Costs and Impacts of Health Reform Proposals from the Incremental to Single Payer – Compiled by the Urban Institute
There is an excellent new study from the Urban Institute that gives the costs and the impacts of a variety of different reform proposals. The estimated 2020 costs range from $26 billion to $2.7 trillion, depending on the details of reform proposal. It will help you make sense of the Democratic presidential debates on health reforms and the 2020 election issues and beyond.
Keep in mind that California is among the pioneer states in implementing the ACA. We have reduced our rates of uninsured from about 17% to about 7% due to aggressive implementation of the federal ACA (Affordable Care Act) plus the state’s own programs to reduce consumers’ out of pocket spending and extend coverage. Of our state’s remaining uninsured, about 60% are undocumented workers and their families, many of whom have emergency or limited scope MediCal. Our costs of coverage are mid range for the nation, and we have much higher rates of enrollment in HMOs, which have lower out of pocket than traditional fee for service private insurance.
The nation has about 34 million uninsured, of whom 6.6 million are undocumented workers and family members, while 25.6 million are US citizens and legal permanent residents. Our national health spending is $3.5 trillion of which $1.3 trillion is federal funding, and $302 billion is state spending. The rest is mostly private – from employers, employees and individuals – as premiums and cost sharing. Our per capita health costs are about twice as high as any other nation, primarily because we pay providers of all kinds (hospitals, doctors, drug companies, etc.) so much more than any other nation.
Our nation’s uninsured rate went down very sharply as the Obama administration implemented the ACA. Under the Trump administration, it has increased as Trump has sharply cut the periods of open enrollment, reduced federal assistance for education, outreach and enrollment, cut the federal assistance that reduces cost sharing (i.e. copays and deductibles) and eliminated an individual’s responsibility to enroll in coverage (the individual mandate).
Option 1 funds reinsurance ($10 billion) and increases funding to reduce consumer cost sharing in the Exchanges. Reinsurance helps to pay plans for their most costly subscribers – i.e. someone who has cancer or another expensive medical condition or accident; federal reinsurance allows plans to offer more affordable coverage. Cost sharing assistance would be increased by reducing copays, deductibles and the subscribers share of premiums to moderate income persons buying individual insurance through the Exchanges (e.g. Covered California) and by extending premium assistance to many more subscribers with middle class incomes. It costs $25 billion annually and would reduce the numbers of uninsured citizens by about 4 million. It reflects substantial reductions in premiums and cost sharing for moderate and middle-income subscribers using the Exchanges. Its costs over the next 10 years would be $320 billion.
Option 2 includes all of Option 1, and it re-institutes the individual mandate (individual responsibility), and it repeals the Trump administration’s exemptions from the ACA protections for short term coverage of up to a year. This reduces the numbers of uninsured citizens by 6 million and costs the federal government $24 billion annually. In other words more people will enroll if it is their responsibility to do so, and per person costs will decrease because more of the healthy enroll in ACA coverage through their employers, the Exchanges and Medicaid. California has recently adopted many of the provisions of Option 2 to take effect in January 2020. This would provide some additional help for Covered California’s moderate and middle-income subscribers and also help the state’s budget. Its costs over the next decade would be $305 billion.
Option 3 includes all of Options 1-2, and it covers the low income uninsured in the 14 states, which have refused to participate in the Medicaid expansion for their low-income citizens. It reduces the nation’s uninsured by nearly 11 million and costs the federal government about $80 billion. Individuals with low incomes are enrolled in the lowest cost Exchange plans with no share of premiums and minimal copays and deductibles (95% coverage). This is primarily beneficial to low-income citizens in the Southern and several Midwestern states, like Florida, Texas, Wisconsin and South Dakota, where the Governors and/or state legislatures have been adamant in resisting this coverage expansion that would be so helpful to their citizens and providers. Several state legislatures are resisting implementation of voter-approved initiatives to adopt the Medicaid expansion. This will be of no extra help to Californians since we already adopted this expansion. Its costs over the next 10 years would be $1.014 trillion.
