Policy Proposals Health Care Coverage, Costs, and Financing

Outline Benefit Design/Coverage Paying for Care Incremental vs. Comprehensive Health Care Reform

Benefit Design/Coverage What does health insurance coverage look like today? Historically, most policies have covered: Hospital Physician Some preventive care Some cost-sharing, possibly with catastrophic cap If the goal is to expand coverage to more individuals : Who receives coverage (all, low income, kids, disabled, workers)? Bare-bones policies or comprehensive health insurance? One standard benefit package, standardized packages, or tailored plans? How much cost-sharing (deductibles, coinsurance, maximum per year)?

Paying for Care How is health insurance financed today? Employer-sponsored : Employee/employer contributions/foregone wages, tax exclusion Medicare : Payroll taxes, federal income taxes, enrollee premiums (Part B income- related in 2007), and beneficiary cost-sharing Medicaid : Federal income taxes and state tax revenues, nominal cost-sharing If the goal is to expand coverage to more individuals: How should it be financed? Should premiums be related to a person’s income? Should the current tax exclusion for employer coverage be limited? Stretch limited resources by offering less generous benefits? Note: Strategies for increasing efficiency (Health IT, P4P, etc.) to be discussed in January

Incremental vs. Comprehensive Reforms If the goal is to reform the health care system, how do we get there? Comprehensive Focus : Achieve coverage for all Examples : Individual mandates; Single payer systems; Voucher system Incremental Focus : Expand coverage to certain populations, improving insurance markets, promoting quality reforms, etc., but not achieve coverage for all Examples : Subsidies for individually-purchased insurance; Medicare or Medicaid expansions; Employer mandates; Health Savings Accounts (HSAs); Quality incentives ( January materials )

Combining Incremental Reforms Comprehensive reforms can be built on frameworks that combine multiple incremental strategies (addressing quality, efficiency, cost, as well as access) However, comprehensive reforms have stated principal goal of guaranteeing coverage for all Features must include: Formal structure that ties parts together Public commitment Accountability

Incremental Reforms

Subsidies Goal : Reduce number of uninsured by subsidizing purchase of health insurance, often through tax credits Examples of subsidy proposals : Provide tax credits to low and middle-income to buy insurance on individual market Create a tax deduction for purchase of individual insurance Provide tax credits for businesses who offer health insurance to employees

Medicare or Medicaid Expansions Goal : Reduce number of uninsured by expanding eligibility for existing government programs (e.g., Medicaid, Medicare) Examples of expansion proposals : Raise income ceiling for Medicaid and SCHIP eligibility Extend public coverage to all uninsured children Offer Medicare to more adults (e.g., age 55-64) without insurance

Employer Mandates Goal : Increase access to health insurance for workers and their families, by requiring employers to offer health insurance Examples of employer mandate proposals : Require employers to cover percentage of premium; small employers in purchasing pools Impose “free rider surcharges” on employers and employees

Health Savings Accounts Goal : HSAs and other forms of consumer-directed care have a goal of making health coverage more affordable by encouraging consumers to be more cost-conscious and focus on healthier behaviors Features of HSAs: People set aside their own money, before taxes, to pay for health care Usually combined with high-deductible health insurance Examples of HSA and other consumer-directed care proposals : Tax credits for employer contributions to HSAs Revise tax definition to include deduction for HSAs and allow people to carry up to $500 in unused flexible spending account (FSA) money over from year to year

Comprehensive Reforms

Individual Mandates Goal : Achieve universal coverage using current system as base Examples of individual mandate proposals : Require individuals to buy insurance, and provide tax credits to do this; those with the lowest income would pay zero premium Mandate that everyone have health insurance or pay modest penalties Create incentives for uninsured to buy into proposed “Medicare Plus” program, but later impose individual mandate if high number of uninsured persons remains

Single Payer Goal : Achieve universal coverage and reduce administrative costs Examples of single payer model proposals : Physicians for a National Health Insurance Program: Comprehensive benefits (medical, dental, LTC, Rx, mental health) Medicare, Medicaid, private health insurance restricted or eliminated For-profit hospitals phased out; hospitals given set budget for year Doctors salaried or paid on fee-for-service basis by federal government Global budget that grows each year with GDP Copayments, deductibles low or zero; financed through variety of taxes State-designed comprehensive insurance—CA, NY, MA...

Voucher System Goal : Achieve universal coverage for basic services Example of voucher system (Emanuel & Fuchs proposal) : Guaranteed enrollment and renewal of risk-adjusted voucher Choice of plans offering basic services Additional services available for higher premium with after-tax dollars Financing through value added tax (VAT) Employer-sponsored health insurance, Medicaid, Medicare eliminated

Combining Incremental Reforms

Oregon Business Council Package of incremental strategies : Changes to control cost growth → system savings → increased coverage No formal integration of public and private initiatives Employers’ strategies: HSAs, increase cost-sharing, etc. to make consumers more cost-conscious Quality incentives (P4P, health IT—to be discussed in January) Increase information on quality, costs, etc. (To be discussed in January) Government’s role: Streamline regulation for Medicare and Medicaid Support for health IT development and standards Malpractice and insurance market reforms Public health initiatives and consumer education

Massachusetts Health Care Trust (S. 755) Integrated package leading to comprehensive reform: Single payer: eliminates private insurance coverage for basic benefits Coverage for all Massachusetts residents Legislative timetable Government’s role: Oversee delivery of health care services to Massachusetts’s residents Collect and disburse funds Negotiate methods and rates of compensation with health care providers and facilities, and approve capital expenditures in excess of $500,000 Support for health IT development and standards Support development and implementation of health quality standards Support development of innovative approaches to health promotion, health education, and research