Weighing Benefits and Costs of Health-Care Reform Plans

Lilo H. Stainton | October 16, 2019 | Health Care
As Democrats debate varying proposals, authors of a new report aim to equip voters with the facts needed to assess the possible options
Credit: Propublica.org/CC
Signing up for health insurance under the Affordable Care Act

The United States has a number of options to expand health insurance coverage, according to a new report, and while all the reforms examined would boost federal expenditures, some would actually reduce the total amount state governments, businesses and households spend on medical care.

In joint research released today, the Commonwealth Fund and the Urban Institute — national policy organizations that have studied access to care — identified eight reform models and detailed how each would affect the number of people uninsured in the nation, the federal budget and health-care spending overall. The models are based on proposals raised as part of the 2020 presidential election, but are not necessarily specific to any candidate or legislation, the groups said.

“Our hope is that this extensive analysis will clarify for voters and policy makers the implications of these proposals before us,” said Sara Collins, a vice president at the Commonwealth Fund. Previous studies by the group showed that many people are struggling to make sense of the reform plans under discussion among Democratic presidential candidates, a dozen of whom participated in a televised debate Tuesday night.

Researchers for the two groups tested models incorporating a wide range of possible solutions, several of which are already in place in New Jersey. Some envision minor enhancements of the existing system — including additional subsidies for certain consumers, a national reinsurance program, which provides a financial backstop for the largest medical claims, and restoring the individual mandate, a tax penalty imposed under the Affordable Care Act on those without insurance. Other models studied also include more comprehensive “universal coverage” concepts that would expand Medicaid and help stabilize the prices for commercial plans.

Finally, the researchers also examined two more expansive “single-payer” options, including one designed to insure all Americans regardless of their residency status, which would add a whopping $2.8 trillion to federal taxpayers’ tab in 2020 alone. While this most generous model — which also features coverage for dental, hearing, vision and long-term care, and would replace private insurance options — would “considerably” reduce spending by consumers, employers and states, the extra costs involved would overshadow these savings and drive up total health care spending by nearly $720 billion, the report notes.

Cost is a ‘big lift’

“All health reform plans involve choices and trade-offs,” said Linda Blumberg, an Urban Institute fellow and lead author. “This report serves as a guidepost for measuring the potential effects of different reform proposals when it comes to covering the uninsured, improving the affordability of health care, and the government funding required to implement them.”

The two organizations did not endorse one model over another, assess the political likelihood of their implementation, or examine how the federal government could generate the revenue needed to pay for the more costly single-payer options.

The cost is “a big lift,” acknowledged Dr. David Blumenthal, the president of Commonwealth. “It’s hard enough to model these technically without modeling the politics as well.”

New Jersey has its own reinsurance program and insurance mandate — initiatives that are credited for blunting the impact of rising insurance rates. While the average cost of plans on the individual market is expected to rise 8.7% in 2020, consumers will still pay lower premiums for these policies than they did last year.

The federal Affordable Care Act, fully implemented in 2014, significantly expanded access to Medicaid in nearly three dozen states — including New Jersey. It further drove down the uninsured rate nationwide by triggering changes within state-based individual markets, which serve those who don’t qualify for Medicaid and don’t get insurance through work.

In the Garden State, the number of people without health insurance declined by more than 40% since then, to roughly 655,000 in 2018, according to New Jersey Policy Perspective, a progressive policy organization that has tracked the law’s impact.  Roughly 800,000 New Jerseyans gained coverage as a result of the law.

Democrats push for enhancements

While President Trump and some of his Republican colleagues have called for repealing or replacing the ACA, or Obamacare, the Democratic presidential candidates have proposed various options for expanding coverage. Former Vice President Joe Biden is among those calling for building on Obamacare, while Sens. Bernie Sanders and Elizabeth Warren are advocating for a “Medicare for All” single-payer system.

