Individual Mandate Will Benefit All, But Directly Affect Only a Few

March 27, 2012 at 12:29 pm

The Supreme Court examined today the requirement in the Affordable Care Act (that is, health reform) that individuals have health coverage or face a penalty.  Apart from the legal questions before the Court, here’s what Americans need to know about this “individual mandate.”

It won’t affect the vast majority of Americans. Most Americans already have insurance — through their jobs or through a program like Medicare, Medicaid, or the Children’s Health Insurance Program (CHIP).  They simply will check a box on their tax forms stating they have coverage.  A new Urban Institute study found that only 7 percent of people under age 65 will have to buy health insurance or face a penalty — and many of them will get subsidies to make coverage more affordable.

Most uninsured Americans want coverage. Many uninsured people don’t have a job that provides insurance and either can’t afford to buy it in the individual market or would get rejected by insurance companies because they have (or have had) serious health problems.  Only 7 percent of the uninsured report that they don’t have insurance mainly because they don’t think they need it, according to the Kaiser Commission on Medicaid and the Uninsured.

The small number of uninsured people who don’t want coverage will simply pay a modest fee. That makes sense, given the burden that the uninsured place on taxpayers and people with health insurance, who help pick up the tab when an uninsured person receives health care (such as at an emergency room).

The individual mandate makes it easier to reform the individual insurance market. Health reform bans many of insurance companies’ most egregious practices — like denying coverage to people with pre-existing health conditions like cancer, autism, or diabetes or charging sick people higher premiums.  But it’s impossible to end those practices unless almost everyone is covered.

Without an individual mandate, these reforms would tend to make health care coverage less affordable.  Here’s why:  older people and people with pre-existing health conditions, who had been unable to buy insurance, would be most likely to enroll in health coverage after the reforms took effect; healthier uninsured people, knowing they could wait until they got sick to buy coverage, would be less likely to enroll.  As the pool of people with coverage got older and sicker, on average, premiums would go up, since less healthy people cost more to treat and, thus, to insure.  These premium hikes, in turn, would lead some healthier people to cancel their coverage, which would raise premiums still higher, and so on.

Notwithstanding the false claims about the individual mandate, the fact remains that it’s an important part of health reform that will move us a long way toward enabling all Americans to have quality, affordable health coverage.

Happy Birthday Health Reform, Part 3: Three Things You Probably Don’t Know About Health Reform

March 26, 2012 at 2:59 pm

Two years since President Obama signed the Affordable Care Act — health reform — into law, opponents continue to make many of the same false claims that they made before Congress passed it.  Repeating those claims hasn’t made them true, but it may have obscured some simple facts about health reform, like these:

FACT #1: The vast majority of Americans will continue to get coverage through private insurers under health reform.

Contrary to claims that health reform is a “government takeover” of the health care system, the overwhelming majority of Americans will get coverage through private insurance companies, just as they do today.

Employer-sponsored health insurance will continue to be the dominant source of coverage for workers and their families.  Many people who can’t get insurance through their job and can’t afford to buy it on their own will get tax credits to help them buy quality coverage through health reform’s “exchanges,” marketplaces where people can compare and buy health insurance.  The plans offered in the exchanges will all be private plans.

Health reform will expand Medicaid to cover low-income families who wouldn’t be able to afford private insurance even with a subsidy.  But, in most states, private insurers cover Medicaid patients.

All in all, health reform builds on the insurance system we already have, but it reins in some of insurance companies’ most egregious practices by establishing important consumer protections (as our last post explained) and helps many people afford coverage.

FACT #2: Health reform is a good deal for states.

Opponents like to say that health reform will burden state budgets.  That’s false.

From 2014 through 2022, the federal government will pay 93 percent of the cost of health reform’s Medicaid expansion, which will enable Medicaid to cover an estimated 17 million more low-income adults and children than it does today, most of whom are now uninsured.

The expansion’s cost to states over this period will be $73 billion — just 2.8 percent more than what they would have spent on Medicaid without health reform.

Health reform will also save states billions of dollars each year in costs for providing mental health care and other health care services to the uninsured.  An analysis by the Kaiser Commission on Medicaid and the Uninsured found that many estimates of state Medicaid costs under health reform don’t adequately take these savings into account, which could be quite substantial. In fact, analysts from the Urban Institute suggest that the savings could more than offset the state costs of expanding Medicaid.

FACT #3: Health reform’s Independent Payment Advisory Board can’t ration health care.

Critics charge that the Independent Payment Advisory Board (IPAB) — a presidentially appointed commission that health reform created to help slow the growth of Medicare costs — will ration health care for seniors, but that’s false.

Health reform specifically prohibits the board from slowing costs by rationing health care, raising Medicare’s premiums or cost sharing, cutting benefits, or restricting eligibility.  It must focus exclusively on proposals that achieve savings in paying for and delivering health care services.

If Congress repeals IPAB, Medicare beneficiaries likely would face far worse alternatives.  Congress would likely consider blunt proposals that generate federal savings simply by shifting significant costs to beneficiaries, such as sharply increasing premiums and raising the eligibility age.

Happy Birthday Health Reform, Part 2: A Look Ahead

March 26, 2012 at 11:54 am

Part 1 of this series looked at some of the benefits that the Affordable Care Act — that is, health reform — has delivered in just its first two years.  But some of the law’s most dramatic improvements to both the health care system and the lives of tens of millions of people lie ahead.

  1. Health coverage for tens of millions of the uninsured.

    Thirty-three million uninsured people will have health coverage by 2022 because of health reform, according to the Congressional Budget Office (see chart).   Research studies consistently show that having health insurance enables people to get more health care services and improves their health.

