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The best of both worlds: Uniting universal coverage and personal choice in health care
The best of both worlds: Uniting universal coverage and personal choice in health care
The best of both worlds: Uniting universal coverage and personal choice in health care
The best of both worlds: Uniting universal coverage and personal choice in health care
The best of both worlds: Uniting universal coverage and personal choice in health care
The best of both worlds: Uniting universal coverage and personal choice in health care
The best of both worlds: Uniting universal coverage and personal choice in health care
The best of both worlds: Uniting universal coverage and personal choice in health care
The best of both worlds: Uniting universal coverage and personal choice in health care
The best of both worlds: Uniting universal coverage and personal choice in health care
The best of both worlds: Uniting universal coverage and personal choice in health care
The best of both worlds: Uniting universal coverage and personal choice in health care
The best of both worlds: Uniting universal coverage and personal choice in health care
The best of both worlds: Uniting universal coverage and personal choice in health care
The best of both worlds: Uniting universal coverage and personal choice in health care
The best of both worlds: Uniting universal coverage and personal choice in health care
The best of both worlds: Uniting universal coverage and personal choice in health care
The best of both worlds: Uniting universal coverage and personal choice in health care
The best of both worlds: Uniting universal coverage and personal choice in health care
The best of both worlds: Uniting universal coverage and personal choice in health care
The best of both worlds: Uniting universal coverage and personal choice in health care
The best of both worlds: Uniting universal coverage and personal choice in health care
The best of both worlds: Uniting universal coverage and personal choice in health care
The best of both worlds: Uniting universal coverage and personal choice in health care
The best of both worlds: Uniting universal coverage and personal choice in health care
The best of both worlds: Uniting universal coverage and personal choice in health care
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The best of both worlds: Uniting universal coverage and personal choice in health care

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  • 1. Best of Both Worlds: Darius Lakdawalla Jay Bhattacharya Amitabh Chandra Michael Chernew Dana Goldman Anupam Jena Anup Malani Tomas Philipson Best of Both Worlds | 1 A Plan for Uniting Universal Coverage and Personal Choice in Health Care The views expressed here are those of the authors alone and do not necessarily represent those of the American Enterprise Institute.
  • 2. Where does America’s health system stand? Best of Both Worlds | 2
  • 3. Best of Both Worlds | 3 1. Rising healthcare spending • ACA creates new government liabilities ($1.1 trillion) • Combined with existing liabilities, these threaten America’s economic well-being
  • 4. Best of Both Worlds | 4 2. High Uninsurance • 50 million Americans are currently uninsured • 10 years after the ACA goes into effect, 20 million still uninsured
  • 5. Best of Both Worlds | 5 3. Increased fragmentation • Cheaper Medicaid-participating providers for the poor • Broad and robust system for rich and middle class 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 82.0 83.0 84.0 85.0 86.0 87.0 88.0 Private Insurance (left axis) Medicaid (right axis) Enrollment as a percent of population: private insurance vs. Medicaid Source: Census Bureau. Health Insurance Historical Tables. http://www.census.gov/hhes/www/hlthins/data/historical/files/hi histt1.xls.
  • 6. What priorities should guide health policy? Best of Both Worlds | 6
  • 7. Best of Both Worlds | 7 1. Ensuring universal access to basic health care • There is clear public support for covering the uninsured • Health policy must return to the principle of basic, equal access for all. 2. Making health care affordable for the poor and sick • The poorest Americans are the least insured • The uninsured die younger and have poorer health 3. Restraining the growth of public spending • Accounts for well over half of national health expenditures in the United States • Rapid public spending growth necessitates higher taxation, higher debt, or both.
  • 8. Best of Both Worlds | 8 4. Ensuring the efficient provision and pricing of health care and health insurance • Encourage high-value services (beta blockers); discourage low-value services (heart stents) • Promote competition among providers • Reduce inefficient regulations, like state mandates and community-rated pricing 5. Respecting the diversity of consumer values regarding the quantity/type of care they wish to receive • No single health plan will be optimal for everyone • Permit individuals to choose a plan that best suits them — allowing them to spend as much or as little as they want, so long as their choices do not end up costing others.
  • 9. What are the barriers to implementing priorities? Best of Both Worlds | 9
  • 10. Best of Both Worlds| 10 1. The Samaritan’s Dilemma • Society’s altruistic desire to help the sick may discourage the healthy from protecting themselves against illness 2. Price Distortions • Opaque prices lead individuals to over-utilize care that costs more than it is worth. • Examples: Tax exclusions for employer-sponsored health insurance benefits and medical care generally 3. Market Power 1. The price of health care is greater than what a competitive, efficient market would charge 2. Physician licensing agreements and provider monopolies, drive up prices by 7 and 34 percent, respectively.
