Sheila Rustgi, Sara R. Collins, Jennifer L. Nicholson
This report—the first of a two-part series—analyzes and compares leading bills of the 110th Congress that are aimed at expanding and improving health insurance coverage. The Commonwealth Fund commissioned the Lewin Group  to estimate the effect of the bills on stakeholder and health system costs and the projected number of people the bills would insure. The Fund also commissioned Health Policy R&D, a health policy firm, to create detailed side-by-side comparative analyses of the bills as well as summaries. The report also includes an analysis of the proposals outlined by President-elect Barack Obama and Senator Max Baucus (D-Mont.), focusing on the insurance coverage provisions of those proposals. Because President-elect Obama and Senator Baucus have proposed frameworks for expanding coverage that lack key details, Lewin provided an estimate of the Building Blocks proposal—published in a Health Affairs article by Cathy Schoen and colleagues at The Commonwealth Fund—which is similar to the Obama and Baucus plans.
Under the current laws, Lewin projects that the number of uninsured in the United States will rise to 48.9 million people in 2010 out of a total estimated population of 306.9 million; 15.9 percent of the total population will be uninsured. Among the plans analyzed, Lewin estimates that up to 48.9 million uninsured could be covered—under a bill proposed by Representative Pete Stark (D–Calif.). At the other end of the spectrum, a bill introduced by Representative Sam Johnson (R–Texas), would result in a net loss of coverage of 283,000. According to Lewin's cost estimates, total health spending could be as high as $64.1 billion—under a bill proposed by Senator Mike Enzi (R–Wyo.)—or we could see net savings of $58.1 billion under Rep. Stark's bill. All coverage and cost estimates are for 2010 and are based on the assumption of full implementation in 2010.
The bills and proposals to expand health insurance coverage take a variety of approaches to achieve incremental as well as more comprehensive expansions in coverage. They fall into four broad categories:
The proposals and bills covered in this report include:
Aims to achieve universal coverage through a mix of private and public group insurance with a shared responsibility for financing. Employers other than small employers would be required to offer coverage or contribute to the cost of their employees' coverage. Expands eligibility for Medicaid and the State Children's Health Insurance Program (SCHIP). Creates an insurance exchange or connector that would offer a choice of private plans and a public option modeled on Medicare, with premium subsidies for low- and moderate-income families and tax credits for small employers. Building Blocks and Senator Baucus's proposal include an individual requirement for insurance. Building Blocks, unlike President-elect Obama's or Senator Baucus's proposal, improves benefits for the Medicare population.
Estimates of Coverage and Costs in 2010
|Number of uninsured covered||44.9 million|
|Total health spending||$17.8 billion|
|State and local||($32.7 billion)|
Establishes a requirement for non-elderly, non-disabled individuals to purchase private insurance, called Healthy Americans Private Insurance (HAPI). HAPI plans would be offered by private insurers through "Health Help Agencies" created by each state or territory, or through an employer under the Senate bill, or through the federal government if there were not a private plan available in a region. The income tax exclusion for employer health benefits would be eliminated and a standard tax deduction (Senate version) or tax credit (House version) would be substituted. Additional subsidies would be available for low-income individuals.
|Number of uninsured covered||46.0 million|
|Remaining uninsured||2.9 million|
|Total health spending||$13.7 billion|
|State and local||($29.0 billion)|
Promotes expanded health insurance coverage by replacing the income tax exclusion for employer health insurance with a standard income tax deduction and income-based, refundable, advanceable tax credits; setting standards for state insurance regulations; establishing an autoenrollment process; allowing coverage to be offered through small business health plans; and providing Medicaid and SCHIP beneficiaries with the option of using the value of benefits to purchase private health insurance. Creates a low-cost health plan option.
|Number of uninsured covered||26.9 million|
|Remaining uninsured||22.0 million|
|Total health spending||$64.1 billion|
|State and local||($21.2 billion)|
Replaces the income tax exclusion for employer health insurance with a refundable, advanceable flat tax credit for individuals to purchase qualified health insurance. The tax credit would only be available in states that establish a state health insurance exchange or a high-risk solution, such as a high-risk pool or reinsurance. The bill would establish a program for the certification of state health insurance exchanges. Creates a low-cost health plan option.
|Number of uninsured covered||22.3 million|
|Remaining uninsured||26.6 million|
|Total health spending||$31.1 billion|
|State and local||($52.9 billion)|
Establishes a commission to oversee demonstration grants to regions, states, or local governments to expand health insurance coverage and to improve health care quality and efficiency. The commission would provide states with a range of reform options, which might include expansion of public programs, tax credits, purchasing pools, buy-ins to state and federal employee benefit programs, risk pools, single-payer systems, and health savings accounts. States would be required to provide a five-year target for reducing the number of uninsured. The commission would review state applications and determine grant amounts and submit to Congress a list of recommended applications and requests for grant funding.
