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Susti. Net Policy Options: Cost and Coverage Estimates Susti. Net Partnership Board November 18, Susti. Net Policy Options: Cost and Coverage Estimates Susti. Net Partnership Board November 18, 2010 Stan Dorn Senior Fellow The Urban Institute

Overview n n n 2 Putting modeling results in perspective Overview of policy options Overview n n n 2 Putting modeling results in perspective Overview of policy options and estimates More detailed analysis

Part I Putting Modeling Results in Perspective Part I Putting Modeling Results in Perspective

Methodological comments n n Overview of Gruber Microsimulation Model Notes Baseline reflects analysis of Methodological comments n n Overview of Gruber Microsimulation Model Notes Baseline reflects analysis of current spending, plus survey data Only goes through age 64 Does not consider new federal categorical grants, etc. Shows results in 2010 dollars, generally for 2014 -2019 o 2017 is often used to illustrate effects after full implementation Ø Cost savings from delivery system and payment reforms? o Pessimistic scenario: no savings o Optimistic scenario: slows annual growth by 1 percentage point v Cf. Cutler/Davis, 1. 9 percentage point in Medicare Ø Ø n Modeling can yield good general estimates, not precise and infallible predictions Ø More inputs and model refinements can change estimates 4

Part II Overview of policy options and estimates Part II Overview of policy options and estimates

Policy options Ongoing 1. 2. 3. 4. 5. Susti. Net for current state populations Policy options Ongoing 1. 2. 3. 4. 5. Susti. Net for current state populations Add Basic Health Program to Susti. Net Permit small employers, municipalities and non-profits to buy Susti. Net Offer Susti. Net to other employers and individuals, including through the exchange Gradually raise HUSKY payments to private levels Short-term 6. 6 Expand HUSKY to cover more low-income adults, in 2012 and 2013

Five general results for the five ongoing options 1. 2. 3. 4. 5. 7 Five general results for the five ongoing options 1. 2. 3. 4. 5. 7 More than half of the uninsured receive coverage Net state budget deficits improve with most of these options, primarily because of a large infusion of federal dollars Small firms experience savings, mainly because they cover fewer workers Many people enroll in Susti. Net Aggregate household purchasing power is largely unaffected

Some key differences among options n Adding Basic Health (BH) Ø Compared to subsidized Some key differences among options n Adding Basic Health (BH) Ø Compared to subsidized coverage in the exchange, more affordable for low-income adults, including HUSKY parents Ø Additional state budget savings Ø Federally-funded reimbursement rate increases for BH members n Raising HUSKY payment rates to private levels Ø Whether the resulting costs exceed other savings depends on Susti. Net’s impact on health cost growth n Short-term: expanding HUSKY before 2014 Ø Increases coverage in 2012 -2013, but costly to the state 8

How Susti. Net options change cost and coverage, pessimistic and optimistic cost-savings assumptions: 2017 How Susti. Net options change cost and coverage, pessimistic and optimistic cost-savings assumptions: 2017 (except option 6, which shows 2013 results) Employer savings (millions) Susti. Net members (thousands) Pessimistic Option 1: Susti. Net for current populations Option 2: Basic Health Option 3: Offer Susti. Net to small firms, municipalities, non-profits Option 4: Offer Susti. Net to all firms and individuals Option 5: Raise HUSKY payments Option 6: Early HUSKY expansion Uninsured gaining Net changes to coverage state spending (thousands) (millions) Optimistic Pessimistic Optimistic 206 -$174 -$371 $485 620 207 -$224 -$418 $459 650 207 209 -$224 -$425 $461 $466 786 815 207 209 -$224 -$427 $461 $498 944 1, 011 207 209 -$32 -$244 $461 $498 944 1, 011 59 59 +$153 +$103 $217 600 Note: for options 2 -5, estimates are cumulative. For example, the effects shown for Option 2 assume implementation of both Options 1 and 2; Effects shown for Option 3 assume implementation of Options 1, 2 and 3; etc. Option 6 estimates assume no other policy changes. Net changes to state spending incorporate revenue and outlay effects. 9

Part III More detailed cost and coverage estimates, by policy option Part III More detailed cost and coverage estimates, by policy option

