Cost Impact Analysis for the Health Care for America Proposal

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Abstract:

Under the Health Care for America Proposal, employers would be required to provide coverage
or pay a payroll tax to have their workers covered under a newly created national health
insurance pool called Health Care for America (HCA). Modeled on Medicare, Health Care for
America would offer a single Medicare-like fee-for-service option (public HCA plan) and a
selection of Health Maintenance Organizations (HMOs) or other private managed care plans
(private HCA plans). People who do not have employer-sponsored insurance (ESI) would be
covered under HCA, including those now covered under Medicaid and the State’s Children’s
Health Insurance Program (SCHIP). The Proposal would provide subsidies for worker HCA
premiums for those living below 300 percent of the Federal Poverty Level (FPL), and premium
subsidies for non-workers enrolled in HCA who are living below 400 percent of the FPL.
We estimate that there were about 47.8 million uninsured people in the country in 2007. The
Health Care for America (HCA) Proposal would reduce the number of uninsured by 46.5
million people (i.e., 97.3 percent of the uninsured), leaving only about 1.3 million people
uninsured. Coverage under the proposal would be as follows:
• We estimate that 122.2 million people would be covered under ESI, compared with 157.0
million people under current law;
• About 128.6 million people would be covered through the newly created HCA pool; and
• Enrollment in Medicare and the TRICARE program (i.e., military retirees and
dependents) would remain the same as under current law.
The Health Care for America Proposal would cover 46.5 million uninsured people without
increasing national spending for health care, largely through lower provider reimbursement,
administrative simplification and other features of the proposal. The spending effects of the
Proposal include:
• Spending for health care services and prescription drugs nationally would increase by
$53.2 billion in 2007 as the uninsured become covered;
• Administrative simplification would reduce administrative costs by about $25.4 billion
in 2007;
• There would be additional savings of $27.9 billion due to changes in provider payments,
requiring people to have and use a medical home, and government negotiation of
prescription drug prices for people covered through HCA.