# Presentation: 685970

## OVERVIEW

- Background and Basics of Cost-Sharing
- Designing Premiums
- Analysis of Impacts of Four States’ Premium Policies
- Implications for CHIP

## BACKGROUND

- Traditionally, Public Insurance (Medicaid) Was for the Poor and Was Free
- As Government Programs Expand to Serve Uninsured People in Working Class Families, Then Issues of Cost-Sharing Become More Relevant
- Premiums Have Been Used in Family-Based Expansion Programs, Like Tenncare or Washington's Basic Health Plan, and Are Now Being Permitted in CHIP Programs

## Sliding Scale Premium: Amount Paid by the Person to
	Purchase Insurance;  Some People Pay More
Premiums affect whether a person gets insurance coverage in the first place
Reduces participation and government share of cost
Copayment: Amount Paid by the Person to Get Specific
	Medical Services (e.g., Office Visit or Prescription Drugs)
Copayments affect whether an insured person gets a specific service, affect health care utilization
Reduces cost per covered person

- 	Purchase Insurance;  Some People Pay More
- Premiums affect whether a person gets insurance coverage in the first place
- Reduces participation and government share of cost
- Copayment: Amount Paid by the Person to Get Specific
- 	Medical Services (e.g., Office Visit or Prescription Drugs)
- Copayments affect whether an insured person gets a specific service, affect health care utilization
- Reduces cost per covered person

- BASICS OF COST-SHARING

## Reduces Government Cost, Both by Sharing Burden and Lowering Participation
Targets Assistance and Subsidies to the Poorest
May Reduce Problems of Welfare and Medicaid Dependency  
May Reduce Crowd-Out
May Reduce Stigma 

- Targets Assistance and Subsidies to the Poorest
- May Reduce Problems of Welfare and Medicaid Dependency
- May Reduce Crowd-Out
- May Reduce Stigma

- ADVANTAGES OF PREMIUMS

## Lowers Participation 
Might Lead to Adverse Selection
Requires More Administrative Effort
Might Break Up Coverage, If People Enter and Exit When They Can Afford

- Might Lead to Adverse Selection
- Requires More Administrative Effort
- Might Break Up Coverage, If People Enter and Exit When They Can Afford

- DISADVANTAGES OF PREMIUMS

## May Reduce Unnecessary Medical Care Use
Can Be Tailored to Accomplish Specific Purposes, e.g., High Copayment for ER, but None for Preventive Services
Can Supplement Provider Payments

- Can Be Tailored to Accomplish Specific Purposes, e.g., High Copayment for ER, but None for Preventive Services
- Can Supplement Provider Payments

- ADVANTAGES OF COPAYMENTS

## Barrier to Care
Can Reduce Use of Cost-Effective Services
Harder for Provider, Could Reduce His/Her Payment

- Can Reduce Use of Cost-Effective Services
- Harder for Provider, Could Reduce His/Her Payment

- DISADVANTAGES OF COPAYMENTS

## RAND Health Insurance Experiment:  Generally, Copayments Reduced Medical Utilization and Expenditures, but Did Not Affect Health Status.  Among Low-Income People, Copayments Associated with Higher Blood Pressure 
Prescription Drugs: Copayments Reduce Drug Use, Could Increase Hospitalization Costs
Tenncare:  Many Went Without Medication Because of Drug Copayments

- Prescription Drugs: Copayments Reduce Drug Use, Could Increase Hospitalization Costs
- Tenncare:  Many Went Without Medication Because of Drug Copayments

- RESEARCH ON COPAYMENTS

## How Low and How High?
Progressivity
Stairsteps
Fixed Dollars or Fixed Percentages?
Equity for Individuals and Families

- How Low and How High?
- Progressivity
- Stairsteps
- Fixed Dollars or Fixed Percentages?
- Equity for Individuals and Families

## PREMIUM STRUCTURE TYPES

## PREMIUM STRUCTURE TYPES (cont.)

##   PREMIUM STRUCTURE TYPES (cont.)

-   PREMIUM STRUCTURE TYPES (cont.)

