For children, as for the population in general, health insurance is a

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1 DataWatch Children And Health Insurance: An Overview Of Recent Trends by Paul W. Newacheck, Dana C. Hughes, and Miriam Cisternas Abstract: This DataWatch examines trends in health insurance coverage of children using recent data from the Current Population Survey. The results indicate that the number and proportion of children who were uninsured changed little between 1988 and However, substantial changes occurred in the composition of the insured population: The proportion of children covered by employer-based private insurance declined from 60.7 percent in 1988 to 56.2 percent in 1992, while the proportion of children covered by Medicaid increased from 15.6 percent to 21.6 percent over the same period. These results indicate that a fundamental shift is occurring in responsibility for insuring the nation s children-from the private sector to the public sector. For children, as for the population in general, health insurance is a critical link to health care. Uninsured children use fewer physician services than insured children use and are significantly less likely than publicly insured poor children are to identify a usual source of routine care. 1 Although most children are covered by some form of private insurance for all or part of their health care needs, a sizable number of children in the United States are uninsured. Of the estimated 38.5 million Americans under age sixty-five without health insurance in 1992, one-fourth were age eighteen and younger. 2 The percentage of children without any form of health insurance has grown significantly in recent years, increasing by 40 percent between 1977 and This trend is of serious concern, given the relationship between health insurance and access to care. The purpose of this DataWatch is to examine children s health insurance status using the most current data available. We base this profile on data from the Current Population Survey (CPS). We examine differences in health insurance coverage patterns in 1992 according to family characteristics and parents attachment to the work force. We also assess recent trends in insurance coverage to determine whether the percentage of children without insurance has continued to rise in the 1990s. Data sources. The CPS has been conducted monthly for more than fifty years and is the official source for government statistics on employment and Paul Newacheck is a professor of Health policy at the University of California, San Francisco (UCSF) Dana Hughes is a senior health policy analyst at the UCSF institute for Health Policy Studies. Miriam Cisternas is a statistician with the UCSF Arthritis Research Group.

2 D ATAWATCH 245 unemployment. 4 It is also a frequently cited source on health insurance coverage. 5 For this purpose, questions are added to the annual March survey to elicit health insurance coverage status during the previous calendar year. For the March survey, the U.S. Bureau of the Census conducts interviews in approximately 57,000 households including almost 150,000 persons. Households are selected to be representative of the nation s noninstitutionalized population. The questions on health insurance coverage were identical in the March surveys of used in this analysis. However, data for these five years are not comparable with data for earlier years because of changes implemented with the March 1989 survey. 6 We considered children to have private insurance if the respondent indicated that a child in the household was covered under a private plan (paid for by someone either inside or outside the household). We classified sample children as being covered by employer-based private health insurance if an adult in the household had employer-based private health insurance that covered the child. Public insurance was defined to include Medicaid, Medicare, or military coverage. A child was considered to be uninsured if no private or public insurance coverage was reported for that child. 7 Findings Coverage and family characteristics. In 1992, 87.6 percent of children under age eighteen had some form of private or public health insurance coverage (Exhibit 1). Three out of four insured children had private health insurance, while one out of four had some form of public coverage (Medicaid, Medicare, or the Civilian Health and Medical Program of the Uniformed Services [CHAMPUS]). Patterns of insurance coverage varied considerably for children of different family characteristics. Most children with private insurance are insured as dependents under a parent s employer-based policy. In 1992, 81 percent of privately insured children, or thirty-eight million children nationwide, were covered through such insurance plans. Children most likely to have employer-based coverage were adolescents, non-hispanic whites, children in two-parent families, and children in higher-income households. Not surprisingly, differentials in rates of employer-based coverage were largest for those characteristics most closely associated with employment status: race and ethnicity, family structure, and family income. 8 Specifically, non-hispanic white children were almost twice as likely as black or Hispanic children to have employer-based insurance, while children in twoparent families were almost three times as likely as children in single-parent households to be covered by employer-based plans. As might be expected,

