The effect of tax credits for nongroup insurance on health spending by the uninsured

Health Affairs

Volumn 23, Issue SUPPL., 2004, Pages

  Reschovsky, James D ^a   Hadley, Jack ^a,b  

^a CENTER FOR STUDYING HEALTH SYSTEM CHANGE   (United States)

^b URBAN INSTITUTE   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

CORRELATION ANALYSIS; DATA ANALYSIS; FAMILY; GOVERNMENT; HEALTH CARE COST; HEALTH CARE DELIVERY; HEALTH CARE MANAGEMENT; HEALTH CARE POLICY; HEALTH CARE SYSTEM; HEALTH INSURANCE; HEALTH PROGRAM; HEALTH SERVICE; HEALTH SURVEY; HUMAN; INCOME; LAW; MARKETING; POLITICAL SYSTEM; POPULATION RESEARCH; PREDICTION; PUBLIC HEALTH; REVIEW; SIMULATION; SOCIAL STATUS; STATISTICAL ANALYSIS; TAX; UNITED STATES;

EID: 4644317101     PISSN: 02782715     EISSN: None     Source Type: Journal    
DOI: 10.1377/hlthaff.W4.113     Document Type: Review

References (41)

1. M. Pauly and L. Nichols, "The Nongroup Health Insurance Market: Short on Facts, Long on Opinions and Policy Disputes," Health Affairs, 23 October 2002, content.healthaffairs.org/cgi/content/abstract/hlthaff .w2.325 (27 January 2004).
2. J. Gabel et al., "Individual Insurance: How Much Financial Protection Does It Provide?" Health Affairs, 17 April 2002, content.healthaffairs.org/cgi/content/abstract/hlthaff.w2.172 (27 January 2004); L. Duchon and C. Schoen, Experiences of Working-Age Adults in the Individual Market: Findings from the Commonwealth Fund 2001 Health Insurance Survey (New York: Commonwealth Fund, December 2001); and D.J. Chollet and A.M. Kirk, Understanding Individual Health Insurance Markets: Structure, Practices, and Products in Ten States (Washington: Henry J. Kaiser Family Foundation, March 1998).
3. J. Gabel et al., "Individual Insurance: How Much Financial Protection Does It Provide?" Health Affairs, 17 April 2002, content.healthaffairs.org/cgi/content/abstract/hlthaff.w2.172 (27 January 2004); L. Duchon and C. Schoen, Experiences of Working-Age Adults in the Individual Market: Findings from the Commonwealth Fund 2001 Health Insurance Survey (New York: Commonwealth Fund, December 2001); and D.J. Chollet and A.M. Kirk, Understanding Individual Health Insurance Markets: Structure, Practices, and Products in Ten States (Washington: Henry J. Kaiser Family Foundation, March 1998).
4. J. Gabel et al., "Individual Insurance: How Much Financial Protection Does It Provide?" Health Affairs, 17 April 2002, content.healthaffairs.org/cgi/content/abstract/hlthaff.w2.172 (27 January 2004); L. Duchon and C. Schoen, Experiences of Working-Age Adults in the Individual Market: Findings from the Commonwealth Fund 2001 Health Insurance Survey (New York: Commonwealth Fund, December 2001); and D.J. Chollet and A.M. Kirk, Understanding Individual Health Insurance Markets: Structure, Practices, and Products in Ten States (Washington: Henry J. Kaiser Family Foundation, March 1998).
5. Evidence of higher insurance loads are given by M. Pauly and A.M. Percy, "Cost and Performance: A Comparison of the Individual and Group Health Insurance Markets," Journal of Health Politics, Policy and Law 25, no. 1 (2000): 9-26.
6. There is considerable disagreement over the seriousness of this second limitation. Tax credit advocates point out that most offers of nongroup coverage are "clean" and that guaranteed issue, guaranteed renewal, and rate regulations many states imposed on the industry protect at least those policy-holders who develop serious health problems after they initially obtain a nongroup policy. Moreover, compensating people for the costs of known health problems with predictable costs at initial enrollment is not necessarily an appropriate insurance function, although it could be considered an appropriate social goal.
7. J. Hadley and J.D. Reschovsky, "Tax Credits and the Affordability of Individual Health Insurance," Issue Brief no. 53 (Washington: Center for Studying Health System Change, July 2002); and J. Hadley and J.D. Reschovsky, "Health and the Cost of Nongroup Insurance," Inquiry 40, no. 3 (2003): 235-253.
8. J. Hadley and J.D. Reschovsky, "Tax Credits and the Affordability of Individual Health Insurance," Issue Brief no. 53 (Washington: Center for Studying Health System Change, July 2002); and J. Hadley and J.D. Reschovsky, "Health and the Cost of Nongroup Insurance," Inquiry 40, no. 3 (2003): 235-253.
9. Gabel et al., "Individual Insurance."
10. See Duchon and Schoen, Experiences of Working-Age Adults; Chollet and Kirk, Understanding Individual Health Insurance Markets; and K. Pollitz, R. Sorian, and K. Thomas, How Accessible is Individual Health Insurance for Consumers in Less-than-Perfect Health'? (Washington: Henry J. Kaiser Family Foundation, June 2001).
11. See Duchon and Schoen, Experiences of Working-Age Adults; Chollet and Kirk, Understanding Individual Health Insurance Markets; and K. Pollitz, R. Sorian, and K. Thomas, How Accessible is Individual Health Insurance for Consumers in Less-than-Perfect Health'? (Washington: Henry J. Kaiser Family Foundation, June 2001).
