SustiNet Policy Options: Cost and Coverage Estimates

SustiNet Partnership Board

November 18, 2010

Stan Dorn

Senior Fellow

The Urban Institute

Overview Putting modeling results in perspective Overview of policy options and estimates More detailed analysis

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Part I

Putting Modeling Results in Perspective

Methodological comments

Overview of Gruber Microsimulation Model Notes

Baseline reflects analysis of current spending, plus survey data Only goes through age 64 Does not consider new federal categorical grants, etc. Shows results in 2010 dollars, generally for 2014-2019

o 2017 is often used to illustrate effects after full implementation Cost savings from delivery system and payment reforms?

o Pessimistic scenario: no savingso Optimistic scenario: slows annual growth by 1 percentage point

Cf. Cutler/Davis, 1.9 percentage point in Medicare Modeling can yield good general estimates, not precise

and infallible predictions More inputs and model refinements can change estimates

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Part II

Overview of policy options and estimates

Policy options

Ongoing1. SustiNet for current state populations2. Add Basic Health Program to SustiNet 3. Permit small employers, municipalities and non-profits to buy

SustiNet4. Offer SustiNet to other employers and individuals, including

through the exchange5. Gradually raise HUSKY payments to private levels

Short-term6. Expand HUSKY to cover more low-income adults, in 2012 and

2013

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Five general results for the five ongoing options

1. More than half of the uninsured receive coverage

2. Net state budget deficits improve with most of these options, primarily because of a large infusion of federal dollars

3. Small firms experience savings, mainly because they cover fewer workers

4. Many people enroll in SustiNet

5. Aggregate household purchasing power is largely unaffected

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Some key differences among options

Adding Basic Health (BH) Compared to subsidized coverage in the exchange, more

affordable for low-income adults, including HUSKY parents Additional state budget savings Federally-funded reimbursement rate increases for BH members

Raising HUSKY payment rates to private levels Whether the resulting costs exceed other savings depends on

SustiNet’s impact on health cost growth

Short-term: expanding HUSKY before 2014 Increases coverage in 2012-2013, but costly to the state

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How SustiNet options change cost and coverage, pessimistic and optimistic cost-savings assumptions: 2017 (except option 6, which shows 2013 results)

  Uninsured gaining coverage(thousands)

Net changes to state spending (millions)

Employer savings (millions)

SustiNet members (thousands)

Pessimistic Optimistic Pessimistic Optimistic Pessimistic Optimistic Pessimistic Optimistic

Option 1: SustiNet for current populations

 206 206  -$174 -$371 $485 $485 620 620

Option 2: Basic Health

 207 207 -$224   -$418 $459 $459 650 650

Option 3: Offer SustiNet to small firms, municipalities, non-profits

 207 209 -$224   -$425 $461 $466 786 815

Option 4: Offer SustiNet to all firms and individuals

 207 209 -$224   -$427 $461 $498 944 1,011

Option 5: Raise HUSKY payments

 207 209 -$32 -$244 $461 $498 944 1,011

Option 6: Early HUSKY expansion

59 59 +$153   +$103 $217 $217  600 600

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Note: for options 2-5, estimates are cumulative. For example, the effects shown for Option 2 assume implementation of both Options 1 and 2; Effects shown for Option 3 assume implementation of Options 1, 2 and 3; etc. Option 6 estimates assume no other policy changes. Netchanges to state spending incorporate revenue and outlay effects.

Part III

More detailed cost and coverage estimates, by policy option

SUSTINET FOR CURRENT STATE POPULATIONS

Option 1

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Policy details

Delivery system and payment reforms apply to Medicaid, HUSKY, and state employee/retiree coverage effective immediately

SAGA immediately moved into Medicaid Full implementation of the Affordable Care Act

(ACA) starting in 2014 General cost and coverage effects as described

earlier for most options

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Coverage effects, 2017 The number of uninsured falls from 376,000

to 170,000—a 55% drop Small firm ESI falls by 11%

Most of the affected small-firm workers (77%) go into the exchange, where the majority receive subsidies

Context: large-firm ESI is largely unaffectedo Rises by 0.6 percent

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Coverage of residents under age 65, with and without reform: 2017

Projection without reform

Public, 12%

Uninsured, 12%

Individual, 4%

ESI, 72%

Projection with reformTax

credits, 4%Public,

16%

Uninsured, 6%

Individual, 4%

ESI, 70%

Note: “Individual” coverage includes unsubsidized coverage in the exchange.

