Session: Cost-Sharing
Room: Upson B17
Time: Tue 13:15-14:45

Presenter: Lisa Clemans (Urban Institute. Health Policy Center)

Discussant: Suhui LiLehigh University

Abstract

A major task in the effort to craft a final health reform bill that can be passed in both Houses of Congress is to balance government costs against making health insurance affordable for low- and middle-income families. We simulate the effect of different premium and cost-sharing subsidy schedules on household financial burdens and government costs, within the context of comprehensive health reform. In this presentation, we will discuss the methods and assumptions underlying the model, and present updated results for bills that may emerge from Congress.

Using the Urban Institute’s Health Insurance Policy Simulation Model (HIPSM), a detailed microsimulation model of the health care system, we estimate coverage, costs, and household financial burdens under legislation proposed by the Senate Finance Committee (SFC) and under two alternative premium and cost-sharing subsidy schedules: those specified in the Senate Leadership bill, and those in H.R. 3962, passed by the House of Representatives.

We find that the number of uninsured would drop from 49 million to 19 million people under the SFC bill and by somewhat more under subsidies of the Senate Leadership bill or the House bill. Government subsidy costs (in $2009) under the SFC bill are estimated at approximately $24 billion. Corresponding costs using the subsidies of the Senate Leadership bill would be $27 billion and costs using subsidies of the House Bill would be approximately $39 billion.

Family health care costs (premiums plus out-of-pocket spending net of subsidies) for those buying nongroup coverage through the exchange (where most of the subsidies are obtained) would vary considerably by income and across the reform options. Under the SFC bill, the median low-income family (with an income of 133 to 199 percent of the federal poverty level [FPL]) would spend 7 percent of income on health care, while the median family with somewhat higher income (200 to 299 percent of the FPL) would spend 11 percent of income. Those at the 90th percentile of the spending distribution, families with greater health care needs and older adults, would face higher burdens due to additional out-of-pocket costs and the effects of 4:1 age rating bands.

Compared to SFC bill subsidies, the Senate Leadership bill subsidies would decrease family health care cost burdens by about 1 percent of income for those between 200 to 399 percent of the FPL. Substituting the premium and out-of-pocket subsidy schedules from the House bill would decrease burdens for lower-income families; much larger decreases would occur among higher spenders due to the additional cost-sharing subsidies.

While each option presented here would greatly reduce the number of uninsured and make health insurance more affordable for millions of Americans. this analysis shows that health care cost burdens under the SFC bill can be substantial, particularly for those with significant health care needs. Expanded premium and cost-sharing subsidies could reduce the largest burdens, and doing so would increase overall coverage as well as government costs.

Key Terms

health insurance, reform, simulation, affordability, cost, coverage, premiums, cost-sharing, subsidies

Authors:

Lisa Clemans-Cope (The Urban Institute. Health Policy Center) and Matthew Buettgens (The Urban Institute. Health Policy Center)