Oregon faces obstacles expanding health insurance to all residents, study finds
By RAND Corporation
Medical Xpress, January 19, 2017
Researchers from the RAND Corporation and Health Management Associates were asked by the Oregon Health Authority to analyze three proposals put forward by policymakers as potential ways to expand health coverage among the uninsured and compared the likely outcomes to the existing health care system.
Researchers used several modeling techniques to analyze how each of the options would affect outcomes on insurance enrollment, payments from households to support health care, total health spending in the state and other impacts. They also assessed the regulatory aspects of each of the proposals.
The single-payer option, introduced as a bill in the Oregon House, would use public financing to provide privately delivered health care to all Oregon residents, including those currently enrolled in Medicare and Medicaid. The proposal would pool state and federal outlays for current public programs, and add additional revenue from new state income and payroll taxes. The plan would cover 100 percent of health care costs for residents with incomes under 250 percent of the federal poverty line and 96 percent of health costs for other residents.
The Health Care Ingenuity Plan would pool revenue from state and federal outlays for Medicaid and ACA marketplaces with addition revenue generated from a new state sales tax. The plan would create a public financing pool to provide basic health insurance for most nonelderly Oregon residents. Medicare would continue to cover seniors and the disabled.
Cost sharing of the private health plans would vary depending on enrollees’ incomes, with the average share of costs covered by the plan ranging from nearly 100 percent for those with incomes below 138 percent of the federal poverty level to 70 percent for those with incomes above 250 percent of poverty. Enrollees could purchase private supplemental insurance to cover cost sharing and additional benefits.
The third proposal, a so-called public option, would create a state-run health plan to cover essential health benefits outlined by the Affordable Care Act and would compete with private plans in the ACA marketplaces. Enrollees in the public option would be eligible for federal advance-premium tax credits and cost-sharing reductions. The public option would set provider reimbursements levels equal to Medicare fee-for-service rates and would require providers who participate in other state health programs to participate in the plan.
Researchers found that both the single-payer option and the Health Care Ingenuity Plan increase coverage relative to the status quo and reduce financial barriers to care.
Under the single-payer plan, researchers assumed the state would have power as the sole purchaser of health care to set payment rates for most providers at 10 percent below the status quo. Overall, there would be little change in health system costs because the increase in patient demand would be offset by lower payments rates and administrative savings.
Under the Health Care Ingenuity Plan, researchers expect there would be higher system costs because Medicaid enrollees and the uninsured would be shifted into private insurance plans, which typically reimburse providers at significantly higher rates than the Medicaid program. These higher payment rates would increase system costs, expand the supply of providers and ease congestion. Researchers also estimate that under the plan, three-fifth of state residents would purchase supplementary insurance to reduce their individual cost sharing.
Researchers estimate that the public option would cover about 9,000 additional Oregon residents, leaving the share of the population who are uninsured at 5 percent. But many people already buying coverage through the ACA marketplaces would likely shift to the public option, saving the average enrollee about $850 per year.
A Comprehensive Assessment of Four Options for Financing Health Care Delivery in Oregon:
Download full report (147 pages total; Summary is 12 pages):
By Don McCanne, M.D.
This study can be very helpful to those who are considering comprehensive health care reform on a state level. RAND has shown that a single payer system would cover everyone without increasing total health care spending; private health insurance for the nonelderly plus Medicare for seniors and the disabled would cover everyone but would increase total spending; and providing a state-run health plan (public option) would have only a negligible impact on coverage and spending.
Health policy wonks should read the full study, and reform activists should read at least the 12 page summary. As with any study of this type, certain assumptions are made and differing emphases can be placed on various features of the reform models. For these reasons this study warrants at least the following comments.
For the single payer model, the authors assumed that payment rates for health care providers would be reduced ten percent below the current average Oregon rates. That supposedly would keep total spending at the same level by offsetting the increased volume of care for those who are newly insured and for those who have a significant decrease in their cost sharing.
The authors assume that services would be less available because of the payment reductions, contending that some providers would reduce their supply of care or perhaps even leave the state. They state that this would lead to “congestion” – greater consumer demand with diminished provider availability. This could result in excessive queues or in the need to travel greater distances for care.
This conclusion derives partly from the fact that they assumed that the administrative savings would be much smaller than several other studies have shown. Although a study demonstrating the tremendous administrative burden placed on the providers was included in the appendix, the authors did not factor in the savings that would accrue for the providers by eliminating the private insurers and simplifying the public payment procedures through a single payer. In fact, one of the reasons for reducing payments is that the amount recovered by eliminating the administrative waste is quite significant.
Another factor is that when the volume increases more room is made for the more pressing problems which partially displaces care that is of little or no value. Thus health care value actually increases when there is some pressure on the schedule. Also the use of other health care professionals such as nurse practitioners and physician assistants can help meet the increased demand at a lower marginal cost.
Also their modeling at a ten percent reduction in average payments is still quite a bit above the Medicare rates that are paid in Oregon. Most providers would not find that having absolutely everyone covered with higher than Medicare rates to be particularly onerous. Besides, most dedicated professionals would be satisfied with reasonable payments for their services. Those who are not perhaps should look for income opportunities that would shift them into the one-percenters – a breed not really welcome in health care.
Another point that should be made is that the two comprehensive models are characterized as a public model that would cause “congestion” (queues for non-urgent services) versus a private model that would increase spending. But the two most objectionable features of the private insurance model are given only fleeting acknowledgment in this study. Those are the very high deductibles and other cost sharing and the limited choice in care because of narrow provider networks. In the single payer model, cost sharing is dramatically reduced or eliminated, and there is only one provider network that includes the entire legitimate health care delivery system. Although high cost sharing and narrow networks may reduce spending in the private insurance model, they are not needed in a publicly administered single payer model.
This study also has important lessons for those who insist that we must enact single payer on the state level before we attempt to enact a national program. For those who believe that enacting a state-level public option will eventually lead to single payer, this study shows that it would have only a negligible impact in reducing the uninsured and in controlling costs. Pass it and then nothing else will happen for years to follow.
The other lesson for state reform activists is that there are major barriers to enacting a bona fide single payer system at the state level – barriers that will most likely require federal legislation. As long as we need to carry the battle to the national level, we might as well go for a national single payer program – an improved Medicare for all. Please do continue to work for beneficial changes at the state level, but please do not let it diminish your advocacy for health care justice for the entire nation.