## USE OF EQUAL PERCENTAGE SUBSIDIES FOR FAMILIES AND INDIVIDUALS

## Tenncare: Sliding Scale Premiums Between 100 and 400% of FPL, Full Premiums Above 400%;  Copayments (Sec. 1115 Project)
Hawaii QUEST: Sliding Scale Premiums Between 100 and 300% of FPL  (Sec. 1115 Project)
Washington Basic Health Plan:  Sliding Scale Premiums Between 0 and 200% of Poverty,  Free for Children Thru Medicaid Expansion (State Funded)
Minnesotacare: Sliding Scale Premiums for Families With Children Between 0 and 275% of Poverty, for Childless Adults Between 0 and 135% of Poverty

- Hawaii QUEST:** Sliding Scale Premiums Between 100 and 300% of FPL  (Sec. 1115 Project)**
- Washington Basic Health Plan:**  Sliding Scale Premiums Between 0 and 200% of Poverty,  Free for Children Thru Medicaid Expansion (State Funded)**
- Minnesotacare: **Sliding Scale Premiums for Families With Children Between 0 and 275% of Poverty, for Childless Adults Between 0 and 135% of Poverty**

- FOUR STATES WITH FAMILY EXPANSIONS - 1995

## MONTHLY PREMIUMS BY POVERTY LEVEL, 1995

## MONTHLY PREMIUMS BY POVERTY LEVEL, 1995 (cont.)

## Rate =  # Participants / # Uninsured People Eligible, Based on Income
Counts of People Enrolled at Different Income Levels  Reported by States for a Month in 1995
Used Three-Year Merged Current Population Survey Data to Estimate Number of Uninsured in Each State in 25% of Poverty Cells
Pooled Data for Minnesota, Wisconsin and Hawaii,  Discarded Tennessee Data
Estimated Preliminary Weighted Regression Model

- Counts of People Enrolled at Different Income Levels  Reported by States for a Month in 1995
- Used Three-Year Merged Current Population Survey Data to Estimate Number of Uninsured in Each State in 25% of Poverty Cells
- Pooled Data for Minnesota, Wisconsin and Hawaii,  Discarded Tennessee Data
- Estimated Preliminary Weighted Regression Model

- ESTIMATING PARTICIPATION RATES

##   ESTIMATED PARTICIPATION FUNCTION, BASED ON THREE STATES, 1995

## As Premiums Rise, Participation Levels Fall
Even When Free, Some Do Not Participate
There Is No "Right" Level for Premiums
Trade-Off Between Budget and Participation Goals, As Well As Perception of What Seems "Fair"

- Even When Free, Some Do Not Participate
- There Is No "Right" Level for Premiums
- Trade-Off Between Budget and Participation Goals, As Well As Perception of What Seems "Fair"

- MAIN FINDINGS OF ANALYSIS

## Includes Children Only,  People May Be More Willing to Insure Children
Other Factors Matter Too:  Publicity, Ease of Application, Type of Benefit Package
Interactions With Medicaid
Federal Rules on Premiums and Copayments Constrain Choices

- Other Factors Matter Too:  Publicity, Ease of Application, Type of Benefit Package
- Interactions With Medicaid
- Federal Rules on Premiums and Copayments Constrain Choices

- CHIP MIGHT BE DIFFERENT

## If Medicaid Expansion, Then Follow Medicaid Rules, Essentially Banning Cost-Sharing
If CHIP-Only, Then Premiums in Families Below 150% of Poverty Must Not Exceed "Nominal" Levels, Related to Medically Needy Rules 	
Modest copayments permitted
If CHIP-Only, Then Total Cost-Sharing in Families Above 150% of FPL Must Not Exceed 5%
  No copayments on preventive services
Total Cost-sharing Hard to Monitor

- If CHIP-Only, Then Premiums in Families Below 150% of Poverty Must Not Exceed "Nominal" Levels, Related to Medically Needy Rules
- Modest copayments permitted
- If CHIP-Only, Then Total Cost-Sharing in Families Above 150% of FPL Must Not Exceed 5%
-   No copayments on preventive services
- Total Cost-sharing Hard to Monitor

- WHAT ARE COST-SHARING RULES IN CHIP?

## Do Market Research,  Run Focus Groups and Occasional Participant Surveys
Identify Size of Potential Target Population
Monitor Income of Participants and Premiums Paid
Can Tinker With Premium Levels Over Time

- Identify Size of Potential Target Population
- Monitor Income of Participants and Premiums Paid
- Can Tinker With Premium Levels Over Time

- MONITORING PREMIUMS