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Politics & Policy

Increments Toward What?

Abstract

 
Incremental proposals to expand health insurance coverage, such as expansions of the State Children’s Health Insurance Program (SCHIP) or creation of new tax credits, should be examined for the values that underlie them and for how they structure future options for additional incremental coverage expansions. This paper examines five design issues in incremental reform: who determines coverage options for the newly insured; what risk pool do they enter; what is the government’s contribution toward their coverage; what barriers are created by efforts to encourage efficiency; and how are issues of federalism handled? Tax credits are a departure from past approaches, while an SCHIP expansion is a continuation of current policy directions.

Preference for one incremental option over another reflects in part the relative values one places on certain health system attributes, such as choice and equity. Such preferences also reflect the confidence one has or does not have in certain institutions, such as governments and insurers. The health policy debate today is filled with incremental proposals to expand coverage that vary in form and detail. By exploring the principles that underlie these proposals, we stand a better chance of adopting policies that reflect our values.

Why Incremental Steps Affect Future Options

Top Why Incremental Steps Affect... Examining Incremental Proposals Comparing Approaches Where Do We Begin? NOTES

 
Incremental steps taken today affect the options available tomorrow. Beyond the specifics of who gains coverage and how much an incremental proposal costs, incremental steps can affect the institutions that must be relied upon for future steps, and they can create expectations that are resistant to change.

Incremental steps can help or harm markets, changing their functioning in ways that affect whether or not future increments can rely upon those markets. For example, a handful of states enacted reforms of their nongroup insurance markets in the early and mid-1990s. Depending upon the existing structure of the market and the specific policies adopted, some of these reforms stabilized the nongroup market, while others did the opposite.¹ These past actions affect the number and risk profile of consumers and the number and practices of insurance carriers in that market and therefore the likelihood that incremental steps designed to build on the nongroup market will succeed.

Incremental steps can build institutions. Under the new State Children’s Health Insurance Program (SCHIP), states can expand Medicaid, build separate state programs, or both. States that had already implemented Section 1115 waivers under Medicaid, and therefore had addressed some of the substantive and political concerns with the bureaucratic and entitlement nature of the program, were more likely to expand Medicaid.² Most other states preferred starting new programs. Regardless of the path taken, all states have now expanded their administrative capacity and learned new lessons about outreach and enrollment under SCHIP. Prior incremental steps thus have created new institutional capabilities that can be relied upon for future expansions.

Incremental steps also can build expectations. The tax exemption of employee benefits and the enactment of the Employee Retirement Income Security Act (ERISA) led employers to play a major role in providing health insurance, with important implications for incremental reform. For example, while most economists agree that the actual costs of insurance coverage are borne by employees, employers and workers alike speak as if the employer pays for coverage.³ This creates barriers to restructuring options that nominally shift costs to employees, regardless of whether or not those options decrease their ultimate financial burden.

Of course, incremental proposals can be repealed, and the nation or a state can start down a new path. The enactment and subsequent repeal of the Medicare Catastrophic Coverage Act of 1988 demonstrate this point, as does partial repeal of the Washington (State) Health Services Act of 1993.⁴ But repeal is rare. Therefore, as we consider adopting incremental coverage expansions, we should have in mind how those expansions will affect future reforms.

Examining Incremental Proposals

Top Why Incremental Steps Affect... Examining Incremental Proposals Comparing Approaches Where Do We Begin? NOTES

 
The nation’s political leaders and the health policy community are examining a series of options designed to expand health insurance coverage of low-income children, their parents, and, in some plans, other adults as well.⁵ The plans vary in their details but can generally be organized around the core features of the two major party presidential candidates. In the 2000 presidential campaign, Al Gore’s proposal relied primarily upon expanding eligibility for SCHIP to more children and their parents. George W. Bush proposed tax credits to cover a portion of the cost of nongroup insurance coverage for individuals and families that do not have employer-sponsored insurance.⁶ This paper is not designed to evaluate these specific proposals or explore the nuances of these plans and their variants. Rather, it uses them as a framework to motivate a discussion about the principles behind them and the longer-term consequences of five key incremental design options.