Option 4 includes all of options 1-3 plus the “public option”. The public option could allow for a Medicare style plan to all Exchange participants or a Medicare back stop (comparable to Medicare Advantage) that gives all Exchange plans access to the lower Medicare reimbursement rates. This plan reduces the numbers of uninsured US citizens by 11 million and costs the federal government $45 billion. The much lower costs than Option 3 are due to reductions in provider reimbursement rates and insurance plan premiums in the Exchange plans. This will improve affordability of premiums for private individual insurance in California. Its costs over the next decade would be $576 billion.
Option 5 includes options 1-4, plus CARE plus elimination of the ESI firewall. CARE refers to automatic enrollment, enrollment at the point of services, retroactive coverage, re-enrollment and collections of premiums through the tax system for those who fail to enroll. It reduces the uninsured by 25 million and achieves 100% coverage of all US citizens and legal permanent residents. 6.6 million undocumented workers and their family members would remain uninsured. It would allow individuals with employment-based coverage to choose to enroll in the Exchange plans (including the public option) if they prefer due to the elimination of the ESI firewall. Its costs to the federal government are $108 billion. However, it is the only option yet discussed that reduces over-all health spending (due to the public option or Medicare backstop). It reduces provider’s uncompensated care to near zero. Under option 5, about 12 million Americans drop their employment-based coverage to get better and lower cost coverage through the Exchanges. This will reduce California’s uninsured by an additional 1.2 million persons. Mayor Pete and Vice President Biden’s plans are roughly mid way between Options 4 and 5. Its costs over the next decade would be $1.353 trillion.
Option 6 includes options 1-5 and further increases the subsidies for premium assistance and cost sharing in the Exchanges. It also provides universal coverage for all American citizens and legal permanent residents, but leaves 6.6 million undocumented workers and family members uninsured. It costs the federal government $146 billion and reduces national health spending by $19 billion. It reduces moderate and middle subscribers’ premiums and cost sharing in the Exchanges even more significantly than options 1-5, and as a result another million citizens would drop their employment-based coverage to get more affordable Exchange coverage. This will improve affordability of care and coverage for many Californians. Its costs over the next decade would be $1.825 trillion.
Option 7 is a Medicare single payer plan. It covers the same essential health benefits as the Affordable Care Act. It eliminates all private insurance and replaces it with the existing Medicare program, which pays about 80% of provider’s bills. It pays doctors and other providers at their existing Medicare rates; hospitals are paid at 115% of Medicare. For low and moderate income, there will be sliding fee scale cost sharing, very much like the Exchanges. It is universal coverage that covers all the uninsured, but not the undocumented. Moreover more undocumented workers become uninsured due to the elimination of employment-based private insurance – 10 million undocumented uninsured. It costs the federal government $1.3 trillion and reduces overall health spending by $210 million due to payment at Medicare rates. Some Californians will see an upgrade in their existing coverage while others (e.g. union members, like teachers and GM employees) will see a downgrade as they have more extensive coverage than the benefits and cost sharing offered under Option 7. Its costs over the next 10 years would be $15.650 trillion.
Option 8 is also a single payer plan, nearly identical to Medicare for All being strongly supported by Senators Warren and Sanders. It covers nearly all services, except for nursing homes, which remains the responsibility of state Medicaid programs. It covers all persons in the US, including the undocumented; there are no more uninsured. It has no copays, deductibles or premiums – no cost sharing. It pays doctors at Medicare rates and hospitals at 115% of Medicare. It costs the federal government an additional $2.7 trillion in its first year alone, and it increases over all health spending by $720 billion because it's a fee for service program with no cost sharing. There is no more private coverage and thus there could a large savings to employers, depending on how it is financed. There is also a big savings for the states by eliminating all of Medicaid, except nursing home care; again this depends on how the program is financed. Its costs over the next decade would be $32.015 trillion.
The Urban Institute makes no recommendations how to pay for the extended coverage offered in these 8 options.
Prepared by: Lucien Wulsin
Dated: 10/18/19