The number of bills which purport to expand access to public health insurance plans is now in the double-digits—and that’s just counting bills which have been introduced so far in 2019 in the current session of Congress. Many of these proposals have similar goals: to lower health care costs, to expand access to health care coverage, or to improve public health. But there are apparent disagreements over the best way to achieve such results. How are we supposed to objectively parse these proposals so that we know which ones, if any, to advocate for? More specifically, what questions might an actuary ask?
What Are The Options?
First, what are we being asked to choose between? The current proposals can be roughly grouped into three categories:
The term “public option” generally refers to a health plan that operates alongside private insurance but is administered by the federal or state government. Current federal proposals for public options generally would be offered through the ACA marketplaces and subject to the same rules as other plans on the marketplace (for enrollment, cost-sharing, premium subsidies, allowable rating factors, etc.). Some bills propose to modify these rules from what is currently in place; for example, two of the public option proposals would expand premium tax credit eligibility from the current threshold of 400% of the Federal Poverty Limit (FPL) to 600% of the FPL.
Buy-ins for Medicare or Medicaid
Buy-in proposals would extend eligibility for either Medicare or Medicaid to a larger group of people. The expanded eligibility group would be allowed to pay the applicable premium associated with a Medicare or Medicaid plan and thus become covered under the plan. The two current Medicare buy-in programs would extend eligibility to adults age 50 or over (the current Medicare eligibility age is 65), while the Medicaid buy-in would be eligible for individuals that are not covered under other insurance and live in states that elect to offer the buy-in. The Medicare buy-ins are sometimes called “Medicare for More” plans; they expand Medicare, but to a limited demographic set.
The two proposals to expand Medicare to all U.S. residents using a single-payer administrative system are commonly referred to as “Medicare for All”. Under these bills, everyone would be in the same plan (with some exceptions for those currently receiving care from the VA, the Indian Health Service, etc.), which would be administered by the federal government. A hybrid option has also been proposed; it would expand Medicare to all U.S. residents but would not constitute a single-payer system. Rather, private insurance plans would still exist, and people could “opt-out” of the government plan in order to purchase private insurance. This hybrid option also includes a provision for insurance companies to administer the public plan, similar to managed Medicaid or Medicare Advantage.
Who Is In Charge?
In other words, who is administering the public plan? The plan might be administered by the federal government, like traditional Medicare, or by state governments, like traditional Medicaid. Alternatively, administration could be contracted out to insurance companies, as Washington State is currently doing with their recently approved public option.
What Is The Role Of Private Insurance?
Will there be only one source of coverage or will there be options? Private insurance may play a role in any of these proposals—even under a single-payer system, private insurance might be available for benefits not covered by the government plan. However, the private insurance market would be affected even under the most conservative proposals, as discussed in the next item.
What Will Be The Effect On Other markets?
Adding a public option to the ACA marketplace might create adverse selection if the public option follows different rules than the other plans in the market. Similarly, adding a Medicaid buy-in or Medicare buy-in could pull people from the large group or small group markets, changing the risk profile of the plans they migrate from (for better or worse). Implementing single-payer without any managed care middlemen (a la managed Medicaid or Medicare Advantage) will largely or completely eliminate the private health insurance market, depending on the rules and benefits covered under the plan. These interdependencies and downstream effects must be considered.
Who Is Eligible For Coverage?
Depending on the proposal, the answer to this question ranges from all U.S. residents (and potentially even non-residents) to very specific demographic groups. The single-payer proposals offer the broadest eligibility criteria, while the buy-in proposals tend to offer the narrowest. For example, the Medicaid buy-in proposal would only be available in states which elect to offer the buy-in.
What Are The Benefits?
The public option and Medicaid buy-in proposals cover at least the ACA’s ten essential health benefits, while the Medicare buy-in proposals cover benefits currently offered through Medicare Parts A, B, and D. The single-payer programs are more expansive, including vision, dental, and long-term care.
What Premiums And Cost-Sharing Are Required?
Premiums might be set anywhere from $0 (as proposed under the single-payer plans) to an amount that would cover expected benefit costs and administrative expenses plus some contingency margin. Some proposals which include non-zero premiums include options for premium subsidies based on income. In general, premiums are only proposed to vary by the rating criteria currently allowed under the ACA: age, geography, family size, and tobacco use.
For Medicare buy-in options, cost-sharing is generally the same as current Medicare, while the Medicaid buy-in proposal would let cost-sharing levels be set by the states. The public plan options on the ACA marketplaces would have cost-sharing follow ACA marketplace rules. The single-payer plans generally have no cost-sharing (with an exception for some prescription drugs under the Senate version).
How Will Funding Be Structured?
This topic also includes the question of which party or parties will bear financial risk if cost outlays exceed available funds. In the most basic insurance arrangement, benefits are funded by premiums, which are also used to pay the cost of the administrative expenses associated with the plan as well as provide for any profit or contingency margin. Along these lines, the public option and Medicare buy-in programs propose to set premiums such that they will cover benefit and administrative costs. The single-payer programs, which would not charge a premium, would be funded instead through taxes. These programs would pool current federal health spending (on Medicare, Medicaid, marketplace subsidies, etc.) into a new trust fund. There is a white paper associated with the Senate version of the bill which discusses specific sources of funding.
What Cost Containment Measures Will Be Put In Place, If Any?
If one of the stated goals of the program is to help contain medical costs, what are the means by which this will be accomplished? On a similar note, will the program have any care management policies and procedures in place, and if so, what will these policies be? The answers to these questions will greatly affect providers, as discussed in the next section.
How Will Providers Be Affected?
There are many relevant and important questions concerning the involvement of providers. One that is probably at the top of the providers’ minds is: what will be their reimbursement levels? Commercial reimbursement rates can be two or three times higher than Medicare reimbursement rates depending on factors including the service performed and the terms of the provider/commercial payer contract. Similarly, Medicare reimbursement rates are typically much higher than Medicaid reimbursement rates. Shifting the mix of a provider’s business from commercial payers to public payers will decrease gross revenue, all else equal. Another question is, will providers be required in some fashion to serve public plan insureds? Whether the answer to this question is yes or no, there will likely be an effect on provider supply.
These are just a few of the items that should be considered when evaluating any of the current options for new or expanded public health insurance programs. These questions can also be used as a general framework for evaluating any health insurance improvement proposal; eligibility, benefits, funding, and effect on providers are particularly critical considerations.
However, we should note that these questions are primarily related to design and implementation. They don’t answer the following: what are the goals of the program, and is this program likely to achieve those goals? While not as actuarial in nature as the questions outlined above, we recommend keeping the end goals in mind as you evaluate each option. After all, some of the proposals represent major overhauls to our health care system—before implementation, we should be confident that we’ve found the best solution!