12. See Duchon and Schoen, Experiences of Working-Age Adults; Chollet and Kirk, Understanding Individual Health Insurance Markets; and K. Pollitz, R. Sorian, and K. Thomas, How Accessible is Individual Health Insurance for Consumers in Less-than-Perfect Health'? (Washington: Henry J. Kaiser Family Foundation, June 2001).
13. Data are gathered through telephone interviews. A field sample is included to obtain information from households that lack telephones. Detailed information about the survey can be obtained from various technical publications available at the Center for Studying Health System Change Web site, www.hschange.org.
14. These income limits were taken from the REACH proposal.
15. Low-income people covered by nongroup insurance would be-eligible for benefits under the Bush and REACH tax credit proposals, provided they lack access to ESI. We do not include them in our target population definition because they are already covered by insurance.
16. Special income maximums falling between those for individuals and families apply for situations where only some of the adults in a family qualify for the tax credit (for instance, if one adult is covered by public insurance). These are known as subfamily rules. The basic tax credit differs from the Bush administration tax credit in that it can cover 100 percent of a nongroup insurance premium, while the Bush administration tax credit is limited to 90 percent.
17. The high moderate and generous tax credits also eliminate lower subfamily income limits.
18. See Hadley and Reschovsky, "Health and the Cost of Nongroup Insurance," for details.
19. In our previous study we found strong evidence to support the need to correct for sample selection bias. Ibid.
20. We used predicted rather than reported out-of-pocket spending to account for families where not all members are presumed to be part of the target population. For instance, because we assume that low-income children will be covered by SCHIP, we assign a mean out-of-pocket spending value associated with publicly insured children obtained from the Medical Expenditure Panel Survey (MEPS) to low-income children when calculating both pre- and post-tax credit out-of-pocket spending. Adults covered by public insurance are treated similarly. The out-of-pocket spending regression, although estimated at the family level, was specified in a manner that allowed us to make individual level out-of-pocket spending predictions. To do this, the dependent variable was specified as average out-of-pocket spending per family member, and age, sex, and health status were entered in terms of the proportion of family members who were in these various demographic/health-status groups. To make individual-level predictions from this equation, values of the age, sex, and health variables were assigned a value of 1 if the individual fell into that age, sex, or health status group and a value of 0 otherwise. Other explanatory variables describe the family. The validity of this approach was verified by comparing individual-level predictions from family members with out-of-pocket spending reports from single-person families. They were found to be very similar. The out-of-pocket spending equations are available upon request from the authors; contact James Reschovsky at jreschovsky@hschange.org.
21. There is also additional variation attributable to prediction error that cannot be indicated.
22. J. Hadley and J. Holahan, "How Much Medical Care Do the Uninsured Use, and Who Pays for It?" Health Affairs, 12 February 2003, content.healthaffairs.org/cgi/content/abstract/hlthaff.w3.66 (27 January 2004).
23. L. Ku and TA. Coughlin, "Sliding-Scale Premium Health Insurance Programs: Four States' Experiences," Inquiry 36, no. 4 (1999/2000): 471-480.
24. M. Merlis, "Family Out-of-Pocket Spending for Health Services: A Continuing Source of Financial Insecurity" (New York: Commonwealth Fund, 2002).
25. S. Glied, "Health Insurance Expansions and the Content of Coverage: Is Something Better than Nothing?" in Frontiers in Health Policy Research, vol. 6, ed. D.M. Cutler and A.M. Garber (Cambridge, Mass.: MIT Press, 2003).
26. I b i d.
27. This is illustrated in S. Glied et al., "Bare-Bones Health Plans: Are They Worth the Money?" Issue Brief no. 518 (New York: Commonwealth Fund, 2002).
28. This is illustrated in Hadley and Reschovsky, "Health and the Cost of Nongroup Insurance." Although imposing minimum benefit levels would decrease out-of-pocket spending for those affected, higher payments for insurance premiums would likely increase the total cost of health care for those affected by the minimums. The Bush administration requires that policies include catastrophic coverage.