  2. More affordable insurance for those who already have it.

    Starting in 2014, many people who now struggle to afford health insurance will get help paying for premiums and out-of-pocket costs (like co-payments for doctor visits).  This help will come in the form of tax credits and help with cost-sharing for private coverage that people buy through the new health insurance marketplaces, called exchanges, that health reform will establish for each state.

    Many states are forging ahead with setting up their exchanges and are well-positioned to have their exchanges operating by the January 1, 2014 target launch date.

  3. More protections for consumers.

    Health reform has already banned some of insurance companies’ worst practices.  But, more protections are on the way.

    Starting in 2014, it will bar insurance companies from denying coverage to anyone with pre-existing health conditions (the law’s current ban applies only to children).  This means that people who previously couldn’t buy health insurance at any price because they had cancer or had had a relatively common procedure such as a c-section will be able to buy insurance and get the care they need.

    Insurers also won’t be able to charge higher premiums to women or sicker people and will face restrictions on their ability to charge older people more.

  4. Steps to begin slowing the growth in health care costs across the economy.

    Rising health care costs are putting pressure on the budgets of families and businesses, as well as public programs like Medicare and Medicaid.  Health reform makes important progress in this critical area by significantly improving Medicare’s long-term financial outlook and taking a number of steps to lower costs and improve the quality of care by beginning to change the way providers deliver health care.

In Case You Missed It…

March 23, 2012 at 5:25 pm

This week on Off the Charts, we focused on House Budget Committee Chairman Paul Ryan’s budget proposal, state budgets, health policy, and low-income housing policy.

  • On the Ryan budget, we featured Robert Greenstein’s statement on the plan, showed that it would eliminate most of the federal government aside from Social Security, health care, and defense over time, and noted that low-income programs would bear the brunt of its cuts.

    Richard Kogan demonstrated that the Ryan budget bears little resemblance to last summer’s bipartisan Budget Control Act, and Jim Horney cautioned that the Ryan budget’s large cut in certain mandatory (entitlement) programs would have a serious impact on safety-net programs.

    LaDonna Pavetti rebutted Chairman Ryan’s claim that welfare reform should be a model for changes to other low-income programs, and Dottie Rosenbaum noted that millions of people would lose part or all of their SNAP (food stamp) benefits under the Ryan plan.

    Paul Van de Water explained that converting Medicare to a premium support system would harm beneficiaries and produce few savings, while Edwin Park exploded the myth that the Medicare drug benefit’s lower-than-expected costs show that adopting premium support would produce savings.

    Park also explained that the Ryan budget’s Medicaid changes would reduce or eliminate health coverage for millions.

    We also posted a roundup of all of our Ryan-related analyses from the week.

  • On state budgets, Erica Williams pointed out that states considering eliminating most or all of their income taxes would have to pay for those cuts by raising other taxes and/or cutting public services.
  • On health policy, Shannon Spillane highlighted health reform’s achievements of its first two years.  Edwin Park explained that the latest Congressional Budget Office (CBO) estimates on health reform’s impact on health coverage and the budget reflect no big changes.

    We also featured Paul Van de Water’s media conference call with former Office of Management and Budget director Peter Orszag and economist Uwe Reinhardt on health reform’s Independent Payment Advisory Board (IPAB).

  • On low-income housing policy, Barbara Sard noted that the President’s budget would raise rents on half a million of the nation’s poorest families.

In other news, we released Robert Greenstein’s statement on Chairman Ryan’s budget and reports on various aspects of the budget: analysis of the budget’s long-term impact, its cuts to low-income programs, its cuts to SNAP, its Medicare proposal, and its tax proposals.

We also released reports on the President’s proposal to raise minimum rents in federal housing programs and the impact of repealing state income taxes, and we held a media briefing on whether Congress should repeal IPAB.

States Slashing Income Taxes Will Find There’s No Free Lunch

March 23, 2012 at 3:55 pm

Kansas, Nebraska, and Oklahoma are considering sharply reducing their income taxes or phasing them out entirely.  But there is no free lunch, as our analysis of the nine states without an income tax (AK, FL, NV, NH, SD, TN, TX, WA, WY) shows.  Property taxes in these states are, on average, 8 percent or 12 percent above the national average, depending on how you measure them, and their sales taxes are 18 percent or 21 percent above the national average (see table).

In other words, residents of Kansas, Nebraska, and Oklahoma would have to pay for slashing their income taxes, one way or another.  Right now, those three states’ property and sales taxes are lower than in most non-income-tax states, but that would likely change if they wipe out much or all of their income tax.

It’s not hard to figure out why property and sales taxes rise in the absence of an income tax.  When faced with the dilemma of funding public services with substantially less tax revenue, lawmakers must find other resources to fill the gap.  They might raise state sales taxes and other fees or shift spending obligations to localities, which in turn may raise property and/or sales taxes.

This is particularly bad for middle- and lower-income families, since they pay more in property and sales taxes as a share of their incomes than higher-income families do.  In essence, states that do away with their income taxes shift more of the responsibility for paying for roads, schools, health care, and other services on to people less able to afford it.

Hikes in sales and property taxes would also affect farms and businesses, which would pay higher taxes on business purchases and on agricultural and commercial property.

Higher sales and property taxes aren’t the only price that residents of Kansas, Nebraska, and Oklahoma would likely pay for slashing their income taxes.  Income taxes represent a large chunk of each state’s general fund tax revenue:  46 percent, 45 percent, and 35 percent, respectively.  So these three states probably wouldn’t offset all of the lost income tax revenue with property and sales tax increases.  This means that, even after years of cuts to public services due to the recession, investments that residents rely on will be back on the chopping block.