Insuring America's Health Principles and Recommendations (2004) / Chapter Skim
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5. Prototypes to Extend Coverage: Descriptions and Assessments
5. Prototypes to Extend Coverage: Descriptions and Assessments
Pages 118-151
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From page 118... ...
Proposals to extend coverage come from many different points along the political spectrum. Although few people openly oppose letting individuals have access to health care, opinions differ on how federal and state law, regulations, and public funds should be used and whether the goal of universal coverage justifies their use.
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From page 119... ...
The Committee cautions, however, that the pursuit of a "perfect strategy" could be an endless process and delay action unnecessarily. The Committee also notes that the four prototypes selected here do not include all possible approaches to achieving universal coverage and are meant to be illustrative of the variety of available mechanisms.
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From page 120... ...
These program costs would vary depending on the model and the richness of the benefit package implemented. Also, there would be costs related to additional utilization by some currently insured people if the defined benefit package for the uninsured were more generous than what they had and their benefits were raised to that level as a result.
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From page 121... ...
The redistributive effects of any health insurance reform proposal will be greater if existing health care revenue is not captured or maintenance of effort not required. The extent to which current financing streams are preserved or there are shifts in the sources of funding are key factors for evaluating reform proposals.
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From page 122... ...
Answers to these questions would likely reflect a person's political assumptions and convictions, affecting both the scale of the whole proposal and whether it relies mainly on voluntary, private-sector efforts or public programs and policies. Currently all three levels of government have responsibilities for providing coverage or care to the uninsured.
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From page 123... ...
As a result of these incentives, older people, those in worse health, or those expected to have high health costs must often pay significantly higher premiums 1These insurance risk pools are distinct from purchasing pools, which permit small firms, associations, and individuals to join together to increase their purchasing power and potentially benefit from economies of scale.
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From page 124... ...
SELECTION OF PROTOTYPES The Committee focuses primarily on proposals and strategies that eliminate uninsurance through major, comprehensive health insurance reform, rather than more limited proposals based on a discrete change to an existing program or a policy targeting a subset of the population. We recognize that the first prototype, which resembles many of the proposals currently under public discussion, is closer to an incremental approach than to comprehensive reform and would not achieve universal coverage, but it is included for the sake of completeness.
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From page 125... ...
The elements of each prototype were selected from commonly described strn,te~ies and seem inherent to the hn,sic model For ex~,mnle ~,lthol~h a, sin~le___ A___ _ _ ____ _______ ____ _ _ _ -- - ~ A -- - -- -- -- -- - - - - -- -- -- or -~ ~ ~~~~~ ~~~~~ ~ ~~~~='~~ 1 1 1 1 1 1 1 · 1 ~ 1 1 1 payer model could have a more or less comprehensive oenetlt package or Could have multiple benefit packages, we selected a single, comprehensive package for discussion purposes, because that is how the model is most often characterized. At a minimum, a benefit package in any of the models would include hospitalization and outpatient medical services.
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From page 126... ...
DESCRIPTION OF PROTOTYPES FOR EXTENDING COVERAGE Prototype 1: Major Public Program Extension and New Tax Credit This approach would make no fundamental changes in the current structure of private insurance. Some public programs would be merged and all expanded dramatically.
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From page 127... ...
The tax credit would be sufficiently large for those with incomes just above the eligibility limit for public coverage and would phase out to zero at the point where family income would make coverage affordable without assistance. Public Programs: Medicaid (except for the long-term care benefit)
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From page 128... ...
Subsidized enrollment in private coverage through a purchasing pool or enrollment in a combined Medicaid/SCHIP public program would be required of those who do not obtain coverage elsewhere.3 Employer Mandate and Subsidy: Employers would be required to provide coverage and finance a portion of health benefits for workers and their families, including, at a minimum, a federally defined benefit package. The package would be defined either by specific services or given an actuarial value, likely following the scope of current employment-based coverage, which is generally comprehensive.
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From page 129... ...
Public Programs: Medicaid, except for the long-term care benefit, and SCHIP would be combined into one public program (federal, state, or jointly run) that offered a basic benefit package for all those not in the workforce or insured through a working family member.
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From page 130... ...
Public Programs: The federal government would design and operate a program to provide the income-related tax credit to assist individuals in the purchase of insurance. Medicaid (except for the long-term care benefit)
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From page 131... ...
For example, in addition to guaranteed issue, the state could require that all plans limit preexisting condition exclusions, adjust risk pools, or offer reinsurance mechanisms to keep premiums within certain affordable limits, and provide the option for people to use their tax credit to purchase state employee benefits.5 Prototype 4: Single Payer A single payer system would mandate coverage for every individual, provide comprehensive benefits, be administered at the federal level of government, and be funded by federal taxes.6 Payer: The federal government would operate a single payer system centrally and make all payments to providers of services. A federal agency would administer the program, setting policy and standards for participation by providers and provider systems.
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From page 132... ...
