Bowen Garrett, coauthor of "Health Reform: The Cost of Failure" and "The Cost of Failure to Enact Health Reform: Implications for States" answers five questions about how coverage and costs will change over the next 10 years if America's health care system is not reformed. The first report lays out national implications; the second breaks down findings by state.
October 31, 2009
1. What will happen nationwide if health care reforms aren't passed?
Continuing with the status quo means that health care costs will go up significantly. Individual out-of-pocket costs will increase by 45 percent or more nationally. Fewer people will be able to afford insurance premiums and employers may be less willing to pay for and offer health benefits, so more people will be uninsured. We'll see Medicaid enrollments rise, driving up government spending, possibly leading to higher taxes. And that's if we do nothing.
"State budgets may be strained now, but they'll face higher costs as more people lose private coverage and turn to public programs."
Our report doesn't support any particular bill or reform effort. Our intent was to model a realistic picture of what will happen to health care coverage and costs on the current path. The report estimates where we'll be in five and ten years under three different economic scenarios, taking account of the unemployment rate, income growth, and health care cost growth. Each of the scenarios—best, intermediate, and worst case—is plausible and none is extreme.
In the best case, the number of uninsured Americans would go from an estimated 49.1 million today to 57 million in 2019. In the worst, 65.7 million people would be uninsured in 10 years. Health care spending by individuals and families would jump from $326 billion this year to $476 billion by 2019 under the best case scenario and $548 billion in the worst case. Government spending on Medicaid and CHIP for those under age 65 would go up from $251 billion to $404 billion best case, or $520 in the worst case. The extra costs would mean higher taxes.
2. Is the story the same from state to state?
No state can escape these economic trends. In 46 states, we're showing employer premium costs rising by more than 60 percent over the next decade, and that's best case! In the worst case, the number of uninsured will grow by more than 30 percent in 29 states and all states will see increases of at least 10 percent.
A key difference here is how each state sets income and other eligibility rules for Medicaid. In other words, how easily can people qualify for benefits? States with more generous Medicaid programs will see smaller increases in the number of uninsured, but higher costs as more people enroll. Our analysis assumes that states will continue to offer Medicaid benefits at current levels, though some might cut public benefits when the costs are too high, stranding more people without coverage.
Also, the share of people working in large firms varies by state, and that affects the state's percentage of uninsured residents. Large firms are much less likely to drop coverage altogether when health costs rise, partly because they can get better rates than smaller firms or self-insure. Small firms face higher administrative costs, which makes per-employee insurance costs higher.
3. Which states will see the biggest cost and coverage changes over the next 10 years?
Florida's uninsured rate will grow the most due to a combination of lower Medicaid and CHIP growth and greater loss of employer-sponsored coverage. Minnesota will have the smallest increase because a large percentage of residents work in large firms and the state's Medicaid program is generous.
Arizona and Nevada will have the highest percentage growth in Medicaid costs, mostly because their populations are growing so fast. These two states will also experience the largest percentage increases in individual and family spending on insurance premiums and out-of-pocket costs. The District of Columbia and West Virginia, which have shrinking populations, will see the lowest growth in Medicaid costs.
4. Who will be hit hardest?
The middle class. People who lose employer coverage but have low enough incomes to qualify for Medicaid can rely on public benefits. People in the middle class who have somewhat higher but still modest incomes can't fall back on Medicaid if their employers stop offering health insurance. Our report finds that every state will see the rate of employer-sponsored coverage fall over the next decade. Half the states would see the number of people with employer-sponsored insurance fall more than 10 percent.
5. The costs of reform—federal and state spending on subsidies and increased Medicaid enrollment—are high too. How do they stack up against the costs of doing nothing?
What the reports highlight is that we can't compare the projected cost of health reform to what we have now. Instead, we have to compare those costs to what's going to happen in the future. And the path we're on has many more uninsured, growing state government costs, and fewer people getting coverage through their employers and from private sources. State budgets may be strained now, but they'll face higher costs as more people lose private coverage and turn to public programs. Without reform, by 2019, spending on Medicaid and CHIP would soar by more than 75 percent in the worst case scenario in every state. So if you take all that into account, the cost of health reform is not as large as its price tag alone would suggest.
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