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Public sector outlays, 2017 State budget situation improves

Pessimistic scenario: $174 million gain Optimistic scenario: $371 million gain

More Federal dollars in Connecticut for Medicaid, HUSKY, and subsidies in the exchangeHigher-cost scenario: $1.88 billionLower-cost scenario: $1.70 billion

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Effects on state spending and revenue, pessimistic scenario: 2017 (millions)

$99

$12

($286)

$16 $16

Medicaid/HUSKY -current populations

Medicaid - newpopulations SAGA

Stateemployee/retiree

coverage Revenue

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Effects on state spending and revenue, optimistic scenario: 2017 (millions)

($25)

$12

($293)

($46)

$19

Medicaid/HUSKY -current populations

Medicaid - newpopulations SAGA

Stateemployee/retiree

coverage Revenue

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Net improvement to state budget, pessimistic scenario: 2014-2019 (millions)

18Note: budget totals include both outlay and revenue effects.

Net improvement to state budget, optimistic scenario: 2014-2019 (millions)

19Note: budget totals include both outlay and revenue effects.

Effect on employer costs

Small firm savings (0-100 workers)$459 million in net savings6.2% cost reduction

No significant net effect on larger firms (101+ workers)$26 million net savings0.2% cost reduction

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Effects on small firm health costs: 2017 (millions)

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No significant net effect on household post-tax purchasing power: 2017

Pessimistic scenario$421 million increase0.4 percent change

Optimistic scenario$417 million increase in purchasing power0.4 percent change

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Effects on household purchasing power, pessimistic scenario: 2017 (millions)

$419

$1,088

$85

($4)

$1,009

Wages Government benefits Premiums Out-of-pocket costs Taxes

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ADDING THE BASIC HEALTH PROGRAM TO SUSTINET

Option 2

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Policy details

Individuals affected (2017 projections) 16,000 HUSKY parents, 133-185% FPL 41,000 other adults < 200% FPL who would otherwise

be in the exchange o Adults 133-200% FPLo Newly legalized immigrants below 133% FPL

The BH option covers them through state contracts with health plans Minimum federal standards re benefits, costs, etc. Enrolled in SustiNet, with HUSKY costs and benefits

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Bottom-line results Most cost and coverage effects largely unchanged

by adding BH to SustiNet Adding BH

Maintains affordability for HUSKY parents and improves it for other low-income adults

Increases net state budget savings Increases SustiNet enrollment, hence its ability to reform

delivery system and payment Concern: provider payment levels

Can raise above HUSKY levels, using federal funds

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Affordability of subsidized coverage in the exchange

FPL Monthly income Monthly premium

Average out-of-pocket cost-sharing

150 $1,354 $54.15 6%

175 $1,579 $81.34 13%

200 $1,805 $113.72 13%

Premium and out-of-pocket costs for a single, uninsured adult, at various income levels qualifying for subsidies under ACA

Notes: Dollar amounts assume 2010 FPL levels. Out-of-pocket cost-sharing represents the average percentage of covered health care services paid by the consumer, taking into account deductibles, copayments, and co-insurance.

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Other factors Federal BH dollars exceed HUSKY costs. E.g., in 2017:

Pessimistic scenario, $22 million Optimistic scenario, $37 million

HUSKY parents > 133% FPL can move to federally-funded coverage without reducing access to care. Resulting additional state budget savings in 2017: Pessimistic scenario, $50 million Optimistic scenario, $47 million

Continuity of coverage and care More covered lives in SustiNet, hence more leverage to

reform delivery system and payment

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Net state budget savings, SustiNet with and without BH, pessimistic scenario: 2014-2019 (millions)

29Note: budget totals include both outlay and revenue effects.

Net state budget savings, SustiNet with and without BH, optimistic scenario: 2014-2019 (millions)

30Note: budget totals include both outlay and revenue effects.

Concerns about adults getting HUSKY rather than coverage in the exchange

Fewer health plan choices Fewer covered lives in the exchange

Shift in leverage from the exchange to the state as a direct purchaser of care

Lower reimbursement rates, hence less access to providers. But must use federal “surplus” on BH members.

