The Economic Consequences of Being Uninsured

I estimate the impact of being diagnosed with a serious new health condition
(cancer, diabetes, heart attack, chronic lung disease, or stroke) on household wealth, food
consumption and total household income for households with and without health
insurance at baseline, using data from the first four waves of the Health and Retirement
Study. I find that health shocks do not have a significant effect on consumption;
households are able to smooth the impact of these shocks. Whether they deplete wealth in
order to do so is not entirely clear; the estimated effect of a health shock on wealth is
large (about $28,000) for both insured and uninsured households, but is not statistically
significant. The proportional effect on wealth is estimated to be larger for uninsured
households (a drop of 20 percent) than for insured households (a drop of about 2 percent),
but again, neither effect is significantly different from zero. Health shocks reduce
household income by about $9,000 and reduce the probability of work by about ten
percentage points; the labor supply response to a shock is about the same whether or not a
household has insurance. There is no evidence that the uninsured face significantly higher
economic risks than the insured in the event of a health shock.