Cost and coverage implications of the McCain plan to restructure health insurance

Health Affairs

Volumn 27, Issue 6, 2008, Pages

  Buchmueller, Thomas ^a   Glied, Sherry A ^b   Royalty, Anne ^c   Swartz, Katherine ^d  

^a UNIVERSITY OF MICHIGAN   (United States)

^b Columbia University ^*  (United States)

^c INDIANA UNIVERSITY   (United States)

^d HARVARD SCHOOL OF PUBLIC HEALTH   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

ARTICLE; HEALTH CARE COST; HEALTH CARE PLANNING; HEALTH ECONOMICS; HEALTH INSURANCE; TAX; UNITED STATES;

HEALTH CARE REFORM; INSURANCE COVERAGE; INSURANCE, HEALTH; POLITICS; TAXES; UNITED STATES;

EID: 54449096585     PISSN: 02782715     EISSN: 02782715     Source Type: Journal    
DOI: 10.1377/hlthaff.27.6.w472     Document Type: Article

References (37)

1. See McCain-Palin, "A Call to Action: McCain Health Care Plan," http://www.johnmccain.com/healthcare (accessed 8 September 2008).
2. Some of the early work on this topic is reviewed in D. Cutler, "Public Policy for Health Care," in Handbook of Public Economics, vol. 4, ed. A. Auerbach and M. Feldstein (Amsterdam: Elsevier, 2002), 2143-2243.
3. J. Gruber and M. Lettau, "How Elastic Is The Firm's Demand for Health Insurance?" Journal of Public Economics 88, nos. 7-8 (2004): 1273-1293.
4. W.J. Carrington et al., "Nondiscrimination Rules and the Distribution of Fringe Benefits," Journal of Labor Economics 20, no. 2 (2002): S5-S33.
5. A.C. Monheit, L.M. Nichols, and T.M. Selden, "How Are Net Health Insurance Benefits Distributed in the Employment-Related Insurance Market?" Inquiry 32, no. 4 (1995-96): 379-391;
6. and T.M. Selden and D.M. Bernard, "Tax Incidence and Net Benefits in the Market for Employment-Related Health Insurance: Sensitivity of Estimates to the Incidence of Employer Costs," International Journal of Health Care Finance and Economics 4, no. 2 (2004): 167-192.
7. A.C. Enthoven and S.J. Singer, "Market-Based Reform: What to Regulate and by Whom?" Health Affairs 14, no. 1 (1995): 105-119.
8. Altering the tax subsidy for insurance also has distributional consequences. Other things equal, replacing the current tax exemption for employer-sponsored insurance with a refundable credit increases the progressivity of the subsidy. However, as we discuss above, eliminating the nondiscrimination rules would likely have a negative effect on low-wage workers who currently receive health benefits through their employers.
9. A. Royalty, "Tax Preferences for Fringe Benefits and Workers' Eligibility for Employer Health Insurance," Journal of Public Economics 75, no. 2 (2000): 209-227.
10. Gruber and Lettau, "How Elastic Is the Firm's Demand for Health Insurance?"
11. J. Gruber and J. Poterba, "Fundamental Tax Reform and Employer-Provided Health Insurance," in Economic Effects of Fundamental Tax Reform, ed. H.J. Aaron and W.G. Gale (Washington: Brookings Institution, 1996), 125-170;
12. and R. Feldman et al., "The Effect of Premiums on the Small Firms' Decision to Offer Health Insurance," Journal of Human Resources 32, no. 4 (1997): 635-658.
13. P. Fronstin, "The Future of Employment-Based Health Benefits: Have Employers Reached a Tipping Point?" EBRI Issue Brief no. 312 (Washington: Employee Benefit Research Institute, December 2007).
14. J. Gruber, "Covering the Uninsured in the U.S." NBER Working Paper no. 13758 (Cambridge, Mass.: National Bureau of Economic Research, January 2008).
15. Prior experience with health insurance tax credits suggests that some insurers may seek to develop and market products of very little true value that sell for close to the amount of the tax credit. See House Ways and Means Committee, Subcommittee on Oversight, "Report on Marketing Abuse and Administrative Problems Involving the Health Insurance Component of the Earned Income Tax Credit," WMCP: 103-14, 103rd Cong., 1st sess., 1 June 1993. We assume in our modeling that regulations implemented to avoid such fraudulent behavior would mean that insurance purchasers who used the credit would be required to make meaningful contributions toward the cost of their coverage.
16. S. Glied, "Is Something Better than Nothing? Health Insurance Expansions and the Content of Coverage," in Frontiers in Health Policy Research, vol. 6, ed. D. Cutler and A. Garber (Cambridge, Mass.: MIT Press, 2003), 55-86.
