A strategy to strive toward universal health coverage
While many states are undertaking health care reform initiatives, including attempting to reach universal coverage within their state, the nation continues to lose ground on coverage and families are feeling the strain on their wallets and their health.
Commonwealth Fund executives say while the need for universal coverage is clear, there is no consensus on how to provide and finance such an expansion. To remedy that situation, they have produced a recommended strategy, "Building Blocks for Reform: Achieving Universal Coverage with Private and Public Group Health Insurance," to provide a pathway to universal coverage with a minimal increase in total national spending and relatively modest net federal budget costs. The authors estimate their plan would insure 44 million of the 48 million Americans who currently don't have health insurance.
Commonwealth Fund president Karen Davis and her colleagues Cathy Schoen and Sara Collins say the beauty of their plan is that it uses techniques supported by many Americans and doesn't require a radical new approach to coverage.
The two core components of the Building Blocks framework are expanding Medicare and maintaining the current role of employer-sponsored insurance. The authors say their plan would continue uninterrupted coverage for many insured people while offering new options for small firms and individuals.
Small businesses, the uninsured, and the self-employed could gain coverage through a new national insurance connector that would offer a choice of Medicare-like options with enhanced benefits, which the researchers call Medicare Extra, and private plans. Medicare Extra premiums would be community-rated for everyone under age 60. The study estimates 2008 premiums at $259 per month for single coverage and $702 per month for families.
Much of the money to finance the plan would come from a "play-or-pay" requirement in which employers would have to offer coverage or pay a payroll tax of 7% of earnings up to $1.25 per hour. Employers offering coverage to employees would be responsible for at least 75% of the premium and plans would have to meet general minimum standards.
Help for low-income adults
Low-income adults with incomes below 150% of the federal poverty level would be eligible for coverage through Medicaid and SCHIP, with premiums fully covered. Middle- and higher-income individuals could gain some financial relief through tax credits. Premium assistance through tax credits would be made available to ensure that premiums don't exceed 5% of income for lower-income households or 10% of income for higher-income households.
Based on estimates by the Lewin Group for the Commonwealth Fund, this Building Blocks framework would achieve near-universal coverage of 44 million of the 48 million estimated uninsured, or 99% of the U.S. population. The remaining uninsured would be largely low-income nontax-filers who could be retroactively enrolled in Medicaid or SCHIP when they seek health care.
About half of the individuals gaining insurance coverage under this framework would obtain their coverage through the national insurance connector and its new insurance products. The other half would be equally split between enrollment in employer plans and enrollment in Medicaid or SCHIP.
The authors say the requirement that employers cover employees or contribute to coverage would induce some employers to offer coverage. Premium assistance based on income also would make it possible for more low-wage workers to take up their employer's offer of health coverage.
Boon to small business
For the 49 million insured people who change their coverage, their coverage would improve or their premiums would be lower. The authors say small businesses are likely to respond to the possibility of improved lower-cost coverage by buying coverage through the national insurance connector instead of buying it directly themselves. An estimated 32 million insured people covered by employers would switch for coverage through the connector. But enrollment directly through employer plans also would increase since some individuals now covered by Medicaid or SCHIP would switch to employer coverage, as would some who are now covered by individual insurance plans.
Total employer-based coverage, either sponsored directly by employer health plans or financed by employers through the connector, would increase from 158 million people to 184 million, going from 53% of the population to 63%. The authors say the change in coverage reflects decisions made by employers or individuals to switch to better health coverage, rather than a requirement that people change their current coverage.
"Some health insurance bills introduced by members of Congress would require everyone to drop employer coverage and be covered under Medicare or a single-payer program, (while) others would abolish employer-based insurance and require everyone to obtain coverage on their own through the individual insurance market or a regional insurance connector," the report says. "Given that many Americans are satisfied with their current coverage, offering choices is likely to garner greater support than requiring radical changes in existing insurance."
An estimated 60 million Americans would be covered through the national insurance connector, including individuals whose employers purchase insurance through the connector. Some 40 million people would obtain coverage through the Medicare Extra fee-for-service plan, and the remaining 20 million would be in private plans.