  • 11. Best of Both Worlds| 11 4. Risk Selection in Insurance Markets • Sicker people purchase more insurance because they value it more. That makes the insured population sicker. • Under community-rating regulations, this drives up premiums for the healthy and discourages them from buying insurance. That raises premiums even more. 5. Impediments to long-run health insurance • Outmoded “liquidated damages” law hampers insurance companies’ willingness to offer long-term insurance contracts
  • 12. A vision for reform Best of Both Worlds| 12
  • 13. Best of Both Worlds| 13 1. National Health Insurance Exchange of private insurers, featuring individualized pricing and premium support 2. Removal of distortionary income tax exemption for employer-provided health insurance 3. A safety net tax levied on all Americans except the poorest, and those whose insurance covers safety-net services
  • 14. National Health Insurance Exchange Best of Both Worlds| 14 Individualized plan pricing and premium supports • Firms participating in the exchange will face fewer restrictions and may price policies based on personal and family medical history • Insurers in exchange must offer and quote a basic health insurance plan whose characteristics would be standardized by law. • Federal government provides premium support equal to the cost of each individual's basic plan to ensure coverage • Consumers may apply that support to a more generous plan if they choose.
  • 15. National Health Insurance Exchange Best of Both Worlds| 15 Regulation of Insurers • Health insurers in the exchange would be regulated uniformly at the national level—not a patchwork of state regulations. • Fosters greater competition: An insurer in Texas can now compete against an insurer in California • Federal regulation would ensure that plans offered on the exchange meet minimum standards for benefits and accessibility
  • 16. National Health Insurance Exchange Best of Both Worlds| 16 Long-term contracts (LTCs) • Short-term contracts don’t encourage insurers to invest in preventions that pay off in the long run • Exchange would require all insurers to offer at least one LTC option to consumers • Exchange would eliminate institutional and legal barriers that hamper LTCs • Liquidated damages rules would be reformed to allow jilted insurers to be made whole • LTC competition across state lines would foster a more robust and competitive market
  • 17. Removing the Income Tax Exemption for Employer-Provided Health Insurance Best of Both Worlds| 17 Current system • Encourages employees to overutilize health care • Encourages use of low-value health care services • Discriminates against the self-employed • Promotes “job-lock”: employees remaining with their company for fear of losing their providers and insurance Removing exemption would: • Increase government revenues by $313 billion/year • Expand the range of health insurance plans available to employees • Increase employees’ wages by at least 90 percent of the employer’s cost of providing coverage
  • 18. Safety-net Emergency Care for All Americans Best of Both Worlds| 18 Reformed system would: • Guarantee a minimum level care regardless of coverage or ability to pay • Congress would define the precise set of covered services Financing the care through the tax system: • Ensures all that Americans pay their fair share of this cost and avoids the free-rider problem • Preserves progressivity through the general tax system. • Exempts individuals whose insurance covers these services
  • 19. Best of Both Worlds: Evaluating the Plan Best of Both Worlds| 19
  • 20. Best of Both Worlds| 20 Revenues 1. Eliminating federal and state Medicaid spending • Low income individuals would be integrated into the national exchange • Medicaid spending would be preserved for home health and long-term care, Medicare premiums for dual eligibles, and vaccines for children • Saves federal and state governments $332 billion 2. Eliminating the tax preference for employer-sponsored health insurance boosts revenues by $313 billion annually Total: $645 in annual revenue
  • 21. Evaluating the “Best of Both Worlds” plan Best of Both Worlds| 21 Coverage for the no-cost basic plan: • Covers “catastrophic expenditures” above a certain threshold • Deductibles and copays would decrease as a share of family income as income decreases, protecting the poor more than the wealthy • Deductibles would decrease by 35 percentage points for households burdened by high medical expenditures, protecting the sick.
  • 22. Evaluating the “Best of Both Worlds” plan Best of Both Worlds| 22 Coverage Examples • All households making less than 150% of the federal poverty level: 0% copay • Burdened households, same characteristics: 0% deductible, 0% percent copay • Burdened households earning less than 400% of FPL: 0% deductible, 10% copay • Burdened households earning 600% of FPL: 25% deductible, 20% copay Best of Both Worlds vs. ACA • All healthy households gain financially relative to the ACA • All households earning less than 500% of FPL ($105,000) gain financially relative to the ACA • Households earning more than $105,000 and who use more care will be asked to pay a bit more.
  • 23. Evaluating the “Best of Both Worlds” plan Best of Both Worlds| 23
  • 24. Evaluating the “Best of Both Worlds” plan Best of Both Worlds| 24
  • 25. Evaluating the “Best of Both Worlds” plan Best of Both Worlds| 25 Budget impact Our plan saves more than $6 billion annually over the ACA Savings/Revenues: $645 billion Premium support expenses: $745 billion First year cost: $100 billion 10th year cost: $145 billion Average cost: $121.55 billion ACA average cost: $127.7 billion Annual savings: $6.1 billion
  • 26. Summary Best of Both Worlds| 26 Ensures Universal Access by providing premiums supports that allow individuals to purchase a basic coverage plan for free. Protects the Poor and Sick by enabling all to purchase health insurance, regardless of income. The poor will have no out-of-pocket health care expenditures Restrains Cost Growth by promoting competition among private health insurers and providers, encouraging them to hold down premiums, minimize overhead, and avoid waste. Ensures Efficient Provision by eliminating state and federal regulations that distort prices in health insurance and health care markets. Respects Diversity by allowing consumers to seek out the types of care they value and avoid the rest—not forcing them into a single limited plan.

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