29. See Council of Economic Advisers, "Health Insurance Credits," 14 February 2002, www.whitehouse.gov/cea/HealthCredit_Feb02wp.pdf (25 September 2003); Executive Office of the President, Budget of the United States Government, Fiscal Year 2004 (Washington: U.S. Government Printing Office, 2003); and statement of Jonathan Gruber, professor of economics, Massachusetts Institute of Technology, submitted to the House Ways and Means Committee, 13 February 2002, waysandmeans.house.gov/legacy.asp?file=legacy/fullcomm/107cong/2- 13-02/records/gruber.htm (27 January 2004). Estimates contained in the president's FY 2005 budget were not available at the time of this writing.
30. See Council of Economic Advisers, "Health Insurance Credits," 14 February 2002, www.whitehouse.gov/cea/HealthCredit_Feb02wp.pdf (25 September 2003); Executive Office of the President, Budget of the United States Government, Fiscal Year 2004 (Washington: U.S. Government Printing Office, 2003); and statement of Jonathan Gruber, professor of economics, Massachusetts Institute of Technology, submitted to the House Ways and Means Committee, 13 February 2002, waysandmeans.house.gov/legacy.asp?file=legacy/fullcomm/107cong/2- 13-02/records/gruber.htm (27 January 2004). Estimates contained in the president's FY 2005 budget were not available at the time of this writing.
31. See Council of Economic Advisers, "Health Insurance Credits," 14 February 2002, www.whitehouse.gov/cea/HealthCredit_Feb02wp.pdf (25 September 2003); Executive Office of the President, Budget of the United States Government, Fiscal Year 2004 (Washington: U.S. Government Printing Office, 2003); and statement of Jonathan Gruber, professor of economics, Massachusetts Institute of Technology, submitted to the House Ways and Means Committee, 13 February 2002, waysandmeans.house.gov/legacy.asp?file=legacy/fullcomm/107cong/2- 13-02/records/gruber.htm (27 January 2004). Estimates contained in the president's FY 2005 budget were not available at the time of this writing.
32. Based on tabulations of the CTS Household Survey by the authors.
33. Applying the relationship between premiums as a percentage of income and take-up estimated in Ku and Coughlin's analysis of state public insurance to our data yields an estimate that 3.1 million people would take up the base tax credit. However, the dropoff in participation is likely to be sharper for the purchase of nongroup insurance than public insurance, because benefits in nongroup policies are typically less generous. This suggests that this is an upper-bound estimate. Take-up predictions based on full post-tax credit costs as a percentage of income yield an estimate of 1.4 million people and might be regarded as a lower-bound estimate. Moderate and generous tax credits yield upper- and lower-bound estimates that are roughly 2.5 and 3.3 times larger. See Ku and Coughlin, "Sliding-Scale Premium Health Insurance Programs."
34. M. Chernew, K. Frick, and C.G. McLaughlin, "The Demand for Health Insurance Coverage by Low Income Workers: Can Reduced Premiums Achieve Full Coverage?" Health Services Research 32, no. 4 (1997): 453-470; and M.S. Marquis and S.H. Long, "Worker Demand for Health Insurance in the Non-Group Market," Journal of Health Economics 14, no. 9 (1995): 47-63.
35. M. Chernew, K. Frick, and C.G. McLaughlin, "The Demand for Health Insurance Coverage by Low Income Workers: Can Reduced Premiums Achieve Full Coverage?" Health Services Research 32, no. 4 (1997): 453-470; and M.S. Marquis and S.H. Long, "Worker Demand for Health Insurance in the Non-Group Market," Journal of Health Economics 14, no. 9 (1995): 47-63.
36. H. Levy and T. DeLeire, "What Do People Buy When They Don't Buy Health Insurance and What Does That Say about Why They Are Uninsured?" NBER Working Paper no. 9826 (Cambridge, Mass.: National Bureau of Economic Research, 2003); and S.K. Long, "Hardship among the Uninsured: Choosing among Food, Housing, and Health Insurance," New Federalism Project, Series B, no. B-54 (Washington: Urban Institute, May 2003).
37. H. Levy and T. DeLeire, "What Do People Buy When They Don't Buy Health Insurance and What Does That Say about Why They Are Uninsured?" NBER Working Paper no. 9826 (Cambridge, Mass.: National Bureau of Economic Research, 2003); and S.K. Long, "Hardship among the Uninsured: Choosing among Food, Housing, and Health Insurance," New Federalism Project, Series B, no. B-54 (Washington: Urban Institute, May 2003).
38. Levy and DeLeire, "What Do People Buy?"
39. Glied, "Health Insurance Expansions."
40. Hadley and Reschovsky, "Tax Credits and the Affordability of Individual Health Insurance"; and Hadley and Reschovsky, "Health and the Cost of Nongroup Insurance."
41. Hadley and Reschovsky, "Tax Credits and the Affordability of Individual Health Insurance"; and Hadley and Reschovsky, "Health and the Cost of Nongroup Insurance."