HEALTH POLICY CENTER REPORT October 2019 From Incremental to Comprehensive Health Insurance Reform: How Various Reform Options Compare on Coverage and Costs Linda J. Blumberg John Holahan Matthew Buettgens Anuj Gangopadhyaya Bowen Garrett Adele Shartzer Michael Simpson Robin Wang Melissa M. Favreault Diane Arnos ABOUT THE URBAN INSTITUTE The nonprofit Urban Institute is a leading research organization dedicated to developing evidence-based insights that improve people’s lives and strengthen communities. For 50 years, Urban has been the trusted source for rigorous analysis of complex social and economic issues; strategic advice to policymakers, philanthropists, and practitioners; and new, promising ideas that expand opportunities for all. Our work inspires effective decisions that advance fairness and enhance the well-being of people and places. Copyright © October 2019. Urban Institute. Permission is granted for reproduction of this file, with attribution to the Urban Institute. Contents Acknowledgments iv From Incremental to Comprehensive Health Reform: How Various Reform Options Compare on Coverage and Costs 1 Background 1 Methodology Overview 2 Simulated Reform Packages 4 Key Findings 11 Detailed Findings for Each Simulated Reform 15 Simulation of Reform 1 Compared with Current Law 15 Simulation of Reform 2 Compared with Current Law 20 Simulation of Reform 3 Compared with Current Law 22 Simulation of Reform 4 Compared with Current Law 24 Simulation of Reform 5 Compared with Current Law 26 Simulation of Reform 6 Compared with Current Law 29 Simulation of Reform 7 Compared with Current Law 33 Simulation of Reform 8 Compared with Current Law 35 Sensitivity Analyses for Single-Payer Proposals 38 Household Spending on Premiums and Out-of-Pocket Costs by Income Group 42 Ten-Year Estimates of Additional Federal Government Revenues Needed to Finance Reforms 44 Discussion 47 Appendix A. Methodology 53 Reforms That Build on the ACA 53 Single-Payer Reforms 56 Notes 66 References 70 About the Authors 72 Statement of Independence 76 Acknowledgments This report was funded by The Commonwealth Fund. We are grateful to them and to all our funders, who make it possible for Urban to advance its mission. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders. Funders do not determine research findings or the insights and recommendations of Urban experts. Further information on the Urban Institute’s funding principles is available at urban.org/fundingprinciples. The authors are grateful for comments and suggestions from Sherry Glied and Robert Reischauer, for research assistance from Caroline Elmendorf and Erik Wengle, and for editing by Rachel Kenney. iv ACKNOWLEDGMENTS From Incremental to Comprehensive Health Reform: How Various Reform Options Compare on Coverage and Costs Background The expansion of Medicaid eligibility, financial assistance for purchasing private nongroup insurance, regulatory reforms, an individual responsibility requirement, and other components of the Affordable Care Act (ACA) led to substantial reductions in the number of uninsured, increased access to care, reduced uncompensated care, and eliminated explicit discrimination against the sick in private health insurance markets. However, three years after implementation of the full coverage reforms, significant problems remain. Though expanded coverage lowered costs for many people, many still found premiums and cost-sharing requirements too high to participate. A Supreme Court decision that made the Medicaid expansion optional for states left many poor adults in 17 states without any way to obtain affordable coverage. Adverse selection into the private nongroup market in some areas, and little to no provider and/or insurer competition in others, has led to high and, in certain years, rapidly growing premiums in some parts of the country. And some areas faced underinvestment in important administrative functions, including outreach and advertising and enrollment assistance. In addition, policy changes since early 2017 have created new problems and exacerbated others. Congress and the Trump administration actively pursued bills that would repeal the ACA, and, later, repeal and replace it with policies reducing market regulations and government investment in health insurance. The administration made steep cuts in enrollment assistance and advertising, cut the open enrollment period in half (though some state-based Marketplaces extended the enrollment period on their own), and reduced the hours of access to the online Marketplaces. The administration and Congress removed the individual mandate penalties through its 2017 tax legislation, and the administration halted federal reimbursement of insurers’ cost-sharing reduction payments through administrative actions. Recent regulations have expanded the availability of alternative coverage options, such as short-term plans and association health plans, likely exacerbating preexisting risk selection problems within the system. The administration has encouraged states to implement work requirements to limit Medicaid eligibility and to apply for waivers that could change the financial assistance and coverage available to nongroup insurance purchasers. In response to these recent measures, the remaining gaps in the health insurance system, and evidence of the increasing number of uninsured starting in 2017 (Henry J. Kaiser Family Foundation 2018; Skopec, Holahan, and Elmendorf 2019; Terlizzi, Cohen, and Martinez 2019; Witters 2019), several policy proposals have emerged. Some have been developed by members of Congress, others by researchers and policy analysts.1 Many borrow significant components from the Medicare program and the ACA Marketplaces. These proposals range substantially in their federal and state budgetary implications, their effects on coverage, and how much they would fundamentally change the structure of the US health insurance system. Discussion of these health policy options for addressing the current system’s shortcomings have become central to the 2020 presidential debates. To allow for more objective, thoughtful comparison of the advantages and disadvantages of various health system reforms, we created a uniform framework for comparing the coverage and cost implications of different proposals and the marginal effects of specific policies when added to a base set of reforms. This report analyzes how eight health care reform packages intended to address the current system’s shortcomings affect health insurance coverage and spending by government, households, and employers. We start with a set of incremental improvements to the ACA, similar to some of those in the Consumer Health Insurance Protection Act of 2019,2 and end with a single-payer-type comprehensive reform similar to the Medicare for All Act of 2019.3 Though we do not model particular bills, we present estimates for an array of reforms presented along a continuum ranging from less to more comprehensive in their effects on coverage and government costs. Because new bills are regularly introduced and specific details of existing bills will likely change, we delineate the specific reform approaches to demonstrate a range of possible changes to the current system without being constrained by particular pieces of legislation. We do not estimate specific revenue raising approaches to fund any of the modeled reforms; we restrict our financial estimates to the effects on spending because revenues can be raised in many different ways with very different distributional implications, depending upon the approach taken. Methodology Overview We estimate the effects of eight health care reform options, highlighting the national coverage and cost implications of each and how they compare with current law. Central estimates include the following: 2 FROM INCREMENTAL TO COMPREHENSIVE HEALTH INSURANCE REFORM ◼ the distribution of health insurance coverage across » employer-sponsored insurance;4 » nongroup insurance, subsidized and unsubsidized; » Medicaid/the Children’s Health Insurance Program (CHIP); » Medicare/other government insurance;5 » any new proposed coverage option, if applicable; and » the uninsured ◼ the distribution of health spending, under current law and postreform, across » households by income group, including premium payments and out-of-pocket costs; » employers; » governments, state versus federal; and » health care providers delivering uncompensated care Our analysis relies on the Urban Institute Health Policy Center’s Health Insurance Policy Simulation Model (HIPSM) and new Medicare simulation model, MCARE-SIM, as well as Urban’s Dynamic Simulation of Income Model (DYNASIM). HIPSM is a detailed microsimulation model of the health care system designed to estimate the cost and coverage effects of proposed health care policy options for the nonelderly (US residents below age 65 not enrolled in Medicare).6 HIPSM is based on two years of the American Community Survey, which provides a representative sample of families large enough to produce estimates for individual states. The population is aged to future years using projections from the Urban Institute’s Mapping America’s Futures program (Martin, Nichols, and Franks 2017). HIPSM is designed to incorporate timely, real-world data when they become available, and we regularly update the model to reflect published Medicaid and Marketplace enrollment and costs in each state. The current version accounts for each state’s Marketplace