3 246 HEALTH AFFAIRS Spring 1995 Exhibit 1 Health Insurance Status Of Children, By Demographic And Socioeconomic Characteristics Characteristic Frequency Total Em ployer Total No health (thousands) private coverage public Medicaid insurance Age All ages 67, % 56.2% % % 12.4% Under 5 years 19, years 26, years 20, Race White, not Hispanic Black, not Hispanic Hispanic Other, not Hispanic 45, , , , Family structure Both parents present 47, One parent present 17, Family income Below 100% of poverty 14, l00%-199% of poverty 14, %-299% of poverty 13, % or more of poverty Source: U.S. Bureau of the Census, Current Population Survey, March 1993; tabulations by the authors. Note: Percentages may not sum to 100 because of multiple coverage. income exhibited the most pronounced gradient with employer coverage. Children in families with incomes at 300 percent or more of the federal poverty level were almost twice as likely to have employer-based insurance as children in near-poor families ( percent of the poverty level) and fully ten times as likely to be covered as children in families with incomes below the poverty level. Public coverage made up for some but not all of the disparities in private coverage. Most children with public coverage are enrolled in Medicaid (87 percent in 1992); the remainder are covered by CHAMPUS or Medicare. Medicaid coverage was most prevalent among younger children, minorities, children in single-parent households, and children in low-income families. More specifically, preschool-age children were twice as likely as adolescents to be covered by Medicaid. This differential is in part a reflection of the favorable treatment given to younger children in the congressionally mandated Medicaid eligibility expansions of the Black and Hispanic children were on average about three times as likely as non-hispanic white children to be covered by Medicaid. Even more pronounced differences are apparent by family structure and income-two variables that are historically linked to Medicaid eligibility. Children in single-parent families were

4 D ATAWATCH 247 more than four times as likely as children in two-parent households to have Medicaid coverage. A substantial income gradient is also apparent, with nearly two-thirds of children in families with incomes below poverty having Medicaid coverage, compared with slightly more than one-fifth of children in near-poor families and less than one-tenth of children in families with incomes above twice the poverty level. 10 It is apparent that despite public- and private-sector efforts to broaden private health insurance coverage and congressionally mandated Medicaid expansions, a significant minority of children remains uninsured 8.3 million children, or 12.4 percent of all noninstitutionalized children in Groups at risk of being uninsured included adolescents, minorities, children living with a single parent, and children in poor and near-poor families. Importantly, even though minority children and other children from disadvantaged family circumstances are disproportionately represented among the uninsured, they do not dominate this population. Specifically, non- Hispanic white children made up a majority of the uninsured child population in Most uninsured children were members of two-parent families, and nearly two-thirds were in families with incomes above the poverty level. Parents attachment to the work force. Given that most Americans receive health insurance through the workplace, it is not surprising that health insurance coverage among children would be closely related to the work-force attachment of parents. Two of the most important determinants of employer-based coverage for children are the number of workers in the family and whether the family head (the parent with the highest earnings) is a full-time worker (Exhibit 2). Exhibit 2 Health Insurance Status Of Children, By Work-Force Attachment Of Their Parents, 1992 Characteristic Frequency Total Employer Total No health (thousands) private coverage public Medicaid insurance Number of working parents No ne 10, % 6.7% % % 12.4% O ne 28, Two 25, Labor-market status of head parent in the past year Nonworker 7, Part-time worker 4, Full-time worker 53, Source: U.S. Bureau of the Census, Current Population Survey, March 1993; tabulations by the authors. Notes: Excludes children living without natural or adoptive parents. Percentages may not sum to 100 because of multiple coverage.

5 248 HEALTH AFFAIRS Spring 1995 The chances of having employer-based coverage differed among children from families in which no parent worked and in families in which at least one parent worked. While only a tiny fraction of children in nonworker families had employer-based coverage, more than half of all children with a working parent were covered by such plans. Having two working parents greatly increased the likelihood of having employer coverage. Indeed, four out of five children with two working parents had employer coverage, and only 8 percent of children in this group were uninsured in Whether the principal breadwinner in the family worked part time or full time also had a substantial impact on the likelihood that a child was covered by employer insurance. Only one in five children were covered by employer-based plans in families in which the head worked only part time. This compares to seven in ten children with such coverage in families in which the head worked full time. Families with limited attachment to the work force in 1992 relied heavily on public coverage-principally Medicaid-to meet the health insurance needs of their children. Public plans covered nearly 80 percent of children in families in which the head was not in the work force and almost half of all children in families in which the head worked only part time. In fact, public coverage made up for most of the gaps in private coverage for families with limited attachment to the work force. For example, children in families with no working parents were about equally as likely as children in families with a working parent to have some form of insurance. Similarly, children in families in which the head was a nonworker were equally as likely as children in families in which the head worked full time to have some type of coverage. The uninsured child population comprises primarily children whose parents have a strong attachment to the work force. In 1992 fully threefourths of all uninsured children were members of families with at least one working parent. Moreover, 70 percent of uninsured children belonged to families in which the principal breadwinner was a full-time worker. Changes in health insurance coverage, The number of children with some type of health insurance coverage climbed from 55.6 million in 1988 to 58.8 million in 1992, a 5.8 percent increase (Exhibit 3). Because the overall child population grew by 5 percent during this period, the percentage of children with insurance coverage rose slightly, from 86.9 percent to 87.6 percent. While the percentage of children who were uninsured declined commensurately, the numeric count of uninsured children remained virtually unchanged over the period. The apparent stability in the percentage of children with insurance over the period masks substantial underlying shifts in private and public coverage. During much of this period the nation was enduring a

