and Community Medicine in the Department of Medicine at the Cambridge Health Alliance, co-director of the Harvard Medical School Fellowship in General Medicine and Primary Care and he leads the Department of Medicine’s general medicine research team.
http://healthaffairs.org/blog/2013/05/29/immigration-reform-and-the-financial-health-of-medicare/?utm_source=rss&utm_medium=rss&utm_campaign=immigration-reform-and-the-financial-health-of-medicare