Who determines coverage options? What sort of health insurance is available to a person—the benefits offered, the delivery systems available, and the health plans that provide them—depends upon how that person enters the insurance market. Most Americans obtain coverage through their employer. Self-insured firms, which tend to be larger, operate in a market that is subject only to minimal federal regulation. There are no mandated benefits and no rating restrictions. Insured plans, generally sold to smaller businesses, are subject to state-defined solvency standards, benefit mandates, market conduct rules, and rating practices. Individuals who purchase coverage on their own buy in the nongroup market, which is also regulated by states, but restrictions on insurers’ rating and underwriting practices are less common there than for small groups.⁷

For people who obtain insurance through government programs, coverage is structured differently. While the federal government defines the parameters of the Medicaid program, states each have their own approaches to operating Medicaid managed care programs: setting capitation rates, defining certain benefits, and determining solvency and service requirements for plans.⁸ The states play the same role for SCHIP, although with less federal oversight.

A tax credit plan makes available to the newly insured all of the options that exist in the private, nongroup market. This market maximizes individual choice. It can be nimble and respond quickly to financial incentives. However, administrative costs are very high in this market.⁹ Also, with weak rules on rating and underwriting, and no organized mechanism for consumers to learn of their choices, some will purchase insurance that does not fit their needs.

By contrast, under an SCHIP expansion the newly insured will obtain the coverage the state selects on their behalf. Government purchasers have extensive experience purchasing coverage for vulnerable populations. The government enters the market with significant purchasing power. State oversight of health plan behavior remains mixed but has improved as Medicaid’s use of managed care has grown.¹⁰ Government-administered systems are subject to public scrutiny and have a natural means of accountability. Yet government programs, subject to political pressure and extensive administrative rules, can be bureaucratic, risk-averse, and unable to fend off political pressures to include every willing provider and insurer.

Different market organizers may be appropriate for different populations. For example, more publicly accountable systems may be important for financially and medically vulnerable populations, while persons with more economic power might be presumed able to have their preferences met in a private market. The low-income population that is the target of incremental coverage expansions falls on the cusp of these two categories, leading to debates over how their options should be structured.

Because the nongroup market is fairly small, a tax credit that puts a large number of uninsured persons into that market could have a sizable effect. An infusion of people and money into this market could help to stabilize premiums and reduce administrative costs. It would certainly increase scrutiny of the nongroup market, possibly leading to some rating reforms and more oversight. If incremental coverage expansions that rely upon the nongroup market are viewed as successful, that market would be poised to grow larger in future incremental reforms, creating the possibility of moving further toward a system of individual choice of health plans.¹¹

An incremental approach that relies upon SCHIP builds upon institutions that already exist. A successful SCHIP expansion would represent an important evolution in the role of public coverage. It would show that public programs can overcome the stigma associated with their historical ties to welfare, making them more viable as vehicles for future expansions that serve the middle class.¹²

What risk pool do people enter? Insurance is inherently different from other products in that the cost is directly tied to the characteristics of those who buy it. If everyone had the same expected health care costs, the value of insurance would simply be the value people place on reducing the volatility of costs around the mean, or risk smoothing. But expected costs are known to differ across populations. Older people have higher average health care costs than younger people have; women have higher costs than men do. Inclusion of populations with known differences in expected cost in a single risk pool creates a predictable transfer of value from one group to another.

The distinction between risk smoothing—buffering people against variation around the mean—and risk pooling—sharing costs across groups with different expected costs—is a critical one. Risk smoothing can occur and provide real value even in a market that accomplishes little or no risk pooling.¹³ How much risk pooling should occur is a matter of social preference made more complex in a voluntary insurance system in which higher levels of risk pooling give the lowest-risk groups an incentive to exit the market.