6 D ATAWATCH 249 Exhibit 3 Trends In Health Insurance Status Of Children Under Age Eighteen, Frequency Total Employer Total No health (thousands) private coverage public Medicaid insurance 63,902 46,944 38,766 12,270 9,961 8,350 64,343 47,376 38,468 12,345 10,100 8,548 65,290 46,436 37,880 14,300 12,094 8,504 66,173 46,114 37,654 15,792 13,514 8,379 67,106 46,514 37,715 16,626 14,481 8,335 Percent distributiona , % 60.7% 19.2% 15.6% 13.1% , , , , Source: U.S. Bureau of the Census, Current Population Survey, March ; tabulations by the authors. a Percentages may not sum to 100 because of multiple coverage. recession that cost many family breadwinners their jobs and their health benefits. The economic downturn, combined with continued medical care price inflation, also affected businesses ability to provide costly health benefits to their remaining workers. The industrial composition of the country was changing as well, with a rapid shift of jobs from industries such as manufacturing, characterized by generous fringe benefits, to jobs in the service sector, characterized by lesser benefits. The net result of these trends was a marked reduction in the percentage of children covered by private insurance, from 73.5 percent in 1988 to 69.3 percent in 1992 (Exhibit 3). The entire decline was attributable to loss of employer-based insurance. The proportion of children with employer-based coverage declined, while coverage under other types of private insurance, such as individually purchased policies, increased modestly. To illustrate the effect of declining rates of employer coverage, we applied the 1988 rate of employer-based coverage for children (60.7 percent) to the 1992 child population. The difference between this figure and the actual number of children with employer-based coverage in 1992 indicates the net loss in children s employer-based coverage attributable to changes in coverage rates and population growth. These computations indicate that had employer coverage rates remained at their 1988 levels, 40.7 million children, not the 37.7 million actually covered, would have been covered by employer plans in During this same period the number and proportion of children with Medicaid coverage grew from 10.0 million in 1988 to 14.5 million in 1992, a 45 percent increase that far outstripped population growth of 5 percent

7 250 HEALTH AFFAIRS Spring 1995 during the same period (Exhibit 3). This large increase was the result of legislative changes enacted by Congress in the 1980s, as well as the recession that pushed more families into poverty during the early 1990s. Following more than a decade of retrenchment in Medicaid eligibility at the state and federal levels, Congress began enacting a series of eligibility expansions in 1984 that gradually required states to cover larger numbers of lowincome children and pregnant women. 12 Additional increases in Medicaid coverage resulted from the recession of 1990 and 1991, when rising unemployment resulted in a substantial increase in the number of children living in families with incomes below poverty. Between 1988 and 1992 the percentage of children living in poor families rose from 19.7 percent to 22.2 percent-a net increase of 2.3 million children. Winners And Losers Both the contraction of employer-based health insurance and the expansion of Medicaid coverage were broadly felt across the child population. However, children were not equally affected (Exhibit 4). Almost all subgroups of children experienced reductions in employer-based insurance between 1988 and Preschool-age children, Hispanic children, children in low-income families, and children in families with weak attachment to the work force were at greatest risk of losing employer coverage. In contrast, children in higher-income families and in families with two working parents experienced only a slight elevation in the risk of losing employer coverage. Medicaid expansions increased the likelihood of coverage for all subgroups of children between 1988 and Younger children, non- Hispanic white and Hispanic children, and children in near-poor families were most likely to benefit from these expansions. Large relative increases in coverage also occurred for children in certain types of families that traditionally have been excluded from Medicaid coverage, including twoparent families, moderate-income families, and families with at least one working parent. However, care must be taken in interpreting changes over time for children in these groups. Since Medicaid covered only a small proportion of children in these groups during the base year, even modest absolute changes can result in substantial relative changes. For the child population as a whole, the expansion of Medicaid coverage more than offset the contraction in employer-based coverage between 1988 and The result was a modest reduction in the overall likelihood that children would be without insurance, as shown in the last set of columns in Exhibit 4. Again, younger children, minorities, and children in poor families were most likely to gain health security; in contrast, the risk of being

