RAND Analysis Finds Some Health Reform Policy Options Would Significantly Reduce Number of Uninsured Americans
New analysis from the RAND Corporation shows that a mandate requiring individuals to obtain health insurance — an option in various current legislative proposals — would increase the number of Americans with coverage by 9 million to 34 million, while a mandate requiring employers to offer insurance would boost the figure by 1.8 million to 3.4 million.
The latest analysis examines policy options designed to expand coverage to the uninsured.
In addition to individual policy options, the analysis examined a plan proposed in the lead-up to the current health care debate by U.S. Sen. Max Baucus. Researchers evaluated the likely effect of the proposal on coverage, spending, consumer financial risk and health. RAND’s analysis of that plan concludes it would reduce the number of people without insurance by an estimated 60 percent to 85 percent, depending on specific design choices.
That proposal relates to draft legislation that is still being negotiated by the Senate Finance Committee, of which Sen. Baucus (D-Montana) is chairman. Not all of the elements examined by RAND will necessarily be part of the legislation that ultimately emerges from that committee, but many of the features are similar to those found in the House Tri-Committee bill and the Health, Education, Labor and Pensions (HELP) Committee bill.
Researchers from RAND, a nonprofit, nonpartisan research organization, found that under different design choices the Baucus proposal could significantly cut the number of uninsured Americans with almost no increase in overall spending on health care, although government costs would increase by an estimated 5 percent to 7 percent.
The Baucus plan would be implemented over time and would include: a requirement that all employers above a certain size offer health insurance to their employees, an expansion in the eligibility for Medicaid and the State Children’s Health Insurance Program and a requirement that all individuals have health insurance coverage.
Researchers examined the effect of excluding companies with fewer than 5, 10 or 25 employees from the mandate, as well as the effect of penalties set at 5 percent, 10 percent and 20 percent of total payroll.
RAND estimates that before implementation of the individual mandate, the number of people who would become newly insured through employer-sponsored coverage could range from 2 million to 7.2 million, depending on assumptions.
Before the individual mandate is implemented, expanding eligibility for Medicaid and the State Children’s Health Insurance Program results in about 5 million more people obtaining health insurance coverage than under the employer mandate alone.
All of the health reform bills introduced by chairs of committees with jurisdiction thus far include some type of new national health insurance exchange that would allow individuals to purchase health insurance in a national market, rather than only among those plans offered in the state where they live. Once this exchange is operational, the plan RAND analyzed would require everyone to have insurance through either a public program (Medicaid, State Children’s Health Insurance Program, TRICARE) or through private sources (employer, individual policies, exchange).
“We found that the individual mandate has the largest effect on reducing the number of people without health insurance,” said Christine Eibner, lead researcher on the analysis of the white paper and an economist at RAND. She noted that the Baucus proposal specifies that subsidies to help purchase insurance would be offered to people with incomes of up to 400 percent of the federal poverty level.
She said the individual mandate is the one policy option that addresses the different characteristics of the uninsured. It will affect both the 44 percent of people who already have an offer of health insurance through their employer or Medicaid, but have not taken it, as well as the remaining group that would have to seek out insurance.
Researchers examined the effect of penalties set at 25 percent, 50 percent and 75 percent of the premium an individual would have to pay for a policy from an insurance exchange. Assuming a moderate employer mandate, increasing the penalty from 25 percent to 75 percent of the premium an individual would pay on the national insurance exchange would reduce the number of uninsured by 32.5 million — a 71 percent reduction. By contrast, a penalty of 25 percent would reduce the number of uninsured by 20.8 million, a 46 percent reduction.
Most of the major proposals in Congress include some new health insurance marketplace (such as the “exchange” in the white paper and the House Tri-Committee bill, and “gateways” in the HELP Committee bill). Subsidies to offset the costs of purchasing health insurance are generally only available to people who purchase via the exchange; and access to the exchange in many bills is limited to those who do not have any other source of coverage. The RAND team estimated that if this restriction were relaxed, 38.3 million people would be newly insured — an 85 percent reduction in the rate of uninsurance.