The rising cost of health care is also whetting this appetite for reform, experts agree. Studies show premiums, deductibles and other out-of-pocket costs are rising faster than wages in many states. The problem is a particular issue in the Garden State, where health-care spending rose 18% between 2012 and 2016, outpacing the national increase of 15% for those years, according to an analysis commissioned by the New Jersey Health Care Quality Institute.

Cost and coverage are two issues clearly on people’s minds, said former state health commissioner Heather Howard, a lecturer at Princeton University’s Woodrow Wilson School of Public and International Affairs. New federal data suggests the uninsured rate may now be on the rise again, she said, which only adds to these concerns.

“Underlying the various national proposals seems to be a consensus that health care is a right, not a privilege,” Howard said. “But there is disagreement about how fast to move and how best to administer a universal health-care benefit, including whether there will be a role for employer-sponsored insurance or private insurance companies.”

Howard said the Commonwealth/Urban report raises important questions that could help voters evaluate these proposals for themselves.

A look at eight models

Through their analysis of the eight options, the organizations identified several common themes. While all models would lower premiums and other out-of-pocket costs for consumers — with single-payer plans providing the greatest savings — the tradeoff was higher federal taxes.

And reaching more universal insurance coverage requires a model that would include the nation’s 6.6 million undocumented immigrants — an estimated 500,000 of whom live in New Jersey, the report notes. An automatic enrollment mechanism connected to other social services would help ensure eligible individuals don’t slip through the cracks.

In addition, there are ways to build on the current hybrid system of public and employer-sponsored care to get near universal coverage with what the researchers termed “fairly moderate” taxpayer investments. But reaching everyone in the nation through a single-payer plan with more generous benefits would cost much more.

For the purpose of the analysis, the Commonwealth/Urban report assumed that each of the eight models was fully implemented in 2020, a process that in reality would take several years to achieve. The researchers found:

  • ACA Enhanced I would provide greater subsidies to individual-market consumers and reinsurance for individual-market plans. It would reduce the percentage of uninsured people by 12% — allowing 4.6 million more to obtain coverage. —  add $25.7 billion to federal taxes, and increase overall health spending by $7.8 billion.
  • ACA Enhanced II, which includes the reforms of ACA Enhanced I, also restores the individual mandate and ends short-term plans. It would expand coverage to 6.3 million people, add $24.5 billion in taxpayer costs, and $7 billion in overall health spending.
  • ACA Enhanced III involves the changes in plans I and II and also expands Medicaid in the 17 states that have yet to do so and creates automatic enrollment features. This model provides coverage for 10.8 million more people, costs federal taxpayers $81.3 billion, and boosts health-care spending by $39.6 billion across the nation.
  • ACA Enhanced IV adds caps on certain payment rates for healthcare providers. This would also expand coverage to some 10.8 million residents, but cost taxpayers $46.7 billion, and would not increase health spending overall.
  • Universal Coverage I involves the other reforms plus additional auto-enrollment features and would allow workers to opt out of employer-sponsored plans if public options were cheaper. It would cover an additional 25.6 million people — all but the 6.6 million undocumented residents — at an additional taxpayer cost of $122.1 billion. But overall healthcare spending would decline by $22.6 billion.
  • Universal Coverage II mirrors Universal Coverage I, but with even more generous subsidies for those buying individual-market plans. It would also cover all but undocumented residents, at a cost to federal taxpayers of $161.8 billion, with an overall healthcare savings of $19.1 billion.
  • Single Payer “Lite” envisions a nationwide public health insurance plan — and no private coverage — with benefits similar to today’s ACA policies, but no premium costs for consumers and limited out-of-pocket expenses. While this plan would cover all legal residents, it could force some undocumented individuals who now have private insurance to lose that coverage. The taxpayer tab would be $1.5 trillion and it would shave $209.5 billion off the total health-care costs.
  • Single Payer Enhanced is a broad, government model with generous benefits for all U.S. residents, regardless of immigration status. The price tag would be $2.8 trillion and health-care spending would rise by $719.7 billion.