Two features of the current system are important when analyzing incremental reforms. First, the current system has no mechanisms to pool risks across separate markets.¹⁴ The existence of entirely separate risk pools has important implications. The voluntary employer based insurance system relies heavily on the fact that Medicare and the portion of Medicaid that serves elders and persons with disabilities have been fully segmented from the private risk pool. With per person costs of about $5,500 and $9,000, respectively, if these populations were included in the same risk pool with employer coverage, premiums for the latter would go up dramatically.¹⁵

Second, the degree of risk pooling within each of these markets varies. Large employers are thought to have a sufficiently heterogeneous workforce that some risk pooling occurs within firms. The degree of risk pooling in the small-group and nongroup markets depends greatly upon regulatory decisions that vary across states.

Public programs. Different incremental health insurance proposals have different answers to the question of which risk pool the newly insured should join, and these varying answers put us on different paths for future insurance expansions. Other than explicit high-risk pools, government insurance programs that charge premiums do not rate on the basis of risk. Existing government programs seem to attract people with average risks, but their current scale is quite small.¹⁶ If these programs were to expand and offer very good benefits at a community rate in a market where many people are subject to risk rating, they could become de facto high-risk pools. This shift would have profound effects for the future. Even more so than today, private insurance would become the domain of lower-risk populations, while high risks would concentrate in government programs. This structure should appeal to some. The private market remains healthy (in both senses of the word), while high risks are spread across the entire tax base. This is not the only possible outcome of expanding existing public programs, but it could happen.

Nongroup market. Incremental expansions that encourage uninsured persons to enter the nongroup market could generate unpredictable results. The existing nongroup market is small compared with the number of people without health insurance, and rating rules vary greatly from state to state. In a state with few rules, where the nongroup market does little risk pooling, potential new entrants with identifiable risk characteristics may find the market unavailable or unaffordable. Uninsured persons with lower identifiable risks may find the market appealing. Under this scenario, the incremental reform could greatly reduce the number of persons without health insurance, but those left uninsured would be disproportionately high risk. The challenges for future expansions would be great.

Community-rated nongroup market. If new entrants are faced with a community-rated nongroup market, those with high risks are more likely to enter. If the newly entering population is large relative to the current nongroup market, rates throughout the nongroup market could rise, causing large departures of currently insured persons.

It is beyond the scope of this paper to examine the policy options available to minimize the risk-segmentation scenarios just described. But it is worth noting that the risk profiles of public programs, the nongroup market, employers, and the uninsured could change greatly after the enactment of an incremental coverage expansion. As incremental policies provide people with insurance, the choice of which risk pool they enter affects the new enrollees as well as the structure of the health care system as a whole.

What does the government contribute? With the type of coverage and the characteristics of the market determining the price of insurance, how does the government determine what it will pay toward coverage for the new people it hopes to reach?

Incremental policies designed to expand access to insurance can come in one of two forms. They can offer a specific set of benefits and make them available at no or some cost to the enrollee, or they can provide people with money or a voucher to subsidize part or all of the cost of health insurance that is purchased on the open market. A defined-benefit approach implies that we start with our policy goal—a specific amount of insurance coverage—and then come up with the funds necessary to achieve that goal. A defined-contribution approach implies that we start with our funding stream—how much we are willing to spend on health care—and leave it to the market to determine what that funding stream will buy.

The difference between these two approaches is clearest when comparing how SCHIP or a tax credit program would function for the lowest-income population. SCHIP offers a fixed benefit; a tax credit offers whatever the person can purchase in the market for the amount of the credit. This difference does not define which one is better: SCHIP could offer an excellent or a poor benefit, and the tax credit could be too little to purchase much insurance or enough for a low-income family to buy an excellent plan.¹⁷

The dynamics shift as one examines programs that serve families with incomes high enough that they are expected to contribute toward the cost of their coverage. In this income range, tax credits phase out, and premium contributions in SCHIP phase in. Yet the implications of these sliding-scale structures differ. For tax credits, the value of the credit is set, so the amount the person will pay for coverage is the cost of insurance less the value of the credit. In SCHIP, the maximum family contribution is based on the family’s income, meaning that the family is not directly affected by the cost to the state of providing the underlying coverage.¹⁸

