The Nativism Tax

What it will cost you to deny illegal immigrants health insurance.

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Rep. Joe Wilson

In his Sept. 9 speech to Congress on health care, when President Obama said, “The reforms I’m proposing would not apply to those who are here illegally,” Rep. Joe Wilson, R-S.C., shot back: “You lie!” What Obama meant was that health care reform would not extend government subsidies to illegal aliens to purchase health insurance. What Wilson meant was that health care reform would nonetheless allow illegal immigrants who were uninsured to purchase unsubsidized health insurance through the exchanges that reform would create. Indeed, to whatever extent the government could track down uninsured illegal immigrants through the tax system, it would compel them to buy health insurance. This was unacceptable to Wilson and other conservatives—not because they felt illegal immigrants should be left in peace, but because they felt illegal immigrants should be excluded entirely from whatever superstructure would be created by health care reform.

It was an insane argument on more than one level. Illegal immigrants are currently permitted to purchase a quart of milk at the corner grocery. Should that activity be banned, too? If an illegal immigrant showed up at an emergency room with a burst appendix, should that person be left to die? But the Senate finance committee (probably at White House Chief of Staff Rahm Emanuel’s insistence) took Wilson’s rude outburst seriously enough to insert language into its version of the bill barring illegal immigrants from participating in the exchanges at all. Senate Majority Leader Harry Reid, D-Nev., followed suit in the “blended” bill now before the full Senate. If this remains in the bill, those of us who aren’t illegal immigrants will end up paying for the health insurance of those who are. Call it a nativism tax.

Here’s how it works.

Currently, if an uninsured illegal immigrant (or any other uninsured person) shows up at an emergency room with a burst appendix, the hospital typically will not leave that person to die. It will treat that person, squeeze that person for some portion of the cost, and then pass the remaining cost onto the federal government, to state government, to charities, and to private insurers, who in turn will pass it onto taxpayers, to charitable givers, and to policyholders.

According to a May 2009 study by Families USA, a nonprofit consumer group, the annual cost of uncompensated care is about $73 billion, of which $30 billion is paid by government and charity. The remaining $43 billion is passed onto health insurers, thereby raising the average family insurance premium by $1,017 annually, about 8 percent of the average family premium. Families USA calls this a “hidden health tax.”

An August 2008 study by the Kaiser Family Foundation crunched the numbers a bit differently, calculating the annual cost of uncompensated care at a more conservative $56 billion annually. The Kaiser study found that only about 2 percent of uncompensated care was passed through to insurance policyholders, as against Families USA’s 8 percent. But this was cold comfort to anti-government opponents of health reform, because Kaiser also found that the cost to government of uncompensated care was $43 billion, as against the $30 billion that Families USA calculated for both government and charity. According to Kaiser, fully 75 percent of the cost of uncompensated care gets billed to taxpayers. Spread evenly among the roughly 138 million taxpayers in the United States, the uninsured cost the average taxpayer about $312 annually.

The St. Petersburg Times’ examined both the Families USA study and the Kaiser study and was unable to reconcile the different findings. “Barring new evidence,” it said, “this seems like a genuine disagreement between experts on a complex issue.” (Among other challenges, the government fluctuates in its commitment to paying this cost. From 2004 to 2008, for instance, it spent $250 million per year to reimburse hospitals for the treatment of illegal aliens. Then it let the program expire.)

The larger point remains: Through some combination of higher taxes and higher premiums, the rest of us end up paying for the uninsured—either $43 billion in higher premiums or $43 billion in higher taxes.

Illegal immigrants represent about 15 percent of the uninsured, but for various reasons (they’re younger, they lack access to government programs) they don’t represent 15 percent of uncompensated care; it’s more like 10 percent, according to a study by the Center for Immigration Studies, a nonprofit research group. Using the Kaiser data, the center calculates that providing uncompensated care to illegal immigrants costs taxpayers $4.3 billion annually. Had the center used the Families USA data, it would have calculated that providing uncompensated care to illegal immigrants costs policyholders $4.3 billion annually. That comes to either $31 for the average taxpayer or $100 for the average policyholder.

By excluding illegal immigrants from the new health insurance exchanges, the Senate health care bill passes up an opportunity to relieve taxpayers and/or policyholders of this cost. They are literally denying uninsured illegal immigrants the opportunity to pay for their own health care by purchasing health insurance. Wilson’s nativism has added $4.3 billion to the cost of health care reform. Now that’s he’s won, will he vote for final passage? Don’t hold your breath.

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