Option 1 SUSTINET FOR CURRENT STATE POPULATIONS 11 Option 1 SUSTINET FOR CURRENT STATE POPULATIONS 11

Policy details n n 12 Delivery system and payment reforms apply to Medicaid, HUSKY, Policy details n n 12 Delivery system and payment reforms apply to Medicaid, HUSKY, and state employee/retiree coverage effective immediately SAGA immediately moved into Medicaid Full implementation of the Affordable Care Act (ACA) starting in 2014 General cost and coverage effects as described earlier for most options

Coverage effects, 2017 n n The number of uninsured falls from 376, 000 to Coverage effects, 2017 n n The number of uninsured falls from 376, 000 to 170, 000—a 55% drop Small firm ESI falls by 11% Ø Most of the affected small-firm workers (77%) go into the exchange, where the majority receive subsidies Ø Context: large-firm ESI is largely unaffected o Rises by 0. 6 percent 13

Coverage of residents under age 65, with and without reform: 2017 Note: “Individual” coverage Coverage of residents under age 65, with and without reform: 2017 Note: “Individual” coverage includes unsubsidized coverage in the exchange. 14

Public sector outlays, 2017 n State budget situation improves Ø Pessimistic scenario: $174 million Public sector outlays, 2017 n State budget situation improves Ø Pessimistic scenario: $174 million gain Ø Optimistic scenario: $371 million gain n More Federal dollars in Connecticut for Medicaid, HUSKY, and subsidies in the exchange Ø Higher-cost scenario: $1. 88 billion Ø Lower-cost scenario: $1. 70 billion 15

Effects on state spending and revenue, pessimistic scenario: 2017 (millions) 16 Effects on state spending and revenue, pessimistic scenario: 2017 (millions) 16

Effects on state spending and revenue, optimistic scenario: 2017 (millions) 17 Effects on state spending and revenue, optimistic scenario: 2017 (millions) 17

Net improvement to state budget, pessimistic scenario: 2014 -2019 (millions) Note: budget totals include Net improvement to state budget, pessimistic scenario: 2014 -2019 (millions) Note: budget totals include both outlay and revenue effects. 18

Net improvement to state budget, optimistic scenario: 2014 -2019 (millions) Note: budget totals include Net improvement to state budget, optimistic scenario: 2014 -2019 (millions) Note: budget totals include both outlay and revenue effects. 19

Effect on employer costs n Small firm savings (0 -100 workers) Ø $459 million Effect on employer costs n Small firm savings (0 -100 workers) Ø $459 million in net savings Ø 6. 2% cost reduction n No significant net effect on larger firms (101+ workers) Ø $26 million net savings Ø 0. 2% cost reduction 20

Effects on small firm health costs: 2017 (millions) 21 Effects on small firm health costs: 2017 (millions) 21

No significant net effect on household post-tax purchasing power: 2017 n Pessimistic scenario Ø No significant net effect on household post-tax purchasing power: 2017 n Pessimistic scenario Ø $421 million increase Ø 0. 4 percent change n Optimistic scenario Ø $417 million increase in purchasing power Ø 0. 4 percent change 22

Effects on household purchasing power, pessimistic scenario: 2017 (millions) 23 Effects on household purchasing power, pessimistic scenario: 2017 (millions) 23

Option 2 ADDING THE BASIC HEALTH PROGRAM TO SUSTINET 24 Option 2 ADDING THE BASIC HEALTH PROGRAM TO SUSTINET 24

Policy details n Individuals affected (2017 projections) Ø 16, 000 HUSKY parents, 133 -185% Policy details n Individuals affected (2017 projections) Ø 16, 000 HUSKY parents, 133 -185% FPL Ø 41, 000 other adults < 200% FPL who would otherwise be in the exchange o Adults 133 -200% FPL o Newly legalized immigrants below 133% FPL n The BH option covers them through state contracts with health plans Ø Minimum federal standards re benefits, costs, etc. Ø Enrolled in Susti. Net, with HUSKY costs and benefits 25