These different dynamics have possible policy implications if demand for the incremental program were to increase, for example, as a result of health care inflation. With no change in policy, the value of the tax credit would remain fixed, yielding a higher cost for the family.¹⁹ Under SCHIP, with no change in policy, the cost to the family would remain the same, while the government would experience higher program costs. Future policy adjustments in the structure of the tax credit or SCHIP could make the end result for families identical. However, the default policy will create certain expectations about cost and coverage that may make it difficult to modify these structural predilections.

Does "target efficiency" come at the cost of equity? All incremental reforms confront the problem of having a limited amount of money to spend on a seemingly insurmountable problem. If a program’s goal is to reduce the number of uninsured persons, a natural measure is how much the program must spend for each person expected to move from being uninsured to being insured. In a dynamic system, where government programs operate under broad rules, it is impossible to design an incremental program where every bit of the new money is precisely calibrated to move people from being uninsured to being insured at the lowest possible cost.

Target efficiency is an economist’s term describing the degree to which program resources achieve their goal. A health insurance program can lose efficiency through either of two mechanisms. First, if some of the program’s resources go to those who are already insured, those resources are not furthering the basic goal of the program. For example, a health care tax credit for all low-income families will help some new families to obtain coverage, but some of the funds will go to low-income families that are already insured. Second, if a program spends more on some groups than would be necessary to move them into the insured category, the program loses efficiency. For example, if a family with earnings of $40,000 feels that it cannot afford to buy insurance but only needs a subsidy of $500 a year to make insurance affordable, a program that provides that family with $1,000 is somewhat inefficient.

Because resources are limited, incremental approaches are sensitive to target efficiency and include provisions designed to increase efficiency. Sliding-scale premiums or tax credits, as discussed above, are one such method.

An additional feature of many incremental proposals designed to increase target efficiency is to create transition costs so that people who are currently insured will not move into the subsidized coverage option.²⁰ This feature translates into different policies for incremental expansions that rely upon SCHIP as opposed to a tax credit. For SCHIP, transition hurdles are created by barring people from participating unless they have been uninsured for a period, typically from two to six months.²¹ The notion is that few people will be willing to risk a period of uninsurance simply to obtain the subsidy, so currently insured people will not enroll. With tax credits, the transition barrier is created by permitting the credit to be used only in the nongroup market. Those with coverage through an employer would have to change health plans and enter an unfamiliar and unpredictable market to take advantage of the credit. Presumably, most insured persons will stay where they are, leaving the new subsidy dollars to be targeted toward the currently uninsured.

Setting aside the issue of how well they work, how will these various policies designed to improve target efficiency affect prospects for future coverage expansions?

Transition barriers increase inequities across groups of persons with similar characteristics. Designs that narrowly target benefits toward the currently uninsured exclude other persons with identical incomes and ability to pay for health care and insurance. Some targeting designs end up disadvantaging those who have been doing the right thing—sacrificing other priorities to buy insurance—while benefiting those who have imposed uncompensated care costs on others by forgoing insurance.

Although they arise from legitimate motivations, these inequities can harm future prospects for additional reforms. Those who benefit from the inequity may develop a sense of entitlement to their benefits, not understanding that they are imposing costs on others. An example of this is the long-standing resistance to capping the amount of employer-paid insurance that is exempt from tax liability. Those harmed by the inequity may become cynical about public policy and oppose future efforts, assuming that proposed policies will be similarly unfair.

Second, artificial barriers create pent-up demand, which increases the likelihood that there will be unintended consequences if those barriers are ever removed. For example, a policy that requires people to be uninsured for a time to qualify for a public insurance program will certainly deter some from enrolling, even if that new program would benefit them. The longer that policy is in effect, and the more people subject to it, the harder it will be to gauge the actual, underlying demand for the program. Over time, it will become more risky to change the policy, simply because the effects of releasing the pent-up demand will become increasingly uncertain.