(In these estimates, the Lewin Group assumed that 15 states would implement universal coverage plans similar to the Massachusetts law.)
|Number of uninsured covered in the 15 states||21.1 million|
|(out of 26.7 million uninsured in 2010 under current law)|
|Remaining uninsured in the 15 states||5.6 million|
|Remaining uninsured nationally||27.8 million|
|Total health spending||$37.7 billion|
|State and local||$19.4 billion|
Creates a new public health insurance program administered by the federal government to provide everyone with multiple choices for health coverage. Under the Stark bill (H.R. 1841), employers would either offer their employees coverage or pay into a fund to cover their employees through the new public program. Under the Kennedy and Dingell bills (S. 1218 and H.R. 2034), employers and their employees would help finance the expansion through new payroll taxes.
|Number of uninsured covered||48.9 million|
|Total health spending||($58.1 billion)|
|State and local||($83.6 billion)|
Phases out the waiting period following the onset of a disability before a person under 65 may qualify to enroll in the Medicare program. The bill also would expand the list of specified fatal diseases that allow individuals to enroll in Medicare.
(In this estimate, the Lewin Group assumed the waiting period would be eliminated in 2010, rather than being phased out.)
|Number of uninsured covered||299,200 currently in waiting period|
|Remaining uninsured||48.6 million|
|Total health spending||($0.6 billion)|
|State and local||($2.3 billion)|
Provides states with incentives to expand coverage for all children up to age 21 in families with incomes up to 300 percent of poverty through Medicaid and SCHIP, as well as incentives to simplify enrollment procedures. The bill would require employers offering coverage to provide a family option with coverage for dependents up to age 21 and would create a new refundable tax credit for coverage of a dependent child under certain circumstances. Any taxpayer, except those in the lowest tax brackets, with uninsured, dependent children would forfeit the personal tax exemption ordinarily available to individuals with dependent children.
|Number of uninsured covered||6.0 million children under age 21|
|Children under age 21||$5.9 million|
|All uninsured||$42.9 million|
|Total health spending||$2.0 billion|
|State and local||($15.7 billion)|
Permits trade, industry, professional, or other similar associations to form association health plans, which could provide health benefits to employees of businesses that are members of the associations.
|Number of uninsured covered||(283,000)|
|Remaining uninsured||49.2 million|
|Total health spending||($0.4 billion)|
|State and local||$0.7 billion|
Creates a nationwide health insurance purchasing pool through which small businesses (100 employees or less) and self-employed individuals could purchase health insurance. The purchasing pool would offer a choice of private plans. Firms of fewer than 50 employees would be eligible for tax credits. An office within the Department of Health and Human Services would be created to administer the small business health options program, and a Small Business Health Board would be established to monitor the implementation of the program and make recommendations for improvements.
|Number of uninsured covered||1.7 million|
|Remaining uninsured||47.2 million|
|Total health spending||$15.6 billion|
|State and local||($1.2 billion)|
The bill would allow health savings account (HSA) contributions to be used to pay health insurance premiums in the individual market, and would increase HSA contribution limits for individuals ($2,250 to $4,500) and families ($4,500 to $9,000) from current levels. More people would be eligible for HSAs, including those participating in certain flexible spending account and health reimbursement arrangement programs, Medicare Part A-only beneficiaries, and veterans receiving benefits from the Department of Veterans Affairs to cover health care expenditures for a service-related disability.
|Number of uninsured covered||5.8 million|
|Remaining uninsured||43.1 million|
|Total health spending||$3.7 billion|
|State and local||$4.5 billion|
Reducing the Number of Uninsured
The bills and proposals that seek fundamental reform of the health insurance system have the most significant impact on reducing the number of uninsured (Figures ES-1 and ES-2). Within that category, bills that create new public insurance programs like Medicare that are open to the full population, such as Rep. Stark's proposal, or use a similar centralized financing mechanism, have the greatest potential to cover everyone. Mixed private–public approaches, like those of President-elect Obama and Sen. Baucus, also have potential to cover nearly everyone but would require an individual requirement for everyone to have insurance to achieve near-universal coverage. Sen. Wyden's and Rep. Baird's proposal to replace the income tax exclusion for employer benefits with an income tax deduction and premium subsidies, combined with new regional purchasing agencies and an individual and employer requirement to participate would also cover nearly everyone.
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While Senators Enzi and Burr also propose replacing the employer benefit tax exclusion with tax credits and new standard income tax deductions, the lack of a strong individual coverage requirement (Senator Enzi does include a process to autoenroll people without coverage), and less organized insurance markets than those proposed by Obama, Baucus, and Wyden reduce the effectiveness of their proposals to cover everyone.
The federal–state partnership bills (Baldwin, Bingaman, Feingold–Graham) that would provide grants to states to expand coverage would result in a varying degree of coverage, depending on the number of participating states, the amount of funding provided, and the reforms that states pursue. Assuming that 15 involved states would pursue a Massachusetts-style reform with an individual requirement to have health insurance, nearly everyone would become covered in those states.
Incremental reform bills cover far fewer people, but target high-risk groups. Sen. Kerry and Rep. Waxman's bill to expand coverage for children up to age 21, covers 6 million uninsured children and young adults out of an estimated 12 million uninsured. Though the bill is aimed at helping eligible children obtain and retain coverage, linking the tax penalty for not covering dependent children in the bill to autoenrollment into default coverage could increase the number of children and young adults covered. Sen. Bingaman and Rep. Green's bill to phase out the two-year waiting period for Medicare for the disabled would be effective at covering everyone in that group, including the uninsured.
