Stretching Scarce Resources: State Strategies to Design Effective, Affordable Benefit Packages

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Stretching Scarce Resources State Strategies to
Design Effective, Affordable Benefit Packages

• Anne Markus, J.D., Ph.D.
• Senior Research Scientist
• The George Washington University Medical Center

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Definitions

• Premium Set amount of dollars per defined
  payment period (usually monthly) paid to obtain
  health insurance coverage.
• Cost-sharing Patient exposure to out-of-pocket
  costs associated with health service delivery.
  Includes
• Deductible
• Coinsurance
• Copayment

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Purposes of Cost-sharing

• General reasons
• Enticing families to be more cost conscious in
  seeking care
• Fostering a sense of ownership/personal
  responsibility
• Directing consumers toward more cost-effective
  care
• Deterring unnecessary utilization
• Raising revenues to reduce sponsor costs of
  health care coverage

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Purposes of Cost-sharing (cont.)

• Additional reasons for states
• Making public health insurance programs aimed at
  the poor look more like private insurance
• Limiting substitution and crowd-out of private
  insurance

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Recent Trends

• Private sector
• No significant changes to contribution
  strategies, but changes to benefit structure
• Medicaid/SCHIP
• HIFA initiative
• Medicare
• Pharmacy Plus initiative

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Cost-sharing Rules in Public Programs

• Medicaid
• Premiums prohibited
• with some exceptions
• Nominal cost-sharing allowed
• with some exceptions
• No overall cap specified
• SCHIP
• Premiums allowed
• Cost-sharing allowed
• Overall cap of 5 of family income

• State employee benefit plans
• Premiums allowed
• Cost-sharing allowed
• May or may not impose overall cap

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Medicaid and SCHIP Waivers

• Medicaid cost-sharing waivers
• (1) inappropriate use of ER
• (2) 2 year demonstration program
• Section 1115 waivers
• (1) waiver of Medicaid and/or SCHIP
  cost-sharing requirements as part of a 5-year
  demonstration program
• (2) streamlined waiver process and increased
  flexibility to design cost-sharing rules under
  HIFA

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Effect of Premiums

• Premiums influence participation in insurance
  programs
• As premiums increase, participation rates
  decrease

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Effects of Cost-sharing

• Use of services
• Cost-sharing influences the use of services
• As cost-sharing increases, use of services
  decreases
• outpatient care
• inpatient care
• prescriptions
• preventive services
• emergency room

• Health outcomes
• Cost-sharing may have an effect on health
  outcomes
• In general, cost-sharing has been found to have a
  minimal or no effect on health outcomes except
  for the poorest populations

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Effect Across Population Groups

• Research shows that cost-sharing has a deterrent
  effect across the board
• children and adults
• people who are healthy and people who have
  chronic conditions
• rich and poor
• Existing body of knowledge also suggests that
  cost-sharing may have a more pronounced negative
  effect on low income people
• studies on premiums in state programs
• non-Medicaid studies on cost-sharing
• Medicaid studies on cost-sharing

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SCHIP Experiences

• All States with separate SCHIP programs have some
  form of cost-sharing
• Research in this area thus far focuses on the
  effect of premiums on initial participation but
  also on continued participation in program
• Anecdotal evidence also suggests that collecting
  and processing premiums and other cost-sharing
  contributions is administratively burdensome
  and/or not worth the cost

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Implications

• Income-related, sliding scale for premium and
  cost-sharing schedule
• Low premiums
• Limited cost-sharing
• Broaden the definition of preventive services
  exempt from cost-sharing
• Individuals with special needs

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HIFA Cost-sharing Rules

• Mandatory eligibility groups (e.g., all children
  up to 100 FPL) same rules as Medicaid
• Optional eligibility groups (e.g., children
  beyond the mandatory eligibility levels) no
  cost-sharing rules specified other than an annual
  cap of 5 of family income for deductibles,
  copayments and coinsurance
• Expansion eligibles (e.g., nondisabled single
  working age adults, childless couples) no
  cost-sharing rules specified

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Examples of State Flexibility Under HIFA

• Arizona (approved HIFA waiver)
• Childless adults lt100 FPL same cost-sharing as
  Medicaid, i.e., 1-5 except prenatal care, EPSDT
  services, family planning
• Parents of SCHIP and Medicaid children 100-200
  FPL same cost-sharing as SCHIP, i.e., family
  premiums up to 25 per month, 5 non-emergency
  use of emergency room, overall limit of 5 of
  annual family income
• California (approved HIFA waiver)
• Parents of SCHIP and Medicaid children lt200 FPL
  similar to cost-sharing under SCHIP, e.g.,
  monthly premiums of 10 or 20, copays