17. We use Gruber's preferred estimate of an average take-up elasticity of -0.5 in the nongroup market. The base is the current number of uninsured people (forty-seven million) plus the twenty million estimated to lose group coverage. See Gruber, "Covering the Uninsured in the U.S."; and Gruber and Lettau, "How Elastic Is the Firm's Demand for Health Insurance?"
18. R. Carroll, "The Economic Effects of the President's Proposal for a Standard Deduction for Health Insurance," National Tax Journal 60, no. 3 (2007): 419-431;
19. Congressional Budget Office, "Appendix C: The President's Proposal for a Standard Tax Deduction for Health Insurance," in An Analysis of the President's Budgetary Proposals for Fiscal Year 2008 (Washington: CBO, March 2007);
20. and J. Sheils and R. Haught, "President Bush's Health Care Tax Proposal: Coverage, Cost and Distributional Impacts" (Fairfax, Va.: Lewin Group, January 2007).
21. For example, the CBO and the Lewin Group estimate that "only" six to twelve million people would lose employer-based insurance under the Bush administration proposal. Ibid.
22. M.S. Marquis and S. Long, "Worker Demand for Health Insurance in the Non-Group Market," Journal of Health Economics 14, no. 1 (1995): 47-63;
23. and J. Gruber and E. Washington, "Subsidies to Employee Health Insurance Premiums and the Health Insurance Market," Journal of Health Economics 24, no. 2 (2005): 253-276.
24. CBO, CBO's Health Insurance Simulation Model (Washington: CBO, 2007).
25. Data for nongroup coverage are for 2006-07. Data are for preferred provider organization (PPO)/point-of-service (POS) plans, the most common option chosen. See America's Health Insurance Plans, Individual Health Insurance 2006-2007: A Comprehensive Survey of Premiums, Availability, and Benefits (Washington: AHIP, 2007).
26. Data for employer coverage are from Henry J. Kaiser Family Foundation/Health Research and Educational Trust, Employer Health Benefits: 2006 Annual Survey (Menlo Park, Calif.: Kaiser Family Foundation, 2006).
27. The sample is people ages 19-64 with individual coverage or who thought about it or tried to buy it in the past three years. See S. Collins et al., "Squeezed: Why Rising Exposure to Health Care Costs Threatens the Health and Financial Well-Being of American Families" (New York: Commonwealth Fund, September 2006).
28. These findings are not unique. See K. Pollitz, R. Sorian, and K. Thomas, "How Accessible Is Individual Health Insurance for Consumers in Less-than-Perfect Health?" (Menlo Park, Calif.: Kaiser Family Foundation, 2001).
29. See, for example, D. Grady, "After Caesareans, Some See Higher Insurance Cost," New York Times, 1 June 2008.
30. This estimate is based on the actual experience of the high-risk pools in California and Illinois, two large states with readily accessible data.
31. Health Insurance Resource Center, "Risk Pools for the Medically-Uninsurable," http://healthinsurance.org/risk_pools (accessed 8 September 2008).
32. V. Patel and M.V. Pauly, "Guaranteed Renewability and the Problem of Risk Variation in Individual Health Insurance Markets," Health Affairs 21 (2002): w280-w289 (published online 28 August 2002; 10.1377/hlthaff.21.w280).
33. Information on external review is available from statehealthfacts.org, http://www.statehealthfacts.org, sponsored by the Kaiser Family Foundation, and is for 2008 (downloaded 22 August 2008).
34. V.C. Bunce and J.P. Wieske, "Health Insurance Mandates in the States 2008," http://www.cahi.org/cahi_contents/resources/pdf/ HealthInsuranceMandates2008.pdf (accessed 8 September 2008).
35. It is sometimes argued that state mandates are wasteful, forcing insurers to provide benefits that consumers don't value, which raises premiums and lowers coverage. When adverse selection exists, however, unregulated competition among insurers can result in certain benefits' not being available even though many consumers do value them. Furthermore, the most credible empirical studies on this issue provide no evidence that state insurance mandates have the effect of reducing coverage. See J. Gruber, "State Mandated Benefits and Employer Provided Insurance," Journal of Public Economics 55, no. 3 (1994): 433-464;
36. and J. Gruber, "The Incidence of Mandated Maternity Benefits," American Economic Review 84, no. 3 (1994): 622-641.
37. L. Burman et al., An Updated Analysis of the 2008 Presidential Candidates' Tax Plans: Revised August 15, 2008, http://www.taxpolicycenter. org/UploadedPDF/411749_update_candidates.pdf (accessed 27 August 2008).