Policy Proposals Health Care Coverage, Costs, and Financing

1. Policy ProposalsHealth Care Coverage, Costs, and Financing

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

3. 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)?

4. 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

5. 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)

6. 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

7. Incremental Reforms

8. 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

9. 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

10. 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

11. 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

12. Comprehensive Reforms

13. 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

14. 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...

15. 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

16. Combining Incremental Reforms

17. 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

18. 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