State & Federal Approaches to Health Reform: What works for the working poor? June 9, 2008 Ellen Meara Meredith Rosenthal Anna Sinaiko Katherine Baicker

2 Insurance & the Working Poor 80% of uninsured individuals live in families with at least 1 worker. 80% of uninsured individuals live in families with at least 1 worker. Most have low incomes Most have low incomes Flurry of state activity to expand coverage Flurry of state activity to expand coverage 3 states have enacted reforms 3 states have enacted reforms 13 other states have proposed reform 13 other states have proposed reform Unintended consequences of reform Unintended consequences of reform Can effect wages and/or employment Can effect wages and/or employment May offer redistribution to low income individuals May offer redistribution to low income individuals Effects may be pronounced for working poor Effects may be pronounced for working poor

3 Goal of the paper Compare 3 expansion approaches: Compare 3 expansion approaches: Employer mandates Employer mandates Public insurance expansion Public insurance expansion Tax credits to buy HI in non-group market Tax credits to buy HI in non-group market Consider broad set of consequences: Consider broad set of consequences: # insured # insured private & public spending private & public spending employment & wages employment & wages redistribution based on income & work. redistribution based on income & work.

4 Methods Combine literature with population estimates Combine literature with population estimates Previously published parameter estimates Previously published parameter estimates 1. Take-up rates 2. Crowd-out 3. Employment & wage response to health costs 4. Cost of insurance coverage Population Current Population Survey Population Current Population Survey Sample – restricted to age 0-64 Sample – restricted to age 0-64 Weighted to represent non-elderly, non-institutionalized Weighted to represent non-elderly, non-institutionalized Used to calculate eligible populations, income & work status Used to calculate eligible populations, income & work status

5 Policies simulated Employer mandate Employer mandate Uninsured, FT workers & dependents at firms with 25+ employees Uninsured, FT workers & dependents at firms with 25+ employees No income cutoff No income cutoff Medicaid expansion Medicaid expansion Income <300% of poverty Income <300% of poverty Tax credit - modest Tax credit - modest Bush-style credit for individuals without ESI or public coverage Bush-style credit for individuals without ESI or public coverage Credit phases out at $30k, $40k, and $60k based on tax filing status Credit phases out at $30k, $40k, and $60k based on tax filing status $1000 limit per adult, $500 per child, $3000 total $1000 limit per adult, $500 per child, $3000 total

6 How do policies perform based on costs & newly insured? # NEWLY INSUREDCOSTS PER NEWLY INSURED

7 Based on typical measures Employer mandates expand insurance to more uninsured at a more moderate cost Employer mandates expand insurance to more uninsured at a more moderate cost Employer mandates involve no new public spending Employer mandates involve no new public spending Tax credits are by far the most expensive way to insure more individuals Tax credits are by far the most expensive way to insure more individuals

8 Labor Market Effects Change in # employed (thousands) Change in annual wages ($billions)

9 Average benefit & redistribution Value of redistribution to previously insured ($billions) Average $ value of benefit for takers

10 % reduction in uninsured by income (workers) % of FPL Employer mandate Medicaid expansion Tax credit <100%12%6%5% % %20303 >300%2103

11 Distribution of tax credit $ By Poverty Level By work status

12 Implication: Must consider unintended consequences Employer mandates have negative effects on labor markets Employer mandates have negative effects on labor markets In aggregate these are modest, but would be concentrated among low wage workers In aggregate these are modest, but would be concentrated among low wage workers Tax credits and Medicaid expansions confer substantial financial benefits to low income individuals with prior coverage Tax credits and Medicaid expansions confer substantial financial benefits to low income individuals with prior coverage

13 Why do reform approaches fail to cover so many poor? The poor fare badly under all 3 approaches The poor fare badly under all 3 approaches Take-up is low Take-up is low Many eligible for Medicaid do not take it up Many eligible for Medicaid do not take it up Similarly low take-up expected for tax credit Similarly low take-up expected for tax credit Uninsured workers may not qualify for coverage Uninsured workers may not qualify for coverage Part-time Part-time Contingent workers Contingent workers Immigrants Immigrants 1/3 of uninsured workers below 300% of fpl were not US citizens 1/3 of uninsured workers below 300% of fpl were not US citizens Medicaid eligibility to non-citizens is severely limited Medicaid eligibility to non-citizens is severely limited Undocumented immigrants unlikely to be covered Undocumented immigrants unlikely to be covered

14 % reduction in uninsured by income (non-workers) % of FPL Employer mandate Medicaid expansion Tax credit <100%0%11%5% % %0143 >300%003