As the nation begins serious consideration of health reform, it is instructive to review the contributions of Medicare and Medicaid over their 40-year history in covering the sickest and poorest Americansthose who typically do not fare well in private insurance markets. These programs have improved access to health care for many of our most vulnerable citizens, and warrant serious consideration as building blocks in a system of seamless coverage for America's 47 million uninsured people.
Currently, most Americans either have group health insurance through employers (55 percent) or are covered by Medicare or Medicaid (22 percent). Building on the strengths of these sources of coverage has many advantages: it minimizes disruption in current coverage, it builds on what works, and it requires minimal new administrative mechanisms. Both have low administrative costs. Medicare is an ideal coverage source for older and disabled adults who are currently uninsured. Beneficiaries report high satisfaction with their coverage, and their ability to access health care services. Medicaid and the State Children's Health Insurance Program (SCHIP) are also ideal coverage sources for low-income adults.
There are steps that Congress can take to prepare these programs to cover a share of the uninsured under health reform. Medicare can be a leading force for change in the health care system, serving as a model for private insurers in public reporting, rewarding quality, requiring evidence-based care, and encouraging use of modern information technology. Medicare has broad physician and hospital participation at prices below those available through private insurance. Medicaid's provider payment rates are undoubtedly below market prices and limit provider participation; they would need to be brought up to Medicare levels.
Further reforms to Medicares payment system can stimulate innovation in the private sectoras has been accomplished previously with the development of prospective payment methodsand help shape a more organized, high performance health system. With more integrated benefits and innovative payment policies, a Medicare-sponsored public plan could also be offered as an option to small businesses and individuals who now have few affordable options for coverage in the private market. Medicaid programs could be strengthened by studying concepts and strategies like state innovations in information technology, pay-for-performance, patient-centered medical homes, and chronic care management.
If initiated early, these reforms could help generate savings to "bend the curve" in national health expenditures and help offset the budgetary outlays required for health insurance coverage for all. In doing so, a mixed privatepublic system of universal coverage with seamless coordination across sources of coverage could transform both the financing and delivery of health care services. Such a system would build on the best that both private insurance and public programs have to offer and also achieve needed savings and ensure access to needed care for all.
Recently, my colleagues at The Commonwealth Fund and I set forth a "Building Blocks" approach to achieving universal coverage through a seamless system of private and public health insurance that builds on what works best in our current health insurance system. We set forth a framework for health coverage reform that features a new public offeringMedicare Extra, which includes elements from Medicare and the Federal Employees Health Benefits Program. Medicare Extra would be available, along with private insurance plans, through a national "insurance connector." We then estimated the changes in insurance coverage, access to care, and costs under a framework founded on the building blocks of private group insurance and this new comprehensive publicly sponsored health plan.
The Building Blocks framework for expanding health insurance coverage has six core components:
- A structured choice of private plans and an enhanced Medicare-like plan (Medicare Extra) made available through a new national insurance connector; insurance would be available to all at community-rated premiums that would not vary with health risks. The same premium rating provisions would apply inside and outside the connector.
- A requirement that all individuals obtain health insurance coverage, with automatic enrollment of uninsured tax-filers through the personal income tax system.
- Financial responsibility shared between employers and employees, with a requirement that all firms cover their workers or else contribute 7 percent of workers' earnings (up to $1.25 per hour) to a pool to help finance coverage.
- An expansion of Medicaid and SCHIP that would allow coverage of all low-income adults and children below 150 percent of the federal poverty level, with modest copayments for health care services, no premiums, and enhanced federal matching to cover additional costs to states.
- Tax credits that offset premium cost in excess of 5 percent of income for lower-income tax filers (15 percent-or-lower tax bracket) and 10 percent of income for higher-income tax filers (benchmarked to premium of the Medicare Extra plan).
- Extension of the option to buy improved Medicare Extra benefits to current Medicare beneficiaries; elimination of the two-year waiting period for Medicare coverage for people with disabilities; the ability of adults age 60 or older to buy in to Medicare; and the same financial protection on premiums as a percentage of income for Medicare beneficiaries as for nonelderly households.
The Lewin Group estimated Medicare Extra premiums at rates that would be more than 30 percent lower than premiums typically charged for employer-sponsored plans, especially those in the small-group marketa result of Medicare's lower administrative costs and payment rates for providers. Overall, the Building Blocks framework could not only help ensure that affordable coverage is available to the uninsured, but it could also ensure improved coverage at lower costs for many employers, the self-employed, and insured individuals currently buying coverage on their own.
Simultaneously, coverage expansions could be linked to other health system reforms. These include giving providers and patients the information they need to make appropriate health care decisions, revising methods for paying providers to encourage greater accountability for the care delivered, and encouraging preventive care use and health promotion. This analysis illustrates that such a strategy has the potential to achieve near-universal coverage, improve quality, and expand accessall while generating health system savings of at least $1.6 trillion over 10 years. Broader system reforms, if combined with coverage expansion, would also achieve federal budget savings that largely offset the cost of achieving universal coverage by years five to 10.
This analysis should help dispel the conventional wisdom that universal coverage is beyond our means. Our analysis shows that it is possible to cover nearly everyone with affordable and comprehensive insurance, expand access to essential care, and improve informed decision-making by patients, clinicians, and payersall while reducing spending on health care. Buying more effective, higher-value care has significant benefits for patients and will help move the U.S. health system toward higher performance. Indeed, more coherent, integrated affordable insurance that covers the population is critical and essential to enable and stimulate nation-wide efforts to slow cost growth and improve value. Fragmented insurance and coverage gaps stand in the way of a path toward more effective, efficient and equitable care, and undermines the nation's health and economic security.
No single element of reformno silver bulletwill be able to achieve the results described here. The framework explored in this paper is uniquely American: it leaves intact coverage for those who are insured; it does not abolish private insurance, as advocated by some who favor government solutions; and it does not abolish public programs like Medicaid and SCHIP, as advocated by some who favor private insurance markets. The question for the nation should not be "public" or "private," but what creative mix will move us toward more accessible, patient-centered, high performance health care system.
The major innovation of our framework is that it builds on what currently works by offering Medicare not just to the elderly and long-term disabled but also to individuals and small firms. It keeps market competition in place, but adds a new competitive dynamic. Private insurers, rather than competing to attract the healthiest patients, would need to add value, flexibility, and innovation to the products they offer.
The most encouraging message from the estimates presented here is that it is possible to aim for a high performance health system that simultaneously achieves better access, improved quality, and greater efficiency. Other nations have long since adopted many of the reforms we have set forth here. The U.S. can learn from their experience, as it can from states like Massachusetts and Vermont that have recently enacted reforms. Our future is up to us.