Target efficiency is so critical to how incremental proposals are evaluated that it is not surprising that certain inequities are accepted in the name of promoting expanded insurance coverage. But these inequities must be examined to see if, in pursuit of other, shorter-term goals, they harm longer-term prospects for improvements in the health insurance system.

How are responsibilities divided between the federal government and the states? The first four issues raise questions about the role of government—as a market organizer, market regulator, and financier. The federal government, the states, or some combination of the two can conduct each of these functions. Maintaining a balance acceptable to states and the federal government is a difficult political art. The challenge is significant regardless of the broad approach taken to increasing coverage.

SCHIP. The enactment of SCHIP in 1997 introduced a new approach to federalism as it applies to incremental coverage expansions.²² Compared with the Medicaid program, SCHIP relies more heavily on federal funds but leaves more design issues to the states. While areas of conflict between the states and the federal government remain, the program retains a broad base of political support at both levels of government.²³

However, efforts to expand SCHIP—with higher eligibility levels and possible inclusion of adults—may raise federalism problems. These proposals would build upon a program that owes much of its success to the eager participation of states in program design and implementation. If the federal government mandates these expansions, it may kill the goose that laid the golden egg. Leaving the decision to expand with the states may mean that the expansions never occur. Of course, the federal government can continue to use financial incentives to entice state policies to change, but federal match rates for SCHIP are already quite high, and incentives may only go so far. In the end, an SCHIP expansion is a federal policy initiative that relies heavily upon state action for its success.

Tax credits. Tax credit proposals raise a different federalism problem. While they were the preferred approach of the Republican candidate for president, they shift control over health policy toward the federal government and away from the states. Federal rules must define the amount of the credit, who is eligible, and what health insurance expenditures qualify. A uniform credit applied to varied insurance market rules around the country would yield unpredictable results. Therefore, some tax credit proposals have the federal government intervene in the individual insurance market to set new rules. All of these changes in the name of individual choice end up centralizing power, countering recent trends toward devolution to states. For tax credits, a policy founded on individual choice may be successful only after much federal intervention.

Health care systems. In addition to the politics of federalism is the reality that health care delivery systems, markets, and costs vary tremendously around the country, as do the numbers of uninsured persons and the percentage of workers covered through their employers. Federal policies, whether setting an income cutoff for program eligibility or defining the amount of a tax credit, are sure to have differential effects in different states. How incremental policies share regulatory, administrative, and financial roles between the states and the federal government will affect their political viability today and the course for future expansions.

Comparing Approaches

Top Why Incremental Steps Affect... Examining Incremental Proposals Comparing Approaches Where Do We Begin? NOTES

 
Proposals to extend SCHIP to new populations and to provide new tax credits emerged only recently as the dominant incremental coverage expansion plans. How can we understand what brought us to this point?

Al Gore’s embrace of an SCHIP expansion can be understood as an effort to build upon the political success of the most recent incremental step: the enactment of SCHIP itself. In its brief life, SCHIP has come to embody what "New Democrats" like best. It reaches beyond the poorest population, is not an entitlement, has been marketed along the lines of a private insurance plan, and has thrown off some of the shackles of the Medicaid bureaucracy. Whether these attributes will remain, and whether the program will ultimately be viewed as having met its goal of reducing the number of uninsured children, cannot yet be known. What is known is that it is politically possible to propose expanding SCHIP, while presumably a proposal to expand Medicaid would not be viable today.

George W. Bush’s embrace of a tax credit approach can be understood as an effort to create an incremental model that reflects the core values of his party. The language surrounding tax credits is one of individual choice, limited government involvement, and the creativity and discipline of the marketplace. It is an attempt to address the well-documented cost barriers to purchasing insurance, but to intervene in the market as little else as possible.²⁴ A new policy designed to reduce the number of uninsured Americans that provides a tax credit to low-income families that purchase nongroup coverage and does nothing else would represent a radically new approach. It would have the government finance coverage for low income families, but play almost no role in designing and administering that coverage.

