The MA health reform and other issues

Transcription

1 The MA helth reorm nd other issues Gruer: three key issues or ny reorm Poolin Need wy to ornize helth cre other thn need Otherwise -- dverse selection Prolem: current system leves out smll irms Aordility Medin mily income is $61K Avpln is $12K or mily o 4 (1/5 o income) Mndtes no wy to enerte 100% covere without them 1 2 MA Reorm: Romney Most mitious stte reorm to dte. Pssed April 12, 2006 Mny etures ut.. Two tht enerte the most het: ndividul mndte, required y lw to crry insurnce Firm Mndtes must provide insurnce or ined $295 Most unique: Connector Primry chrcteristics o MA pln People < 300% FPL cn purchse stte run insurnce t susidized rtes Commonwelth cre <150% et ree insurnce Children up to 300% enrolled throuh SCP Connector Centrl mrket or insurnce For people 300%+ o FPL people not in roups cn purchse t roup rtes Community rted ll people py the sme 3 4 1

2 ndividul mndte Must own quliied insurnce or ce ine 1 st yer: ine ws $ : Fine 50% o insurnce pln or your eorphic re, up to $912 Cn ile hrdship exemption (2% not suject to ine Section 125 plns Firms not oerin insurnce must set up ility or workers to purchse insurnce in pre-tx $ Firm mndte Applied to irms w/ > 11 employees Must provide insurnce or ce nnul ine o $ mportnt question out MA reorm mndte people hve insurnce, wht lso must e estlished? From policy perspective, why is this diicult? Why MA? Cn it e exported to other sttes? Wht hs hppened to costs in MA since reorm? Wht hs hppened to the stte udet durin this time? 7 8 2

3 Lon, elth Airs, 2008 Two surveys o dults in MA Beore: Fll 2006, 3,101 respondents Ater: Fll 2007, 2,938 respondents Compred insurnce rtes over time 9 10 Lon, Stockley, nd Yemne, AER Use dt rom the Current Popultion Survey Smple yer olds Compre 2005/06 with 2007 or MA versus ll other sttes Dierence in dierence model Adds seculr trend in outcomes --wht would hve hppened in the sence o the intervention

4 Replcin EP Tx preerred sttus o EP hs some dvntes ncresed covere Reduces dverse selection Prolems Encoures more extensive insurnce pckes Genertes redily identiile uninsured Tx inequlity Prolem: EP hs encoured rpid rowth o costs Now, insurnce expensive we eliminte tx preerred sttus, will mke insurnce prohiitively expensive ow cn mintin susidy with less distortions ut one tht susidizes? Tx credits Replce tx-ree EP with tx credit Tx credit eneit pid to workers throuh the tx system n most cses, reundle Reimursed ter income txes re clculted even i you owe money Exmple: Erned income tx credit Populr proposl Prt o McCin s presidentil pltorm Outlined s option y Cutler nd Drnovein clss redins Common component o some current proposls eore Conress

5 Bsic outline Fmilies received vere o $4000 tx eneit rom EP (mily pln) Only ville to those w/ EP nd lowers the cost o insurnce Elim. Tx preerred sttus nd replce w/ tx credit o $4000 or couples. Beneits: susidizes insurnce, does not distort mrket or insurnce s much, ville to people with covere not rom employers Another exmple: Wht is ter tx cost o rom FEDS only A mily w/ $70,000 in txle income 36.5% mrinl tx rte 25% ederl 7.65% Socil Security nd Medicre 32.65% mrinl rte in totl (FEDERAL ONLY) Suppose they receive $12,000 policy were txle eneit, they would e suject to n dditionl $3918 in ederl txes Exmple Fmily o 4 with $90,000 in lor ernins, no other income ve EP vlued t $12,000 ve no deductions (i.e., do not own home) so they tke the stndrd deduction Tx rtes, mrried ilin jointly ncome reers to txle income: Adjusted ross income minus deductions 10%on income etween $0 nd $16,700 15%on income etween $16,700 nd $67,900; plus$1,670 25%on income etween $67,900 nd $137,050; plus$9,350 28%on income etween $137,050 nd $208,850; plus$26, %on income etween $208,850 nd $372,950; plus$46, %on income over $372,950; plus$100,

6 Federl txes with tx preerred EP ncome $90,000 - stndrd deductions -$18,700 Txle income (T) $71,300 Federl ncome Txes on T $10,200 +SS/Medicre txes (7.65%)* $ 6,885 Totl ederl txes $17,085 is txle ut with reundle credit ncome ($90K + $12,000 ) $102,000 - stndrd deductions -$18,700 Txle income $83,300 Federl ncome Txes $13,200 +SS/Medicre txes (7.65%) $ 7,803 Totl ederl txes $21,003 -tx credit $ 4,000 Totl $17,003 *These txes re on ll $90,000 in txle income Wht will this do to demnd or? Mx utility y consumin elth insurnce () All other oods () Oriinl udet constrint ncome with proportionl tx rte t EP is tx preerred (not suject to tx) = x + (1-t) New system is no loner tx preerred But, i hve quliied, receive tx credit (C) > * to receive credit Assume hve quliied helth insurnce + C =

7 Current system Current system Old udet constrint: Budet without tx preerred EP: k New System: line ove * line m elow * +c * k m 25 +C 26 Old udet constrint: Wht is the impct on demnd or +c * m New System: line ove * line m elow * Consider re ove * First wht re the income/sustitution eects Su eects re esiest price o hs increse, so demnd should ll Look t previous rph, wht hs hppened to the udet constrint or >*? Wht does this men out reltive incomes?

8 1 to 3: Sustitution eect Consider second cse 1 +c 3 2 U2 3 to 2: ncome eect U1 Person lredy t rekeven point B Wht will they do? Oriinl utility mximizin undle is t U4 Will they move to U5? c U5 U4 Consider someone who is mximizin t some level elow the rek even point, * Cll this U6 * m

9 Some questions out tx credits? ow eective re tx credits or low income people? +c * m U7 U6 Wht must e deined y the FEDS i they institute tx credit? Wht prolems does tht enerte?