The study says the attraction of Medicare Extra comes from its lower premiums compared with private plan offerings, For 2008, it estimates that individuals under age 60 would pay $259 per month, compared to the average employer premium for single coverage of $373 per month in 2007. For families, Medicare Extra would be $702 per month, compared with just over $1,000 per month for employer coverage last year.
If such a premium differential persisted over time, it might be expected that more switching would occur. Large employers would be likely to seek extension of the Medicare Extra option to their choices as well, leading to still further enrollment growth. And that could lead to transforming the private insurance market as private insurers try to meet the competition by lowering overhead, taking a tougher line in provider payment negotiations, and adopting innovative practices to pursue higher value or lower premiums.
Total cost is reasonable
Recognizing that one of the major barriers to enactment of universal health insurance coverage is the perception that it is extraordinarily costly, the researchers say the estimated net effect on national health spending from implementing their Building Blocks framework would be an increase of less than 1% ($15 billion) of the $2.4 trillion in estimated national health expenditures for 2008.
This is possible because the voluntary shift of a substantial number of people into Medicare Extra coverage achieves significant savings, including $15.4 billion in lower administrative costs and $22 billion in lower Medicare provider payment rates for individuals switching from private coverage.
Most of the increased spending is attributed to an increase in the use of health services by newly insured and more adequately insured people. The study welcomes this change because a major goal of universal coverage is to reduce existing disparities in health care between the insured and uninsured, improve receipt of preventive care, and make it more affordable to access services and medications for control of chronic conditions.
The authors say the Building Blocks framework would result in a reallocation of spending by federal and state governments, employers, and households. While the overall impact on health spending is relatively minor, some sectors would gain while others would lose. "The most significant gainers, not surprisingly, would be uninsured and underinsured households who are relieved of the financial burdens of health care; estimated net savings for households in 2008 are $76 billion," they say.
State governments would also see benefits with a drop in their spending of $12 billion in 2008 as federal health insurance premium subsidies for low-wage workers replace some shared federal-state Medicaid outlays and yield some savings for state employee health insurance coverage.
Given the design choices the authors propose, the federal government would have a net cost of $82 billion in 2008, stemming largely from greater use of health services and reduced financial burdens on households. Some $43 billion of that total would come from improved coverage and financial protection for Medicare beneficiaries to provide them with coverage comparable to that of adults under age 65.
"If no other steps are taken to reform the way in which care is provided, these expenditures could be expected to grow with the rise in health care costs," the report says. "The substantial costs to the federal budget estimated for 2008, and the inevitable growth in outlays for all payers over time, make it imperative that any proposal to expand coverage be coupled with significant measures to achieve health system savings."
The study estimates a total impact on health system spending over 10 years of $218 billion, still relatively modest when looking at total health spending projected to be $33 trillion in that time period. But the impact on individual sectors would be significant. Thus, the 10-year federal budget cost would be $1.3 trillion, while employers would pay an additional $267 billion over and above current projected outlays. Households and state and local governments would experience significant 10-year savings of $1.2 trillion and $164 billion, respectively.
To offset such costs, the authors say, it will be important to pursue coverage expansion simultaneously with comprehensive reforms to control costs and improve quality and access. The report looks at reforms suggested by the Commonwealth Fund's Commission on a High Performance Health System and says the 10-year impact shows there could be significant savings if both approaches are pursued simultaneously.
"The estimates presented here should help dispel the conventional wisdom that universal coverage is beyond our means," the report concludes. "Our analysis shows that it is possible to cover nearly everyone with affordable and comprehensive insurance, expand access to essential care, and improve informed decision-making by patients, clinicians, and payersall while reducing spending on health care. Buying more effective, higher-value care has significant benefits for patients and will help move the U.S. health system toward higher performance....The most encouraging message from the estimates presented here is that it is possible to aim for a high-performance health system that simultaneously achieves better access, improved quality, and greater efficiency. Other nations have long since adopted many of the reforms we have set forth here. The U.S. can learn from their experience, as it can from states like Massachusetts and Vermont that have recently enacted reforms. Our future is up to us."
Download the report at http://www.commonwealthfund.org/publications/publications_show.htm?doc_id=685132.
While many states are undertaking health care reform initiatives, including attempting to reach universal coverage within their state, the nation continues to lose ground on coverage and families are feeling the strain on their wallets and their health.You have reached your article limit for the month. Subscribe now to access this article plus other member-only content.
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