Testimony: Status of U.S. Health Insurance Coverage and the Potential of Recent Congressional Health Reform Bills to Expand Coverage and Lower Consumer Costs

Executive Summary

Thank you, Mr. Chairman, members of the Committee, for this invitation to testify today on current proposals to reform the U.S. health care system. My comments will focus on the national gains in health insurance coverage since the passage of the Affordable Care Act (ACA), the problems people continue to report affording health insurance and health care, and the potential of recent Congressional health reform bills to address these problems.

The ACA brought sweeping change to the U.S. health system, expanding comprehensive and affordable health insurance to millions of lower- and middle-income Americans, and making it possible for anyone with health problems to buy health insurance by banning insurers from denying people coverage or charging them more because of preexisting conditions.

The number of uninsured people in the United States has fallen by nearly half since the ACA was signed into law, dropping from a historical peak of 48.6 million people in 2010 to 29.7 million in 2018. There was also a decline in the share of people who reported financial problems associated with medical bills or who had problems getting health care because of cost. A large body of research on the effects of the ACA shows that the overall impact of the legislation on people’s ability to afford health insurance and get needed health care has been positive.

However, three distinct, yet interrelated, problems remain: millions of people are still uninsured, millions of people with insurance have plans that are leaving them underinsured, and health care costs are growing faster than median income in most states.

After dropping significantly through 2015, the national uninsured rate has held steady at around 9 percent, with ominous upticks in 14 states in 2017. These stalled gains stem from four primary factors:

• Seventeen states have not yet expanded Medicaid, including the heavily populated states of Florida and Texas.
• People with incomes just over the marketplace subsidy threshold (about $48,560 for an individual and $100,000 for a family of four) and many in employer plans have high premium contributions relative to income.
• Congressional and executive actions regarding the individual market and Medicaid have reduced potential enrollment in both.
• Undocumented immigrants are ineligible for subsidized coverage under the ACA.

In addition to the 29.7 million people who lack insurance, an estimated 44 million working-age adults with insurance are underinsured because they have high out-of-pocket costs and deductibles relative to their income. This is up from 29 million in 2010, according to Commonwealth Fund survey data. The greatest growth in the share of underinsured adults is occurring among those in employer health plans. However, people who buy plans on their own through the individual market — including the ACA marketplaces — are underinsured at the highest rates.

The growth in underinsurance is attributable to two primary factors:

• Growth in cost-sharing, particularly deductibles, in the individual market and employer plans
• Sluggish growth in U.S. median income; out-of-pocket health care costs and deductibles comprise a growing share of income among low- and moderate-income families.

Leaving millions of people uninsured or underinsured has implications for families and the nation’s general prosperity. Commonwealth Fund surveys have consistently found that people who lack health insurance even for short periods of time, or those who are underinsured, avoid or delay needed health care and are at risk of accumulating medical debt. Many adults with medical bill or debt problems report serious financial problems including using all their savings to pay their bills or receiving a lower credit rating as a result of their debt. Other research has demonstrated that people who don’t have adequate health insurance all their lives have fundamentally different life experiences and less economic opportunity than those who are adequately insured. This includes lower educational attainment, lifetime earnings, and life expectancy.

A major factor underlying trends in both uninsured and underinsured rates is the overall rate of growth in U.S. health care costs. Health care costs are the primary driver of premium growth in private insurance. To temper premium growth, insurers and employers have increased deductibles, exposing enrollees to growing out-of-pocket risk. This means that health care costs ultimately drive consumers’ decisions to buy insurance (via premiums) and whether to get health care (via cost-sharing). Income-based subsidies and risk-reduction strategies like reinsurance can lower premiums and consumers’ out-of-pocket costs, but they will not address the underlying cost drivers. Moreover, the federal and state costs of those policies also will be affected by overall cost growth. It is therefore critical that such policies be paired with strategies to lower U.S. health care costs.

There is growing evidence that prices paid to providers — especially hospitals — rather than use of health care services, are the primary driver of health care cost growth. There is also considerable evidence that prices explain the wide health care spending gap between the United States and other wealthy countries.

Recent research also indicates that per capita costs in U.S. private insurance are rising faster than those in public insurance programs. Medicare sets prices for providers, while prices in commercial plans are usually the result of negotiation between providers and insurers or employers. Gerard Anderson and colleagues note that the difference between prices paid by public and private insurers ballooned from 10 percent in 2000 to 50 percent in 2017. They argue that to lower the rate of growth in U.S. health care costs, we need increased scrutiny of private insurer payments to providers.

Congressional Democrats have introduced several bills aimed at addressing the interrelated problems of uninsurance, underinsurance, and rising health care costs. The bills are similar in that they expand the public portion of our mixed private–public health care system. They fall along a continuum that ranges from adding public plan features to private insurance to Medicare-for-All proposals. The bills may be broadly grouped into three categories:

• Adding public plan features to private insurance. These bills include provisions to enhance the premium and cost-sharing subsidies for marketplace plans, fixing the so-called family coverage glitch in employer plans, adding reinsurance, and addressing the Medicaid coverage gap for low-income people in nonexpansion states.
• A choice of public plans alongside private plans. In addition to enhancing ACA subsidies and providing reinsurance, the bills in this category also give consumers a choice of a public plan, based on either Medicare or Medicaid, for employers and people in the ACA marketplaces. The bills use the leverage of the federal government’s buying power in setting premiums for the public plan, establishing provider payment rates, and negotiating prescription drug prices. Some bills also improve benefits for people currently enrolled in Medicare.
• Making public plans the primary source of coverage in the U.S. Bills in this category are single-payer or Medicare-for-All bills in which all residents are eligible for a public plan that resembles the current Medicare program, but is not the same program we have today. The bills limit or end premiums and cost-sharing and end most current forms of insurance coverage, including most private coverage, with the exception of HR 7337, which retains employer coverage as an option. Benefits are comprehensive and include services not currently covered by Medicare such as dental, vision, and long-term care. The approach brings substantial federal leverage to bear in setting premiums and lowering provider and prescription drug prices.