Rep. Johnson and Sen. Durbin's bills are focused on the affordability issues facing small companies that buy insurance in the small-group market. By allowing small businesses to effectively bypass state insurance regulations, the Johnson bill makes small-group coverage more affordable for companies with a young and healthy workforce but less affordable for those with an older or less healthy workforce, which would result in a net loss of coverage of 283,000 people. The Durbin bill seeks a different approach by establishing a national purchasing pool for small employers with regulations against rating on the basis of health and requiring participating states to regulate their small-group markets, therefore avoiding the adverse selection that affects the Johnson bill. While the Durbin bill provides relief to many small companies, the incentives are not sufficient to cause most non-insuring firms to offer coverage. About 1.7 million uninsured people would become insured under this bill.
Rep. Cantor's proposal to double the amount of pretax income that people can contribute to health savings accounts (HSAs) and allow people to use the funds, without tax penalty, to purchase health insurance in addition to covering out-of-pocket costs, is estimated to insure 5.8 million people. Currently, people can use HSA balances to pay for costs not covered by insurance but not for premiums.
Improving the Quality of Health Insurance Coverage
Many of the bills and proposals aim to not only expand coverage but to set standards for covered benefits and out-of-pocket costs. Both President-elect Obama and Sen. Baucus are explicit about the need for defining benefit standards for both private and public health plans. To achieve this, Sen. Baucus would establish an Independent Health Coverage Council with members appointed by the President with advice and consent of the Senate that ensures coverage is affordable, clinically appropriate, ensures access to necessary services, and protects enrollees from high out-of-pocket costs.
Federal Health Expenditures
The bills that would fundamentally reform the health insurance system are estimated to be the most expensive to the federal government, with the exception of Sen. Wyden's bill (Figure ES-3).
Under the current financial system, Rep. Stark's AmeriCare bill would cost the federal government about $188.5 billion in 2010. Though it would insure less than half the number as the Stark bill, Sen. Enzi's bill is estimated to cost the federal government nearly as much—$176.4 billion. Sen. Burr's bill would cost $161.3 billion.
The Building Blocks framework, an approach similar to that of President-elect Obama (but including a coverage requirement) and Sen. Baucus, has estimated federal costs in the first year of $103.9 billion, which also includes the cost of improving coverage for Medicare beneficiaries. Senator Wyden's bill, which is estimated to cost the federal government $1.2 trillion, raises sufficient revenue and offsets other spending through new income taxes, household and employer premium contributions, and the elimination of Medicaid to provide a net savings of $40 billion.
The federal cost of the federal–state partnership bills (Baldwin, Bingaman, Feingold–Graham) to provide grants to 15 states to implement Massachusetts-style universal coverage strategies is estimated at about $40 billion.
Incremental bills are less expensive to the federal government than most of the proposals for fundamental insurance reform but cover fewer people. The spending estimated in some incremental bills, such as Sen. Durbin's and Rep. Johnson's small business bills, mostly offers improved coverage and cost relief to people or businesses that already have coverage, rather than expanding coverage.
National Health Expenditures
Though Rep. Stark's AmeriCare bill is the most expensive to the federal government, it provides the biggest overall health savings, lowering projected national expenditures by $58 billion (Figure ES-4). It achieves this by significantly lowering the costs of insurance administration by covering most people through a program like Medicare, which has substantially lower administrative costs than private insurance. Savings are also accrued by paying all providers at Medicare reimbursement rates.
Senator Enzi's bill increases national health spending by $64 billion. By insuring more people through the individual insurance market, where administrative costs average 25 percent to 40 percent of premium dollars, the bill increases administration costs by $22 billion. In addition, the bill allows Medicaid beneficiaries to use the value of their benefits to purchase private health insurance. This feature increases provider payments by an estimated $17.3 billion because providers would be paid at private, rather than Medicaid, rates.
A great deal can be learned from the estimated impact on coverage and costs of the bills introduced in the 110th Congress, and much that will prove useful to Congress and the new Obama administration as they move forward in 2009 to develop new proposals to reform the health care system. The proposals to fundamentally reform the health system reveal the importance of an individual insurance requirement to bring most people into the system. Bills without an autoenrollment mechanism and individual requirement fall far short of universal coverage. The effectiveness of such a requirement, however, is contingent upon an enforcement mechanism and the ability to determine an appropriate level of benefits covered and cost-sharing that will improve health outcomes over the long term yet ensure affordability.
In the long run, it will not be productive to focus only on the impact of reform policies on federal, employers', or families' budgets. Instead, we must move forward while watching the number that really matters—the more than $2 trillion we spend collectively as a nation on health care each year. This ultimately determines the size and growth of all participants' budgets.
 The Lewin Group is a wholly owned subsidiary of Ingenix which in turn is owned by UnitedHealth Group. The Lewin Group maintains editorial independence from its owners and is responsible for the integrity of any data that it produces for the Fund.