Crowd-Out Under SCHIP: Looking Back and Moving Forward Lisa Dubay, Ph.D., Sc.M. Associate Professor Johns Hopkins Bloomberg School of Public Health © 2006, Johns Hopkins University. All rights reserved.

What is Crowd-Out? Crowd-out is the substitution of public for private health insurance coverage that occurs when public subsidies are provided. Crowd-out occurs through a number of mechanisms: –Those with employer-sponsored coverage drop it and enroll the public program –Employers may drop their offers of coverage or increase premiums inducing employees to drop –New firms entering the market do not offer coverage or set premiums at unaffordable levels. Crowd-out is an inevitable aspect of any proposal to expand coverage. © 2006, Johns Hopkins University. All rights reserved.

The Good, the Bad, and the Ugly Crowd-out increases the cost per newly insured person. Crowd-out provides relief to low-income families who may be paying a large share of their health insurance premium or have policies with limited benefits or substantial cost- sharing. Levels the playing field for business who have done the right thing by providing health insurance coverage to low- wage workers. © 2006, Johns Hopkins University. All rights reserved.

How Is Crowd-Out Measured? Econometric studies use household surveys to estimate the share of the increase in coverage under SCHIP that is due to the substitution of employer-sponsored coverage. –Challenging to develop the counterfactual for what would have happened in the absence of SCHIP –Studies use a variety of methods to accomplish this task Enrollee surveys estimate the share of children newly enrolled in SCHIP who had employer-sponsored coverage in prior (usually six) months. –Household surveys of new enrollees –Attempt to differentiate between voluntary and involuntary dropping of employer-sponsored coverage

What Does the Evidence Say? (1) CBO review of the econometric studies suggests that crowd-out was in the range of 25 to 50 percent of the increase in coverage. –Estimates of declines in public coverage are consistently small but estimates of increases in SCHIP coverage quite variable. –Estimates of impact on employer coverage from these studies imply that SCHIP resulted in at most a 10 percent decline in employer-sponsored coverage among SCHIP eligible children and a 2 percent decline in employer- sponsored coverage among all children.

What Does the Evidence Say? (2) CMS Evaluation documented state evaluations of crowd-out in 16 states. –8 states reported no evidence of crowd-out –5 states reported crowd-out rates of less than 5 percent –3 states reported crowd-out rates between 10 and 20 percent Congressionally Mandated SCHIP Evaluation of experience in 10 states –28 percent of new entrants had employer-sponsored coverage in the six months prior to enrollment 14 percent involuntary coverage loss 8 percent employer coverage unaffordable 6 percent voluntary coverage loss –No evidence of variation in crowd-out by eligibility thresholds

Not the Only Measure of Success ! SCHIP has been remarkably success: –reduced the rate of uninsurance among low-income children by a third –increased access to care –improved health status among children. Crowd-out under SCHIP has been consistent with what was expected under the initial CBO scoring of 40 percent. SCHIP has not lead to large declines in employer- sponsored coverage.

Implications for Crowd-Out in House and Senate Bills Incentive Payments –House Bill provides much stronger incentives for states to increase enrollment of Medicaid eligible children and consequently new enrollment in Medicaid and SCHIP Employer Buy In/Premium Assistance –House bill allows employer-buy in demonstration program –Senate bill requires greater co-ordination between public and private coverage and establishes a premium assistance demonstration project Changes in matching rate –Senate bill includes lower match on expansions above 300 percent of poverty. CBO estimates of crowd-out from new enrollment under the House and Senate bills are virtually identical at 30 and 35 percent, respectively.

In Closing Crowd-out is inevitable in any effort to subsidize health insurance coverage. Public expansions in coverage have been shown to be the most cost-effective method for reducing uninsurance. Both the House and Senate bills provide strong incentives to states to enroll eligible but uninsured children, especially those eligible for Medicaid where there is little employer- sponsored coverage to crowd-out. Public support for SCHIP is extraordinarily high, with more than eight in ten Americans saying that they want Congress to further strengthen and fund SCHIP.