RAND researchers also estimated the increase in national spending on health care, the increase in government spending, the effect for consumers in different types of households, and the change in the health of the population that might be caused by adopting provisions in the white paper.
Under all of the policy options, the increase in national spending on health care was negligible, meaning that increasing the number of people with insurance would not likely change the rate of growth in health spending. Government spending would increase by 5 percent to 7 percent under the most likely scenarios; however, if the insurance exchange were open to a much wider group of people, government spending could increase by as much as 9 percent, according to the RAND analysis.
Consumers who are currently uninsured would likely spend more on health care if the proposals were implemented than they do today. RAND researchers estimate that people without insurance currently spend about 2 percent of their income on health care on average, compared with 6 percent among those with insurance. The analysis suggests the plan would prompt those who become newly insured to increase their spending on health care to about 5 percent, on average.
Researchers also evaluated whether any change would occur in the proportion of population likely to experience very high rates of spending on health care. They found that about one-quarter of the nation’s population would spend more than 10 percent of their income on health care after the policy change, the same proportion that faces high levels of spending today.
For a complete discussion of the options considered go here.
Go here to compare different policy options across a broad set of criteria.
Meanwhile, another Rand study finds that the program created to provide Medicare recipients with prescription drug benefits exceeded expectations during its first two years, extending pharmacy coverage to most seniors while reducing their overall spending on drugs.
Although Medicare Part D generated confusion when it was introduced in January 2006, the program has worked well for most seniors and is comparable to other non-Medicare drug plans that cover large groups of seniors, according to the report published in the August edition of the American Journal of Managed Care.
“In the beginning there was a lot of concern about Medicare Part D, but we found convincing evidence that it has exceeded expectations and generally has been successful,” said Geoffrey Joyce, the study’s lead author and a senior economist at RAND, a nonprofit research organization. “Most seniors now have prescription drug coverage that allows them to buy drugs at a reasonable cost.”
Researchers estimate that during its first year in 2006, Medicare Part D resulted in a 16 percent drop in out-of-pocket spending among seniors for prescription medication and a 7 percent increase in the number of prescriptions filled. The savings appears to have been concentrated among the poor and disabled.
“It appears that Medicare Part D has been particularly successful in lowering costs for the poor and the disabled, which is an important finding since initially there was concern these groups would be particularly vulnerable under a privately administered benefit,” Joyce said.
Researchers from RAND Health used administrative records to examine seniors’ participation in the Medicare Part D program, including how the program has affected seniors’ access to medications, their use of prescription drugs and their financial risk. They also compared the 10 largest Part D plans in 2006 to seven non-Medicare drug plans often cited as examples of low-cost or generous pharmacy benefits.
After two years, about 90 percent of seniors have drug coverage at least as generous as the standard Part D benefit. Medicare recipients in most states could choose from more than 50 different Part D plans in 2008, a sign of competition among the private companies that provide the coverage.
The number of covered drugs in the 10 largest Medicare Part D plans compared favorably with the coverage provided by other prescription drug plans that insure seniors, such as those offered by Kaiser Permanente, the Veterans Administration and the California Public Employees Retirement System.
Among the 300 prescription drugs most often used by seniors, about half were covered under the lowest co-payment tiers provided by the 10 largest Medicare Part D plans, according to the study. The number of drugs not covered varied from four to 41 among the largest Part D plans. In contrast, Kaiser Permanente and the Veterans Administration excluded 75 and 84 medications, respectively.
Although the program has exceeded initial expectations, researchers say problems remain with Medicare Part D.
A substantial number of predominantly low-income seniors still need to be better educated that enrolling in the program is in their interest and given instruction about how to evaluate the many plans offered to choose the one that best meets their prescription drug needs.
In addition, the annual spending caps included in the plans leave too many seniors without pharmacy coverage for a portion of each year, according to researchers. Recent work suggests that 3 million seniors reached the so called “donut hole” or gap in Part D coverage during 2007, with about 20 percent of seniors stopping their medications after their coverage lapsed for the year.