8 D ATAWATCH 251 Exhibit 4 Changes In Employer-Based Coverage And Medicaid Coverage Between 1988 And 1992, By Characteristics Of Population Ag e Under 5 years 6-11 years years Employer coverage Medicaid No insurance Percent Percent Percent change chan ge change 58.1 % 51. 7% -11% 1 9.3% % 56% 12.6% 10.5% -17% Race White, not Hispanic Black, not Hispanic Hispanic Other, not Hispanic Family structure Both parents present One parent present Family income Below 100% of poverty %-199% ofpoverty %-299% of poverty % or moreofpoverty Region Northeast Midwest South West Working parents No ne O ne Two 6 ; : : Labor-market status of head parent in the past year Nonworker Employed part time Employed full time Source: Original tabulations of the Match 1993 Current Population Survey. uninsured increased slightly for adolescents and for children in families with higher incomes. Discussion The percentage of children without health insurance rose significantly in the late 1970s and mid-1980s. In their examination of data from the National Medical Expenditure Survey (NMES), Peter Cunningham and

9 252 HEALTH AFFAIRS Spring 1995 Alan Monheit found that this increase was primarily attributable to loss of employer-based private insurance combined with more restrictive Medicaid eligibility policies. The decline in employer coverage was the cumulative result of several trends, including growing numbers of employers dropping dependent coverage for their workers and a shift in the labor market toward fields of employment that are less generous with health benefits. The decline in Medicaid coverage during this period was largely the result of more restrictive federal Medicaid eligibility rules and the failure of state governments to adjust income eligibility thresholds to keep pace with inflation. 1 3 Examining more recent data on children s insurance coverage, we found that the downward trend in employer-based private coverage has continued, even accelerated, into the early 1990s. During the ten-year period studied by Cunningham and Monheit, employer-based private coverage of children declined 4.8 percentage points-from 67.7 percent to 62.9 percent. 14 During the five-year period in the present study, employer coverage declined 4.5 percentage points-from 60.7 percent to 56.2 percent. The loss of private coverage occurring between 1977 and 1987 contributed to a 40 percent increase in the proportion of children without any form of insurance. Despite the recent acceleration in the rate of loss of private insurance, the proportion of children without any insurance actually declined slightly between 1988 and The relative stability in the size of the uninsured population is largely attributable to expanded Medicaid coverage for children. As a result, nearly five million children were added to Medicaid between 1988 and These results illustrate the significant role Medicaid plays in providing a safety net for children. In the face of large-scale losses in employer coverage and severe economic contraction, the elastic nature of the Medicaid program has helped to provide millions of children with continued access to care. A number of studies have confirmed Medicaid s value in ensuring access to health care services for children. Among children from poor families, those with Medicaid coverage have been shown to be more likely than those without Medicaid coverage to have a usual source of health care and to receive routine preventive care services (such as physical, eye, and dental exams) at professionally recommended intervals. 15 Moreover, while uninsured children from poor families lag behind children from nonpoor families in their overall use of ambulatory care, children from poor families with Medicaid coverage do not differ much from nonpoor children. 16 Although Medicaid provides important insurance protection for children who otherwise would be uninsured, it does not afford children the same level of access to care that private health insurance provides. For