Moving beyond the two presidential candidates’ plans in their outline form, one finds proposals being discussed in the health policy community that provide a more nuanced picture. Some tax credit proposals go beyond the basic design to include new consumer protections in the nongroup market, or the ability to apply the credit toward insurance bought in new purchasing pools or toward the employee’s share of employer coverage. Others adjust the value of the credit to account for the varying risk of the population, so that the credit more closely matches the likely cost of insurance for the individual. There are even proposals that seek to blend tax credits and public coverage, giving families their choice. These variants on the tax credit theme represent an effort to find an approach that marries the values that underlie the two models.

If tax credits form the frame of the next increment, and if such a plan can reduce the number of uninsured, it could form the basis for future expansions. But its success depends on there being a meaningful benefit package available at a cost (net of the tax credit) that is affordable for low-income families with varying health risks in varying insurance markets and with limited negative spillover effects on other markets. As an untested model, a tax credit plan that gets all of these items right will be difficult to design. Therefore, it is natural to add features to the tax credit frame designed to improve the odds of success.

Relying upon SCHIP as the basis for future expansions is the more conservative option because it builds upon institutions and programs that already exist. It continues the practice of the government defining as well as financing coverage for low-income persons. It largely buffers such persons from certain aspects of the market place, including pricing on the basis of risk and having the burden of rising prices fall on the consumer. This is not to deny the real challenges involved; it is simply to say that an SCHIP expansion is a continuation of the current direction of incremental health policy.

Where Do We Begin?

Top Why Incremental Steps Affect... Examining Incremental Proposals Comparing Approaches Where Do We Begin? NOTES

 
Creating a successful incremental expansion requires making judgments about the fundamental design issues discussed in this paper, addressing a range of complex administrative and implementation issues not examined here, and placing it all in a political context.

Children were an easy target for recent expansions because they are uninsured through no fault of their own, they are less expensive to cover than adults are, and routine care for children can be characterized as preventive. With SCHIP in place, serious incremental proposals must now extend to adults as well. Persons in fair or poor health, those with the largest unmet medical needs, and those who face the largest financial barriers to obtaining care—conditions that are highly correlated—are an obvious target.²⁵

Neither an SCHIP expansion nor a new tax credit would necessarily reach those with the greatest medical needs. Extending SCHIP to uninsured parents of eligible children would place those adults ahead of the much larger group of uninsured nonparent adults who are at least as likely to be in fair or poor health.²⁶ Persons with significant health care needs would have the strongest incentive to use a tax credit to purchase health insurance. However, these are the same persons who face underwriting in the nongroup insurance market and who, because of their low incomes, are most likely to have difficulty affording coverage.

This apparent mismatch between the two dominant plans and the goal of reaching those with the greatest need can be explained in part by political considerations. People will be eager to learn how effective the newly enacted program has been. As we have learned from much-touted falling welfare caseloads and growing SCHIP enrollment figures, simple counts of the number of persons reached by the program will form the basis for evaluating its success in the short run. Interpretation of these data will be colored by the extent to which people believe that the program beneficiaries are not simply drawn from the ranks of the previously uninsured, a complex phenomenon that has come to be known as crowding out.

It is easy to count the number of adults and children covered under an SCHIP expansion, and it is possible to estimate the number covered by a tax credit.²⁷ However, these figures will be subject to different uses and interpretations. For an SCHIP expansion, the enrollment figures will likely be somewhat discounted based upon historical estimates of crowding out. New administrative and survey data that inquire into applicants’ previous insurance status may provide a fairly prompt, if limited, sense of the extent of the phenomenon. Still, it is reasonable to expect that enrollment figures will be viewed as a proxy for the program’s early success.

