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State & Federal State & Federal Approaches to Health Approaches to Health Reform: What works Reform: What works for the working poor?for the working poor?
June 9, 2008June 9, 2008Ellen MearaEllen Meara
Meredith RosenthalMeredith RosenthalAnna SinaikoAnna Sinaiko
Katherine BaickerKatherine Baicker
2
Insurance & the Working Insurance & the Working PoorPoor
80% of uninsured individuals live in 80% of uninsured individuals live in families with at least 1 worker.families with at least 1 worker. Most have low incomesMost have low incomes
Flurry of state activity to expand coverageFlurry of state activity to expand coverage 3 states have enacted reforms3 states have enacted reforms 13 other states have proposed reform13 other states have proposed reform
Unintended consequences of reformUnintended consequences of reform Can effect wages and/or employmentCan effect wages and/or employment May offer redistribution to low income May offer redistribution to low income
individualsindividuals Effects may be pronounced for working poorEffects may be pronounced for working poor
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Goal of the paperGoal of the paper Compare 3 expansion approaches:Compare 3 expansion approaches:
Employer mandatesEmployer mandates Public insurance expansionPublic insurance expansion Tax credits to buy HI in non-group marketTax credits to buy HI in non-group market
Consider broad set of consequences:Consider broad set of consequences: # insured# insured private & public spending private & public spending employment & wages employment & wages redistribution based on income & work.redistribution based on income & work.
4
MethodsMethods
Combine literature with population estimatesCombine literature with population estimates Previously published parameter estimates Previously published parameter estimates
1.1. Take-up rates Take-up rates
2.2. Crowd-out Crowd-out
3.3. Employment & wage response to health costsEmployment & wage response to health costs
4.4. Cost of insurance coverageCost of insurance coverage Population - 2005 Current Population SurveyPopulation - 2005 Current Population Survey
Sample – restricted to age 0-64Sample – restricted to age 0-64 Weighted to represent non-elderly, non-institutionalizedWeighted to represent non-elderly, non-institutionalized Used to calculate eligible populations, income & work Used to calculate eligible populations, income & work
statusstatus
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Policies simulatedPolicies simulated Employer mandateEmployer mandate
Uninsured, FT workers & dependents at firms Uninsured, FT workers & dependents at firms with 25+ employeeswith 25+ employees
No income cutoffNo income cutoff Medicaid expansionMedicaid expansion
Income <300% of povertyIncome <300% of poverty Tax credit - modestTax credit - modest
Bush-style credit for individuals without ESI or Bush-style credit for individuals without ESI or public coveragepublic coverage
Credit phases out at $30k, $40k, and $60k Credit phases out at $30k, $40k, and $60k based on tax filing statusbased on tax filing status
$1000 limit per adult, $500 per child, $3000 $1000 limit per adult, $500 per child, $3000 totaltotal
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How do policies perform How do policies perform based on costs & newly based on costs & newly
insured?insured?14.2
5
1.5
0
5
10
15
Newly insured
(millions)
Employer mandate
Medicaid expansion
Tax credit
0
28603289
0
6000
00
2000
4000
6000
8000
Public
$/newly
insured
Private
$/newly
insured
Employer mandate
Medicaid expansion
Tax credit
# NEWLY INSURED COSTS PER NEWLY INSURED
7
Based on typical Based on typical measuresmeasures
Employer mandates expand insurance to Employer mandates expand insurance to more uninsured at a more moderate costmore uninsured at a more moderate cost
Employer mandates involve no new Employer mandates involve no new public spendingpublic spending
Tax credits are by far the most Tax credits are by far the most expensive way to insure more expensive way to insure more individualsindividuals
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Labor Market EffectsLabor Market Effects
-235
0 0
-250
-200
-150
-100
-50
0
Employer mandate
Medicaid expansion
Tax credit
-21
7
0
-30
-20
-10
0
10
Employer mandate
Medicaid expansion
Tax credit
Change in # employed
(thousands)
Change in annual wages
($billions)
9
Average benefit & Average benefit & redistributionredistribution
0
6
8
0
2
4
6
8
10
Employer mandate
Medicaid expansion
Tax credit
Value of redistribution to previously insured ($billions)
2860
2138
687
0
1000
2000
3000
4000
Employer mandate
Medicaid expansion
Tax credit
Average $ value of benefit for takers
10
% reduction in uninsured % reduction in uninsured by income (workers)by income (workers)
% of FPL% of FPLEmployeEmploye
r r mandatmandat
ee
Medicaid Medicaid expansioexpansionn
Tax Tax creditcredit
<100%<100% 12%12% 6%6% 5%5%
100-100-200%200%
1818 1111 44
200-200-300%300%
2020 3030 33
>300%>300% 2121 00 33
11
Distribution of tax credit Distribution of tax credit $$
0.19
0.270.54
<100%
100-200%
>200%
By Poverty Level
0.4850.56
Workers
Non-workers
By work status
12
Implication: Must consider Implication: Must consider unintended consequencesunintended consequences
Employer mandates have negative Employer mandates have negative effects on labor marketseffects on labor markets In aggregate these are modest, but would In aggregate these are modest, but would
be concentrated among low wage workersbe concentrated among low wage workers
Tax credits and Medicaid expansions Tax credits and Medicaid expansions confer substantial financial benefits to confer substantial financial benefits to low income individuals with prior low income individuals with prior coveragecoverage
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Why do reform approaches Why do reform approaches fail to cover so many poor?fail to cover so many poor?
The poor fare badly under all 3 approachesThe poor fare badly under all 3 approaches Take-up is lowTake-up is low
Many eligible for Medicaid do not take it upMany eligible for Medicaid do not take it up Similarly low take-up expected for tax creditSimilarly low take-up expected for tax credit
Uninsured workers may not qualify for Uninsured workers may not qualify for coverage coverage Part-timePart-time Contingent workersContingent workers ImmigrantsImmigrants
1/3 of uninsured workers below 300% of fpl were not 1/3 of uninsured workers below 300% of fpl were not US citizensUS citizens
Medicaid eligibility to non-citizens is severely limitedMedicaid eligibility to non-citizens is severely limited Undocumented immigrants unlikely to be coveredUndocumented immigrants unlikely to be covered
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% reduction in uninsured % reduction in uninsured by income (non-workers)by income (non-workers)
% of FPL% of FPLEmployeEmploye
r r mandatmandat
ee
Medicaid Medicaid expansioexpansionn
Tax Tax creditcredit
<100%<100% 0%0% 11%11% 5%5%
100-100-200%200%
00 1212 44
200-200-300%300%
00 1414 33
>300%>300% 00 00 33