Bottom-line results n n Most cost and coverage effects largely unchanged by adding BH Bottom-line results n n Most cost and coverage effects largely unchanged by adding BH to Susti. Net Adding BH Ø Maintains affordability for HUSKY parents and improves it for other low-income adults Ø Increases net state budget savings Ø Increases Susti. Net enrollment, hence its ability to reform delivery system and payment n Concern: provider payment levels Ø Can raise above HUSKY levels, using federal funds 26

Affordability of subsidized coverage in the exchange Premium and out-of-pocket costs for a single, Affordability of subsidized coverage in the exchange Premium and out-of-pocket costs for a single, uninsured adult, at various income levels qualifying for subsidies under ACA FPL Monthly income Monthly premium 150 175 200 $1, 354 $1, 579 $1, 805 $54. 15 $81. 34 $113. 72 Average out-ofpocket costsharing 6% 13% Notes: Dollar amounts assume 2010 FPL levels. Out-of-pocket cost-sharing represents the average percentage of covered health care services paid by the consumer, taking into account deductibles, copayments, and co-insurance. 27

Other factors n Federal BH dollars exceed HUSKY costs. E. g. , in 2017: Other factors n Federal BH dollars exceed HUSKY costs. E. g. , in 2017: Ø Pessimistic scenario, $22 million Ø Optimistic scenario, $37 million n HUSKY parents > 133% FPL can move to federallyfunded coverage without reducing access to care. Resulting additional state budget savings in 2017: Ø Pessimistic scenario, $50 million Ø Optimistic scenario, $47 million n n 28 Continuity of coverage and care More covered lives in Susti. Net, hence more leverage to reform delivery system and payment

Net state budget savings, Susti. Net with and without BH, pessimistic scenario: 2014 -2019 Net state budget savings, Susti. Net with and without BH, pessimistic scenario: 2014 -2019 (millions) Note: budget totals include both outlay and revenue effects. 29

Net state budget savings, Susti. Net with and without BH, optimistic scenario: 2014 -2019 Net state budget savings, Susti. Net with and without BH, optimistic scenario: 2014 -2019 (millions) Note: budget totals include both outlay and revenue effects. 30

Concerns about adults getting HUSKY rather than coverage in the exchange n n Fewer Concerns about adults getting HUSKY rather than coverage in the exchange n n Fewer health plan choices Fewer covered lives in the exchange Ø Shift in leverage from the exchange to the state as a direct purchaser of care n Lower reimbursement rates, hence less access to providers. Ø But must use federal “surplus” on BH members. Could raise reimbursement. Ø In 2017, increase of at least 7 -13 percent 31

Option 3 PERMITTING SMALL FIRMS, MUNICIPALITIES, AND NONPROFITS TO BUY SUSTINET 32 Option 3 PERMITTING SMALL FIRMS, MUNICIPALITIES, AND NONPROFITS TO BUY SUSTINET 32

Policy details and modeling constraints n Policy: certain employers can buy Susti. Net for Policy details and modeling constraints n Policy: certain employers can buy Susti. Net for their employees Ø Can begin as early as 7/1/2012 Ø Small firms, small municipalities, and small nonprofits: same rules as small group market Ø Option to buy commercial-style benefits Ø Larger municipalities: to avoid adverse selection, experience-rated premiums (or act as ASO) n 33 Modeling does not show specific effects on municipalities and non-profits

Bottom-line results n n n Most cost and coverage totals are unchanged Susti. Net Bottom-line results n n n Most cost and coverage totals are unchanged Susti. Net serves many small firms If Susti. Net slows cost growth Ø A few more small firms offer coverage Ø A few more uninsured gain coverage 34

More details n Many small firms buy Susti. Net. In 2017: Ø Pessimistic scenario: More details n Many small firms buy Susti. Net. In 2017: Ø Pessimistic scenario: 136, 000 covered lives, or 24% of small-group market Ø Optimistic scenario: 166, 000 covered lives, or 29% of small group market n Net coverage impact of small firm option, 2017: Ø Under pessimistic scenario, no net coverage effects Ø Under optimistic scenario (Susti. Net slows cost growth): o Small firm coverage rises by 9, 000, or 1. 4% o Number of uninsured falls by 2, 000, or 1. 2% 35