While these bills would create different degrees of change, all have the potential to make the following general changes in the U.S health care system:

• Improve the affordability, benefit coverage, and cost protection of insurance for many or all U.S. residents
• Lower the rate of cost growth in hospital and physician services, prescription drugs, and health plan and provider administration
• Reduce the number of uninsured people, in some bills to near zero
• Reduce the number of underinsured people, in some bills to near zero.

Estimates of the potential effects of these provisions include:

• By lifting the top income eligibility threshold for marketplace premium tax credits, we could insure 1.7 million more people and lower silver plan premiums by 2.7 percent, at a net federal cost of $10 billion in 2020.¹
• Reinstating the ACA’s reinsurance program could increase insurance coverage for up to 2 million people, lower silver plan marketplace premiums by as much as 10.7 percent, and result in net deficit savings of as much $8.8 billion in 2020.²
• Enhancing premium tax credits and lifting the income eligibility threshold could reduce annual marketplace premium contributions by enrollees from $356 to as much as $9,434.³
• Funding and extending the cost-sharing reduction payments and pegging premium tax credits to the gold plan could decrease marketplace deductibles by $1,650 for people with incomes at 250 percent of poverty ($30,350 for an individual) and above.⁴
• Allowing HHS to negotiate prescription drug prices under a Medicare-for-All approach could lower drug prices by 4 percent to 40 percent.⁵
• Replacing most private insurance with public insurance under a Medicare-for-All approach could lower insurance and provider administrative costs from a current 13.9 percent of spending in commercial plans to 6 percent to 3.5 percent of all spending.⁶
• Setting provider prices at Medicare rates under a Medicare-for-All approach could reduce U.S. health spending by $384 billion in 2022, or $5.3 trillion over 10 years.⁷
• Recent estimates of the effects of a Medicare-for-All proposal on U.S. national health care expenditures range from: declines of 9.6 percent (Pollin) and 2.1 percent (Blahous) to increases of 1.8 percent (RAND), 9.8 percent (RAND), 12.6 percent (Thorpe) and 16.9 percent (Urban Institute).⁸

In the area of costs, what has captured the greatest attention in the emerging debate around Medicare for All is the significant shift in the how national health spending would be financed. With the exception of HR 7339, which retains employer coverage as an option for employers and employees, all the bills in this category would shift most U.S. health care spending from households and employers and state and local governments to the federal budget.⁹ This shift raises important questions about financing sources, in particular the incidence of taxation.

What is notable about the range of national health expenditure estimates under a Medicare-for-All approach is that the increase in expenditures is often less than the increase in demand for health care induced by providing comprehensive coverage to everyone. The range of spending estimates is very wide. This is because the degree of potential savings and efficiencies depend on certain assumptions, particularly the ability of a single-payer plan to lower provider payments, prescription drug costs, and administrative costs. The mechanisms for achieving slower health care cost growth in these proposals could be considered, refined, and applied not only in single-payer approaches but in other health reform strategies as well. For example, as part of a set of incremental ACA reforms, the Urban Institute estimated that capping provider payments at a level just above Medicare rates in the individual market could lower federal spending on the ACA’s premium tax credits by $11.8 billion and household spending on premiums by $1.7 billion in 2020.¹⁰

Conclusion

Since the ACA was passed in 2010, Congress has not passed further legislation to insure more people or make private plans more affordable or cost-protective. Many states have stepped up by promulgating regulations, passing legislation, and establishing programs like reinsurance to secure insurer participation, inform consumers of their coverage options, and lower consumer costs. But people living in states that did not embrace the coverage expansions (i.e., the Medicaid expansion or choosing to operate a state-based marketplace) are lagging those who live in more actively engaged or resourced states. Some states that have taken actions like establishing reinsurance programs are struggling to finance them long term.

Improving coverage for all U.S. residents will require federal legislation. The bills recently introduced are an amalgam of provisions that individually or collectively have the potential to make small to large improvements in coverage and increase the ability of people to get the health care that they need. Lowering premiums, limiting out-of-pocket cost exposure, and lowering the overall rate of health care cost growth are achievable goals. These bills provide mechanisms to move forward on each. Some ideas — like enhancing the ACA’s subsidies — won’t completely solve the U.S.’s significant affordability problem, but will provide a step toward providing targeted relief to several million people.

Many of these ideas can be implemented without a major reorganization of the health care system. For example, paying providers in commercial insurance plans at prices closer to Medicare’s or allowing the Secretary of Health and Human Services to negotiate prescription drug prices have potential to slow health care cost growth and would not require an immediate shift to a single-payer system. The Medicare-for-All bills feature some of the proposed approaches in less sweeping bills, such as enhancing marketplace subsidies or as transitional coverage improvements during a multiyear transition to a single-payer system. On the other hand, moving piecemeal also involves trade-offs. Based on the experience of the ACA, it appears possible or even likely that additional steps may take some time to achieve.

The committee is to be commended for taking on the issue of health reform. Hearings like these allow for fact-based consideration of policy options, their potential implications, and their trade-offs. I look forward to your questions.

Thank you.

Read the full testimony.