For a tax credit, an effort to represent the number of claimants as a measure of how many gained coverage because of the credit will strain credulity.²⁸ No realistic estimates of crowding out will be possible in the short run, since tax forms contain no information on prior insurance coverage. Yet every tax credit recipient, even if he or she would have had insurance anyway, can be counted among those who benefit from the new program. The tax credit may build a political constituency quickly, regardless of whether or not it has reduced the number of uninsured persons.

We are still very much in a period when each increment is greeted with skepticism. In the simple language of politics, this argues for covering the maximum number of people at the least cost. The next incremental steps are unlikely to target people in poor health for assistance despite their greater needs. This approach leaves our greatest challenges ahead and may leave some of our neediest neighbors with less assistance than appropriate, but perhaps it will help the nation to build the political will to take additional, bolder steps in the future.

Incremental policy decisions have largely structured the health insurance market as we know it today. ERISA created the possibility of significant employer experimentation with purchasing strategies but also barred state-adopted employer mandates. Medicaid eligibility expansions have brought us step-by-step to the point where 52 percent of poor children now have public insurance coverage.²⁹ Some of these outcomes were intentional; others were unanticipated side effects that grew over time into established aspects of our health care system.

If large-scale, comprehensive approaches are off the table, those who remain committed to the goal of universal coverage must take incrementalism seriously. Increments can achieve short-term objectives, but depending upon how they are structured, they may make the longer-term goal of universal coverage easier or harder to attain. Even though comprehensive reform seems unrealistic today, we must continue to discuss and define what the health care system of the future should look like. Then, we can judge incremental reform proposals not only on the basis of who they cover today, but whether they move us in the right direction for the future.

Editor's Notes

 
Alan Weil is director of the Urban Institute’s Assessing the New Federalism project.

The Assessing the New Federalism project has received major support from the Annie E. Casey, W.K. Kellogg, Robert Wood Johnson, Henry J. Kaiser Family, Ford, David and Lucile Packard, and John D. and Catherine T. MacArthur Foundations. The opinions expressed are those of the authors and do not represent those of the Urban Institute, its trustees, or its sponsors.

NOTES

Top Why Incremental Steps Affect... Examining Incremental Proposals Comparing Approaches Where Do We Begin? NOTES

 