Payment rates would be negotiated between the federal agency and providers of services, drugs, supplies, and equipment, creating a system of administered prices for medical care. Public Programs: With everyone enrolled in a single payer system with virtually no financial barriers to care, the need for Medicaid and SCHIP for lower income individuals and families would be obviated.
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From page 133... ...
Nonetheless, the higher income levels covered by the public program, the extended eligibility for Medicare, and the larger tax incentives are likely to result in substantially greater numbers of people covered. Prototype 2: Employer Mandate, Premium Subsidy, and Individual Mandate Coverage under this prototype would be close to universal because all employers would be required to offer affordable insurance and individuals would be required to have some form of coverage: through employment-based insurance (their own or a family member's)
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From page 134... ...
134 TABLE 5.1 Summary Description of Prototypes INSURING AMERICA'S HEALTH Prototype 1 Prototype Major Public Program Employer Extension and Premium Status Quo New Tax Credit Individual Subsidies Favorable federal tax Current federal tax treatment Federal p: treatment for employment- for employment-based coverage; employers based coverage federal tax credit for moderate- workforce income people to purchase employee employer's plan or individual health bet insurance federal tar employmc Mandates None None Employer qualified i workers; i obtain co, employer, or public Government Congress sets mandatory and Federal agency implements tax Public age Roles optional eligibility for public credit subsidy fo coverage and regulates em- defines ha ployment-based coverage; enforces federal agencies define basic organizes Medicaid, SCHIP benefits packages, and finance jointly with states; joint regulation of employment-based coverage; states administer public coverage (Medicaid, SCHIP) and define optional eligibility, offer state-funded coverage programs, regulate small group and nongroup insurance markets Public Programs Federal and state funding of Medicaid and SCHIP combined Medicaid public coverage for seniors, and expanded, comprehensive combined disabled, and categories of the benefits, minimal cost sharing; employme poor: Medicare, Medicaid, Medicare expanded to 55-year-olds income-r~ SCHIP, and programs at the no change state and local levels Private Health Two-thirds of all insurance Current private group and Offered to Insurance purchased through workplace, nongroup insurance markets pools small proportion purchased in small group and nongroup markets
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From page 135... ...
PROTOTYPES TO EXTEND COVERAGE 135 Prototype 2 Employer Mandate, Premium Subsidy, and Individual Mandate Prototype 3 Individual Mandate and Tax Credit Prototype 4 Single Payer went average; derate1se idual :ltS tax mbined Have taring; 5-year-olds 1d Lets Federal premium subsidy to employers with low-wage workforce, passed on to employee in affordable health benefit; current federal tax treatment for employment-based coverage Employers must offer qualified insurance to workers; individuals must obtain coverage from employer, private market, or public program Public agency(ies) provides subsidy for employers; defines basic benefit package; enforces mandates; organizes purchasing pools Medicaid and SCHIP combined for all without employment-based coverage; income-related premiums; no change to Medicare Offered through purchasing pools Individual/family federal tax credit based on family income and size; refundable, advanceable Individuals must purchase qualified coverage Federal agency defines basic benefit package and certifies acceptable plans; another federal agency administers and enforces tax credits; state operates purchasing pools Medicaid and SCHIP eliminated; no change to Medicare All insurance private, purchased individually, or through groups or state purchasing pools Federal funding of program with minimal cost sharing Individuals must enroll Federal agency administers program, global budget, and payments through contractors and private health plans Medicaid and SCHIP eliminated; Medicare possibly integrated Supplemental policies optional for noncovered services and amenities Continued
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From page 136... ...
Prototype 2: Employer Mandate, Premium Subsidy, and Individual Mandate To avoid gaps in coverage similar to the current system, it would be necessary to make provisions for smooth transitions of workers from one job to another and in and out of the workforce. Some brief gaps in coverage would be likely given the various potential family- and job-related transitions.
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From page 137... ...
Family income changes would not trigger eligibility problems either because the entitlement and mandate would reside with the individual and would not be income related, as Medicaid and SCHIP programs are now. Health Care Coverage Should Be Affordable to Individuals and Families Prototype 1: Major Public Program Extension and New Tax Credit Coverage would become more affordable than currently for lower income families that qualify for the expanded public program, for the near-elderly who
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From page 138... ...
The public program would provide comprehensive coverage designed to be affordable for the lower income population. For moderate-income individuals and families, the tax credit would be related progressively to income.
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From page 139... ...
Currently, without federal standards, state regulation is effectively limited by insurers' exit options: insurers can leave a heavily regulated state to do business in less regulated states. Prototype 4: Single Payer The main single payer strategy would be readily affordable for most families because it includes only minimal cost sharing and the comprehensive benefit package would reduce the need for additional spending on health services.
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From page 140... ...
Some individuals or businesses could find the taxes a burden, depending on which taxes were used and their rate and · 1 1nclacnce. Health Insurance Strategy Should Be Affordable and Sustainable for Society Prototype 1: Major Public Program Extension and New Tax Credit The expansion of the public programs would be designed with at least some cost sharing.
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From page 141... ...