Option 4 OFFERING SUSTINET TO ALL INDIVIDUALS AND FIRMS, WITHIN AND OUTSIDE THE EXCHANGE Option 4 OFFERING SUSTINET TO ALL INDIVIDUALS AND FIRMS, WITHIN AND OUTSIDE THE EXCHANGE 36

Policy details n Susti. Net offered inside the exchange to small firms and individuals Policy details n Susti. Net offered inside the exchange to small firms and individuals Ø Susti. Net follows the same rules that apply to other plans in those markets n Susti. Net offered outside the exchange to large firms Ø To prevent adverse selection, premiums are experience-rated (or Susti. Net acts as ASO) 37

Bottom-line results n n In addition to small firms, large firms and individuals enroll Bottom-line results n n In addition to small firms, large firms and individuals enroll in Susti. Net Very few other effects, beyond the previous option for small firm purchase Ø Under optimistic scenario, employer premiums drop by an additional $35 million, or 0. 3 percent 38

Many firms and individuals enroll in Susti. Net Small firm enrollment Covered Share of Many firms and individuals enroll in Susti. Net Small firm enrollment Covered Share of lives small firm coverage Pessimistic 136, 000 scenario Optimistic 164, 000 scenario 39 24% 29% Large firm enrollment Covered Share of lives large firm coverage Individual enrollment Covered Share of lives individual market 126, 000 165, 000 8% 32, 000 14% 10% 33, 000 15%

Option 5 INCREASING HUSKY REIMBURSEMENT 40 Option 5 INCREASING HUSKY REIMBURSEMENT 40

Policy details n By 2019, average HUSKY costs per capita = average costs for Policy details n By 2019, average HUSKY costs per capita = average costs for large firm coverage in CT Ø 34. 5% increase Ø Note: federal law imposes some limits in going above Medicare rates n 41 Phased-in starting in 2015

Effect of higher HUSKY reimbursement on net state budget savings, pessimistic scenario Note: budget Effect of higher HUSKY reimbursement on net state budget savings, pessimistic scenario Note: budget totals include both outlay and revenue effects. 42

Effect of higher HUSKY reimbursement on net state budget savings, optimistic scenario Note: budget Effect of higher HUSKY reimbursement on net state budget savings, optimistic scenario Note: budget totals include both outlay and revenue effects. 43

Option 6 SHORT-TERM: EXPANDING HUSKY IN 2012 AND 2013 44 Option 6 SHORT-TERM: EXPANDING HUSKY IN 2012 AND 2013 44

Policy details n In 2012 -2013, HUSKY expands to 185 percent FPL for all Policy details n In 2012 -2013, HUSKY expands to 185 percent FPL for all adults Ø This eligibility is limited to parents under current law n 45 Before 2014, federal government pays standard Medicaid match

Bottom-line effects n n The number of uninsured falls by 59, 000, or 16% Bottom-line effects n n The number of uninsured falls by 59, 000, or 16% That results from: Ø 82, 000 more people in HUSKY Ø 23, 000 fewer recipients of ESI (a 1. 1% drop) n 46 State and federal spending rises

Effects of HUSKY expansion on federal spending and state budget deficits, pessimistic and optimistic Effects of HUSKY expansion on federal spending and state budget deficits, pessimistic and optimistic scenarios about cost growth: 2012 -2013 (millions) 2012 Pessimistic scenario $434 Change in federal spending Increase in $139 state budget deficit State outlays $143 State revenue increases 47 $4 2013 Optimistic scenario $423 Pessimistic scenario $452 Optimistic scenario $417 $123 $153 $103 $128 $5 $158 $5 $109 $6

Conclusion and summary n n n 48 Similarities among ongoing options Ø Cover more Conclusion and summary n n n 48 Similarities among ongoing options Ø Cover more than half of the uninsured Ø In most cases, improve state budget picture Ø Achieve modest savings for small firms Differences between ongoing options Ø BH: more affordable for low-income adults, more state savings, but smaller provider networks and fewer plan choices than in exchange Ø Offering Susti. Net to new populations increases Susti. Net enrollment (hence clout in achieving delivery system reforms), may yield modest savings, offers a new choice for buyers, but takes work Ø Raising HUSKY payment improves access; whether costs exceed other savings depends on the effectiveness of Susti. Net reforms Short-term HUSKY expansion covers many uninsured, but costs money