1. L. Nichols, "State Regulation: What Have We Learned So Far?" Journal of Health Politics, Policy and Law (February 2000): 175–196.
2. I. Hill, "Charting New Courses for Children’s Health Insurance: Assessing the Experiences of Separate versus Medicaid Expansions under SCHIP," Policy and Practice (forthcoming).
3. L.J. Blumberg, "Who Pays for Employer-Sponsored Health Insurance?" Health Affairs (Nov/Dec 1999): 58–61.
4. P.L. 100-360 (1988). For details on the Washington State repeal, see L. Nichols et al., Health Policy for Low-Income People in Washington, Assessing the New Federalism State Reports (Washington: Urban Institute, 1997).
5. See, for example, Henry J. Kaiser Family Foundation, "The Kaiser Project on Incremental Health Reform," <www.kff.org/docs/sections/kcmu/incrementalreformproject.html> (2 October 2000); and Commonwealth Fund Task Force on the Future of Health Insurance, Strategies to Expand Health Insurance for Working Families (New York: Commonwealth Fund, October 2000).
6. Descriptions of each candidate’s plan are available on their respective Web sites in League of Women Voters Education Fund and Kaiser Family Foundation, "Health Issues in the 2000 Presidential Election," pamphlet (2000). The Gore plan included a tax credit component, but his campaign materials emphasize the SCHIP expansion.
7. D. Chollet, "Consumers, Insurers, and Market Behavior," Journal of Health Politics, Policy and Law (February 2000): 27–44.
8. Different coverage issues arise in the large fee-for-service component of Medicaid. I do not examine these because almost all recent incremental reform plans presume the use of some form of managed care.
9. M. Pauly and A. Percy, "Cost and Performance: A Comparison of the Individual and Group Health Insurance Markets," Journal of Health Politics, Policy and Law (February 2000): 9–26.
10. R. Hurley and S. Wallin, "Adopting and Adapting Managed Care for Medicaid Beneficiaries: An Imperfect Translation," Assessing the New Federalism Occasional Paper (Washington: Urban Institute, 1998).
11. Individual choice can also be promoted by purchasing pools, which some tax credit advocates hope will emerge.
12. J. Stuber et al., "Beyond Stigma: What Barriers Actually Affect the Decisions of Low-Income Families to Enroll in Medicaid?" Policy Issue Brief (Washington: George Washington University Medical Center, Center for Health Services Research, 2000).
13. M. Pauly and B. Herring, Pooling Health Insurance Risks (Washington: AEI Press, 1999).
14. ERISA prohibits states from, among other things, requiring self-funded employers to participate in any risk-sharing systems such as high-risk pools.
15. Health Care Financing Administration, "Medicare: A Brief Summary," <www.hcfa.gov/pubforms/actuary/ormedmed/DEFAULT3.htm> (10 August 2000); and "Medicaid: A Brief Summary," <www.hcfa.gov/pubforms/actuary/ormedmed/DEFAULT4.htm> (10 August 2000).
16. E. Kilbreth, "State-Sponsored Programs for the Uninsured: Is There Adverse Selection?" Inquiry (Fall 1998): 250–265.
17. Even for a family with no income, Bush’s plan provides a maximum contribution of 90 percent of the cost of coverage. "Text: Bush’s Speech on Health Care," 11 April 2000, <www.washingtonpost.com/wp-srv/onpolitics/elections/bushtext041100.htm> (4 October 2000).
18. In Gore’s plan, families with incomes above 250 percent of the federal poverty level pay the full cost of coverage for their children. These families would be affected by changes in premium costs. Some existing state programs charge adults and families a premium based on the underlying premium cost. M. Crebs-Carter and J. Holahan, "State Strategies for Covering Uninsured Adults," Assessing the New Federalism Discussion Paper 00–02 (Washington: Urban Institute, 2000).
19. The family could move to less expensive coverage, but this would still be a loss.
20. While these barriers and boundaries are not essential to the ideas behind incremental reform, they are generally found in incremental proposals. Democratic presidential candidate Bill Bradley proposed a plan that had no such barriers. He elevated the principle of equity over that of target efficiency, making the plan easy to attack from a cost perspective. The Health Insurance Association of America’s proposal, InsureUSA, as do some others, permits tax credits to be used for the employee’s portion of employer coverage.
21. A. Westpfahl and I. Hill, "States’ Early Impressions of and Experiences with Crowd Out under SCHIP," Assessing the New Federalism Discussion Paper (Washington: Urban Institute, forthcoming).
22. A. Weil, "The New Child Health Insurance Program: A Carefully Crafted Compromise" (Washington: Kaiser Family Foundation, Project on Incremental Health Reform, 1999).
23. See, for example, HR-15 in "Policy Positions" (Washington: National Governors Association, 2000).
24. Kaiser Commission on Medicaid and the Uninsured, Uninsured in America: A Chart Book (Washington: Henry J. Kaiser Family Foundation, 2000).
25. Ibid.
26. Author’s tabulations from the 1999 National Survey of America’s Families.
27. Tax filing units and health insurance "families" are not the same. A count of tax returns and dependents claiming the tax credit could overstate or understate the number of persons who are actually insured.
28. One model of a refundable tax credit similar in size to the Bush proposal, although reaching families with higher incomes, found that only one-quarter of those who take up the tax credit would be previously uninsured. J. Gruber and L. Levitt, "Tax Subsidies for Health Insurance: Costs and Benefits," Health Affairs (Jan/Feb 2000): 72–85.
29. G. Kenney et al., "Health Insurance, Access, and Health Status of Children," Snapshots of America’s Families II (Washington: Urban Institute, 2000). This figure excludes Medicare.

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