Premiums and cost sharing could be required of all enrollees but kept at a minimal level for those who qualified for the public programs. Administrative factors such as enforcement of the mandate and creation and regulation of purchasing pools would increase administrative costs of the program.
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From page 142... ...
This model creates new administrative functions: enforcement of the employer's mandate and calculation of the employer's federal premium subsidy; enforcement of the individual's mandate; and regulation of the private insurance market to ensure the availability of insurance with appropriate basic benefits and operation of the public program. The current functions of the existing private insurance market and its related regulation would remain, and new administrative functions related to the purchasing pools and certification that benefit packages meet federal standards would be added.
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From page 143... ...
Also, the individual mandate and tax credit would require the creation of an administrative structure to pay the credit in advance and enforce its appropriate use, both to ensure that people received the correct credit amount and that it was spent on qualified insurance. Prototype 4: Single Payer This health insurance strategy would greatly reduce, if not virtually eliminate, employment-based insurance; the small group and nongroup insurance market; current federal, state, and local programs to cover the uninsured; and most out-ofpocket health spending by individuals and families.
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From page 144... ...
If the public were unwilling or unable to fund the budget fully, constraints in the form of more limited access to some services could develop over time. Nearly the whole populace would likely contribute both through taxes and cost sharing, but the single payer approach would undoubtedly have significant redistributive effects.
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From page 145... ...
Health Care Coverage Should Enhance Health and Well-Being by Promoting Access to High-Quality Care That Is Effective, Efficient, Safe, Timely, Patient-Centered, and Equitable Prototype 1: Major Public Program Extension and New Tax Credit The combined federal-state public program would include a comprehensive benefit package, comparable to the current Medicaid benefits, which could be designed to promote appropriate, cost-effective use of services even though cost sharing would be minimal for lower income enrollees and have less impact on use. Employment-based insurance and policies purchased on the independent insurance market with the tax credit would meet certain federal standards.
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From page 146... ...
Some plans might be based on current medical evidence to the extent feasible and designed with cost sharing to promote the use of appropriate services. The required basic benefit package for individual coverage would be less comprehensive than the current average employment-based benefit package, but employers would be allowed to offer richer packages as add-one to the basic coverage, which some workforces might demand and some labor markets might deliver.
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From page 147... ...
Prototype 4: Single Payer The comprehensive benefit package would be defined nationally and would cover everyone. The cost sharing could be designed to encourage use of services determined to be appropriate and cost effective, but the effect on use might be minimal because the dollar amount ofthe cost sharing would be minimal.
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From page 148... ...
All of them offer improvements over the status quo. Some balancing among the objectives emerges: a comprehensive benefit package is more likely both to achieve better health and to cost more than a basic package.
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From page 150... ...
150 INSURING AMERICA'S HEALTH TABLE 5.2 Summary Assessment of Prototypes Based on Committee Principles Prototype 1 Principles Prototyp e Status Quo Major Public Program Extension and New Tax Credit Employer Premium Individual Coverage should be universal Coverage should be continuous Coverage should be affordable for individuals and families Strategy should be affordable and sustainable for society Coverage should enhance health through highquality care Not universal; 43 million uninsured Not continuous; income, age, family, job, and healthrelated gaps in coverage Private coverage unaffordable to many moderate- and low-income persons Not affordable or sustainable for society; uninsurance is growing; cost of poorer health and shorter lives is $65-$130 billion; some participants contribute; no limit on aggregate health expenditures or on tax expenditures spending is higher than other countries, sustainability of current public programs depends on economy and political support Quality of care for the population limited because one in seven is uninsured Would not achieve universality because voluntary, but would reduce uninsured population Family- and job-related gaps in coverage More affordable than current system for those with low or moderate income All participants contribute; aggregate expenditures not controlled; new public expenditures for only the public program expansion and tax credit; sustainability of public program depends on revenue sources and political support; size of credit depends on political support Opportunities to promote quality improvements similar to current system Coverage 1; depends 0 of mandat Brief gaps and j ob tr Yes for wo adequate assistance; designed to all enrolle All partici basic parka,, current ems revenue fi public prc depends 0 for emplo assistance Could desi in expande and basic current er for quality
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From page 151... ...
. revenue trom parents in public program; sustainability depends on revenue sources for employers' premium assistance and public program Could design quality incentives in expanded public program and basic benefit package; current employer incentives for quality remain Depends on size of tax credit, enforcement, and cost of individual insurance Minimal gaps Subsidy based only on income and family size leaves older, less healthy, and those in expensive areas with less affordable coverage No limit on aggregate health expenditures or on tax expenditure, though federal costs relatively predictable and controllable through size of credit; sustainable through federal income tax base; size of credit depends on political support Similar incentives to current private insurance system, consumer could choose quality plans Likely to achieve universal coverage Continuous until death or age 65 Minimal cost sharing, but could be problem for lowest income Nearly all participants contribute; aggregate expenditures controllable, utilization not directly or centrally controlled; high cost to federal budget; administrative savings; sustainability depends on revenue source and political support Potentially yes; depends on proper design
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