Could raise reimbursement. In 2017, increase of at least 7-13 percent

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PERMITTING SMALL FIRMS, MUNICIPALITIES, AND NON-PROFITS TO BUY SUSTINET

Option 3

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Policy details and modeling constraints Policy: certain employers can buy SustiNet for

their employees Can begin as early as 7/1/2012 Small firms, small municipalities, and small nonprofits:

same rules as small group market Option to buy commercial-style benefits Larger municipalities: to avoid adverse selection,

experience-rated premiums (or act as ASO) Modeling does not show specific effects on

municipalities and non-profits

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Bottom-line results

Most cost and coverage totals are unchanged

SustiNet serves many small firms If SustiNet slows cost growth

A few more small firms offer coverageA few more uninsured gain coverage

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More details Many small firms buy SustiNet. In 2017:

Pessimistic scenario: 136,000 covered lives, or 24% of small-group market

Optimistic scenario: 166,000 covered lives, or 29% of small group market

Net coverage impact of small firm option, 2017: Under pessimistic scenario, no net coverage effects Under optimistic scenario (SustiNet slows cost growth):

o Small firm coverage rises by 9,000, or 1.4%o Number of uninsured falls by 2,000, or 1.2%

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OFFERING SUSTINET TO ALL INDIVIDUALS AND FIRMS, WITHIN AND OUTSIDE THE EXCHANGE

Option 4

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Policy details SustiNet offered inside the exchange to

small firms and individualsSustiNet follows the same rules that apply to

other plans in those markets SustiNet offered outside the exchange to

large firmsTo prevent adverse selection, premiums are

experience-rated (or SustiNet acts as ASO)

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Bottom-line results

In addition to small firms, large firms and individuals enroll in SustiNet

Very few other effects, beyond the previous option for small firm purchaseUnder optimistic scenario, employer

premiums drop by an additional $35 million, or 0.3 percent

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Many firms and individuals enroll in SustiNet

  Small firm enrollment

Large firm enrollment

Individual enrollment

Covered lives

Share of small firm coverage

Covered lives

Share of large firm coverage

Covered lives

Share of individual market

Pessimistic scenario

136,000 24% 126,000 

8% 32,000 14%

Optimistic scenario

164,000 29% 

165,000 

10% 33,000 15%

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INCREASING HUSKY REIMBURSEMENT

Option 5

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Policy details

By 2019, average HUSKY costs per capita = average costs for large firm coverage in CT34.5% increaseNote: federal law imposes some limits in

going above Medicare rates Phased-in starting in 2015

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Effect of higher HUSKY reimbursement on net state budget savings, pessimistic scenario

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Note: budget totals include both outlay and revenue effects.

Effect of higher HUSKY reimbursement on net state budget savings, optimistic scenario

43Note: budget totals include both outlay and revenue effects.

SHORT-TERM: EXPANDING HUSKY IN 2012 AND 2013

Option 6

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Policy details In 2012-2013, HUSKY expands to 185

percent FPL for all adultsThis eligibility is limited to parents under

current law Before 2014, federal government pays

standard Medicaid match

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Bottom-line effects

The number of uninsured falls by 59,000, or 16%

That results from:82,000 more people in HUSKY23,000 fewer recipients of ESI (a 1.1% drop)

State and federal spending rises

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Effects of HUSKY expansion on federal spending and state budget deficits, pessimistic and optimistic scenarios about cost growth: 2012-2013 (millions)

  2012  2013 

  Pessimistic scenario

Optimistic scenario

Pessimistic scenario

Optimistic scenario

Change in federal spending

$434 $423 $452 $417

Increase in state budget deficit

$139 $123 $153 $103

State outlays $143 $128 $158 $109

State revenue increases

$4 $5 $5 $6

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Conclusion and summary Similarities among ongoing options

Cover more than half of the uninsured In most cases, improve state budget picture Achieve modest savings for small firms

Differences between ongoing options BH: more affordable for low-income adults, more state savings, but smaller

provider networks and fewer plan choices than in exchange Offering SustiNet to new populations increases SustiNet enrollment (hence

clout in achieving delivery system reforms), may yield modest savings, offers a new choice for buyers, but takes work

Raising HUSKY payment improves access; whether costs exceed other savings depends on the effectiveness of SustiNet reforms

Short-term HUSKY expansion covers many uninsured, but costs money

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