The figure of 7 million uninsured in California appears to be inflated

This column is based on a report published by the Institute, available at http://www.pacificresearch.org./

I hate to intrude on the doom and gloom about the "crisis of the uninsured," but the problem of Californians without health insurance is not as awful as generally portrayed.

The media continued to circulate the claim that there are almost 7 million Californians uninsured. This figure has become unmoored from its source and simply floats on the ocean of public discontent with our health-care system without explanation or understanding.

The statistics most widely cited by the media and other parties come from the Census Bureau's "Income, Poverty, and Health Insurance Coverage" publication. However, the Census Bureau also conducts a Survey of Income and Program Participation (SIPP). One major difference between the two is that the first report, which also provides the more-alarming figure, relies on annual surveys. It collects information on myriad issues, including health care, and asks respondents (by phone or in person) to think back a year.

The SIPP, on the other hand, asks respondents about their insurance status, month by month. The two methods yield very different results. The figures from the annual report show over twice as many uninsured as those from the monthly survey.

Unfortunately, the more conservative SIPP does not collect data at the state level. However, using state-level data from the report with the scarier estimate invites the question of whether asking people to think back a year leads to more accurate responses than quizzing them every month and then adding up 12 months' responses. If you think the monthly survey is more accurate, then you agree with Census Bureau researcher Shailesh Bhandari, who wrote a paper supporting that conclusion.

So, although we cannot quantify California's uninsured directly from these monthly surveys, we can use the national differences between the two reports to make a pretty good estimate of the number of Californians who are uninsured for at least a year. If the national numbers apply to California, the number of uninsured in our state drops from almost 7 million persons to a little under 3 million, or about 9 percent of the population.

That's a big difference, but 3 million is still a lot of folks without insurance. However, many of them are uninsured by choice, or at least their parents' choice. A report from UCLA's Center for Health Policy Research figures that 900,000 Californian children are eligible, but not enrolled, for government programs. So, nearly two-thirds of California's children who reportedly lack health insurance have, in fact, parents who haven't signed them up for free, taxpayer-funded health insurance.

Some argue that low-income people don't register for these programs because of cultural or language barriers. I don't buy it. If someone wants or needs something, and someone else is offering it for free, the former will find the latter. Indeed, there is a whole "advocacy industry" dedicated to getting health and social services to people who have a claim on the state. It's more likely that they don't enroll because they don't need to until they get sick.

Higher-income people without insurance have a different challenge: The price is too high. If your auto insurer charged you only a $5 co-pay for a tank of gas, you'd use too much gas, and car insurance would be way too expensive, for obvious reasons. You'd be involved in endless squabbles and paperwork with insurance bureaucrats, trying to prove that you "needed" so much gas. It would be even worse if you were forced to buy this "managed car" policy through your employer. However, rules that force health insurers to provide such policies ensure that many Californians will choose not to buy them.

One way to reduce the cost is to simplify the policies. In California, mandatory coverage of services such as alcohol and drug treatment, in vitro fertilization, acupuncture and chiropractic care raises health care costs by about 30 percent, says the Council for Affordable Health Insurance. Let's cut out these benefits, which many patients do not value.

Another way to reduce the cost is to make health insurance look more like proper insurance: no more $5 co-pays for a tank of gas. Allow people to spend pretax dollars on ordinary health expenses, with an insurance policy that kicks in after a certain point. The vehicle for this is a Health Savings Account (HSA), a tax-advantaged account, similar to an IRA, at a financial institution. Combined with a high deductible health insurance policy, the whole package comes at a lower price than traditional policies.

The IRS made HSAs available in 2004. California, however, continues to tax HSA contributions and earnings, reducing their appeal. California must repeal this health tax. Although the number of uninsured is not as bad as it's made out to be, these two steps will nevertheless move it in the right direction: towards zero.