Abstract

  • Issue: The potential impact of health reforms is usually measured by aggregate costs and effects on coverage, especially the number of uninsured. However, the estimated changes in federal costs could also potentially reflect large changes in household spending. Important impacts on financial burdens are not measured by modeling teams consistently and often get lost in debates over merits of proposals. Frequently, failing to measure the distributional impacts of policy changes on household health care financing burdens leaves critical benefits of new spending unknown.
  • Goal: Delineate measures of change in the distribution of household health care financial burdens that sophisticated microsimulation modeling teams, such as those of CBO, the Urban Institute, and RAND, could straightforwardly incorporate into their analyses of reform proposals.
  • Methods: Develop metrics to measure financial burden using the Urban Institute’s Health Insurance Policy Simulation Model and its underlying data. Display and test each metric using an illustrative reform.
  • Key Findings and Conclusions: We propose two standard objective measures of health care financial burdens that microsimulation modelers can regularly produce. We also contend that it is critical to accompany these measures with a third metric that estimates the change in total health care services under reform.

Introduction

The potential impact of health reform proposals is usually measured by the aggregate costs of the proposal and its effects on insurance coverage, especially its effects on the number of uninsured. The Congressional Budget Office (CBO) produces a cost estimate that measures the impact of the proposed reform relative to current law, in terms of changes in federal spending, revenues, net effects on the deficit, and changes in health insurance coverage.

However, behind the estimated changes in federal costs are potentially large changes in household spending. For example, a substantial share of costs of certain reforms that aim to expand coverage can frequently be attributable to projected reductions in households’ financial burden of paying for medical care (premiums plus out-of-pocket costs including deductibles, coinsurance, and copayments) relative to the current baseline. Other reforms that aim to reduce household spending on premiums may increase household spending on out-of-pocket costs.

These important impacts on household financial burdens are not measured in a consistent manner and, as a result, get lost in debates over the merits of various proposals. For many proposals, failing to measure the distributional impacts of a policy change on the health care financing burdens of households leaves a critical benefit of new spending unknown. Moreover, commonly computed measures, such as the federal cost per newly insured person, could appear misleadingly high without taking into account that a proposal is not just increasing coverage but is also reducing financial burdens for those already insured.

 

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