10 D ATAWATCH 253 example, Medicaid-covered children are less likely than privately insured children to use any health services, including hospital care, ambulatory care, dental and vision services, and prescribed medications. 17 In addition, Medicaid-covered children are nearly twice as likely as privately insured children to report having no regular source of care. 18 Thus, while Medicaid provides a critical safety net for millions of American children, it is not a substitute for private health insurance coverage. There is little evidence to suggest that the downward trend in employerbased coverage for children will diminish in the near term. Indeed, the recent increase in the rate of decline in employer-based coverage for children is an ominous sign. This trend suggests increased reliance on Medicaid as a coverage source of last resort for families losing private coverage because of the changing economy or employer cutbacks in benefits for dependents. The needs of these vulnerable families, combined with the evidence presented in this paper on Medicaid s efficacy and its relatively low per child cost, must be considered by policymakers as they debate the future of this program. Research for this paper was supported in part by grants from the Maternal and Child Health Bureau, Department of Health and Human Services to the Institute for Health Policy Studies at the University of California, San Francisco (no. MCJ-65089)) and to the Child and Adolescent Health Policy Center at The George Washington University (no. MCJ-113A18). NOTES 1. AC. Monheit and P.J. Cunningham, Children without Health Insurance, The Future of Children (Winter 1992): ; R.F. St. Peter, P.W. Newacheck, and N. Halfon, Access to Care for Poor and Nonpoor Children: Separate and Unequal? journal of the American Medical Association 267 (1992): ; M.L. Rosenbach, The Impact of Medicaid on Physician Use by Low-Income Children, American Journal of Public Health 29 (1989): ; J.D. Kasper, The Importance of Type of Usual Source of Care for Children s Physician Access and Expenditures, Medical Care 25, no. 5 (1987): ; and J.J. Stoddard, R.F. St. Peter, and P.W. Newacheck, Health Insurance Status and Ambulatory Care for Children, The New England Journal of Medicine 330 (1994): Employee Benefit Research Institute, Sources of Health Insurance and Characteristics of the Uninsured: Analysis of the March 1993 Current Population Survey (Washington: EBRI, 1994) P.J. Cunningham and A.C. Monheit, Insuring the Children: A Decade of Change, Health Affairs (Winter 1990): Current Population Survey, March 1993 Technical Documentation, prepared by Data User Services Division, Data Access and Use Staff, Bureau of the Census (Washington: U.S. Bureau of the Census, 1993). 5. EBRI, Sources of Health Insurance and Characteristics of the Uninsured; R. Kronick, Health Insurance, : The Frayed Connection between Employment and Insurance, Inquiry (Winter 1991): ; and K. Levit, G. Olin, and S. Letsch, Americans Health Insurance Coverage, , Health Care Financing Review

11 254 HEALTH AFFAIRS Spring 1995 (December 1992): EBRI, Sources of Health Insurance and Characteristics of the Uninsured. 7. All insurance variables, with one exception, were created using a methodology identical to that employed by the Bureau of the Census. This exception applies only to a relatively small number of children reported as having private health insurance coverage that was provided through someone living outside the household. Although the interview question regarding coverage provided by persons living outside the household does not elicit the type of private coverage provided (employer-based or individually purchased), the Census Bureau classifies this coverage as being provided through an employer-based plan. We chose not to make this assumption. Specifically, we counted these children as privately insured but not as having employer-based coverage. Consequently, estimates of the total number of children reported with private health insurance presented here are identical to Census Bureau estimates, but estimates of the subtotal of children with employer-based coverage differ. Our approach results in a slight underestimate of the actual population with employer-based coverage, while the Census Bureau approach results in a slight overestimate. 8. Employment status does not explain all of the differences in rates of private coverage by race, family structure, and income. A separate multivariate analysis revealed that after parental employment status was controlled for, minority children and children from single-parent or low-income families were still at a disadvantage in obtaining private insurance coverage. Controlling for occupation and industry might further explain differences in rates of private coverage. 9. Medicaid participation rates are also likely to be higher for younger children and especially infants, because enrollment is automatic for the newborn children of pregnant women enrolled in the Medicaid program. 10. J. Feder et al., The Medicaid Cost Explosion: Causes and Consequences (Baltimore: Kaiser Commission on the Future of Medicaid, 1993). 11. Kronick, Health Insurance, Feder et al., The Medicaid Cost Explosion. 13. Cunningham and Monheit, Insuring the Children; and Levit et al., Americans Health Insurance Coverage, Based on a comparison of data from the 1977 and 1987 National Medical Expenditure Surveys. 15. P. Newacheck and N. Halfon, Preventive Care Use by School-Aged Children: Difference by Socioeconomic Status, Pediatrics 82, no. 3 (1988): P. Newacheck, Access to Ambulatory Care for Poor Persons, Health Services Research 23, no. 3 (1988): D.C. Lefkowitz and A.C. Monheit, Health Insurance, Use of Health Services, and Health Care Expenditures, AHCPR Pub. no , National Medical Expenditure Survey Research Findings 12 (Rockville, Md.: AHCPR, 1991). 18. D.L. Wood et al., Access to Medical Care for Children and Adolescents in the United States, Pediatrics 86, no. 5 (1990):