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Defining Affordability for Massachusetts

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Do not want to cause unintended ... An affordability scale should be a conservative measure. ... Any affordability schedule should be a conservative measure. ... – PowerPoint PPT presentation

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Title: Defining Affordability for Massachusetts


1
Defining Affordability for Massachusetts
How can research inform the individual mandate?
  • Christine Barber
  • Community Catalyst
  • Connector Board Meeting
  • April 2007

2
What is Affordability?
  • Why is defining affordability important?
  • Do not want to cause unintended financial harm to
    families
  • Maintain political legitimacy of health reform
  • Why did we conduct this analysis?
  • Not literature available other studies assume
    affordability
  • How do we define affordability?
  • Affordability The percentage of income a
    household can devote to health care, while having
    sufficient income to address other necessities.
    We include total health costs.

3
What does affordability mean? Methodology
  • Guiding Principles
  • An affordability scale should be a conservative
    measure.
  • The scale should be progressive as income
    increases.
  • Methods
  • Analyzed available research
  • Existing public programs
  • Current spending on health care
  • Household budgets
  • Take-up rates and price sensitivity
  • Public opinion research

4
1. Existing Public Programs
  • What we looked at
  • State Childrens Health Insurance Program
    (SCHIP) 5 maximum of income
    (federal)
  • Free Care Pool
  • No cost sharing for people below 200 FPL
  • What this tells us
  • Not very useful. Often arbitrary, specific to
    population, voluntary programs

5
2. Current Spending on Health Care
  • What we looked at
  • Urban Institute for Blue Cross Blue Shield
    Foundation
  • National data on health care spending
  • Non-group total spending
  • What this tells us
  • Middle income people pay average of 8.5 of
    income for total health costs
  • At 600 FPL, people can afford unsubsidized,
    non-group health plans, at 8.5/income after
    meeting other basic needs.

6
Building a Standard of Affordability
  • At 600 FPL and above, people can afford total
    health costs at about 8.5 of income.

7
3. Household Budgets
  • What we looked at
  • Greater Boston Interfaith Organization Study
  • MassFESS (Family Economic Self-Sufficiency
    Standard)
  • Economic Policy Institute Basic Family Budget
  • What this tells us
  • More than whats affordable, show us what is
    unaffordable
  • People earning below 300 FPL barely have enough
    income to cover basic needs (before health care
    costs)
  • Given how many people can only nominal amounts
    toward health care, and variation in
    circumstances, should not impose penalties for
    not buying insurance.

8
Building a Standard of Affordability
  • At 600 FPL, people can afford total health costs
    at about 8.5 of income.
  • For people under 300 FPL, who can only afford
    nominal amounts toward health care, no penalties
    should be imposed.

9
4. Take-up rates and Price Sensitivity
  • What we looked at
  • Economist Kenneth Thorpes work on take-up and
    price elasticity for Vermonts Catamount Health
    Reform.
  • Taking into account price of insurance as
    percentage of income, what would people purchase
    voluntarily?
  • What this tells us
  • People just above 300 FPL would purchase
    insurance at about 4 of income.
  • Therefore, set lower-bound of affordability
    scale at 4 of income.

10
Building a Standard of Affordability
  • At 600 FPL, people can afford total health costs
    at about 8.5 of income. This is an
    upper-bound of affordability.
  • For people under 300 FPL, who can only afford
    nominal amounts toward health care, no penalties
    should be imposed.
  • For people just above 300 FPL, set lower-bound
    of affordability scale at 4 of income.

11
5. Public Opinion Research
  • What we looked at
  • Robert Blendon, Harvard School of Public Health,
    for Blue Cross Blue Shield Foundation.
  • As a check on our findings, what do respondents
    find reasonably affordable?
  • What this tells us
  • Blendons findings are generally in accord with
    our analysis.

12
Building a Standard of Affordability
  • At 600 FPL, people can afford total health costs
    at about 8.5 of income. This is an
    upper-bound of affordability.
  • For people under 300 FPL, who can only afford
    nominal amounts toward health care, no penalties
    should be imposed.
  • For people just above 300 FPL, set lower-bound
    of affordability scale at 4 of income.
  • A sliding scale of affordability is needed. For
    people between 300 - 600 FPL, create
    progressive scale from 4 to 8.5 of income.

13
Building a Standard of Affordability
Any affordability schedule should be a
conservative measure. The scale should utilize a
progressive scale as income increases. What is
affordable may not be available.
14
Building a Standard of Affordability
  • What are limitations of this paper?
  • We only looked at affordability for an individual
  • Affordability curve can be drawn in a number of
    ways
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