Modeling Dr. Dynasaur 2.0 Coverage and Finance Proposals

Effects of the Expansion of Vermont's Dr. Dynasaur Program to All Individuals Through Age 25

by Andrew W. Dick, Carter C. Price, Dulani Woods, Martin McNamara, Steven P. Schramm, Elrycc Berkman

Download eBook for Free

FormatFile SizeNotes
PDF file 1 MB

Use Adobe Acrobat Reader version 7.0 or higher for the best experience.

Research Questions

  1. What would be the effects of expanding Vermont's Dr. Dynasaur health insurance program to cover all citizens of Vermont, regardless of income, through age 25? (The current Dr. Dynasaur program combines the state's Medicaid program and Child Health Insurance Program for children ages 0 through 18 to provide health insurance coverage for those with family incomes below 317 percent of the federal poverty level.)
  2. What new revenues would be required to fund the program expansion?

The authors assessed an expansion of Vermont's Dr. Dynasaur program that would cover all residents age 25 and younger. The current Dr. Dynasaur program combines Vermont's Medicaid program and Child Health Insurance Program for children ages 0 through 18 to provide a seamless insurance program for those with family incomes below 317 percent of the federal poverty level. The authors used RAND's COMPARE-VT microsimulation model with Vermont-specific demographic, economic, and actuarial data to estimate the effects on health insurance coverage, costs, and premiums. They also identified the new revenues required to fund the program expansion and explored three alternative financing strategies to raise those funds: (1) an increase in the Vermont income tax, (2) a Vermont payroll tax, and (3) a Vermont business enterprise tax.

The authors found that enrollment would increase by more than 260 percent under the 100-percent enrollment scenario and by nearly 200 percent under the 70-percent enrollment scenario by 2019. Not surprisingly, the children and young adults who move off employer-sponsored insurance (ESI) and into Dr. Dynasaur 2.0 have considerably lower expected health care costs than those who remain on ESI, increasing the per-person premiums by nearly $1,000 for those remaining enrolled in ESI. Annual health care expenditures per person for children and young adults in 2019 are estimated at $4,325 with Medicare prices. The combination of increased reimbursement rates, large increases in enrollment, and relatively low Dr. Dynasaur premiums (no more than $720 per year) will require significant new tax revenues to meet program obligations.

Key Findings

Modeled Outcomes for 2019

  • Enrollment would increase by more than 260 percent under the 100-percent enrollment scenario and by nearly 200 percent under the 70-percent enrollment scenario.
  • Total program expenditures would increase dramatically, in part because of increased reimbursement rates, but largely because of the increased enrollment.
  • Increases in administrative costs reflect the increased enrollment, but we found that these projections had a large amount of uncertainty.
  • New sources of revenues included federal medical assistance percentage funds (which the authors estimated conservatively at current Medicaid reimbursement rates) and increased premium collections.
  • Because premium collection was limited to no more than $60 per family per month ($720 per year), regardless of family income, program expenditures per enrollee far outpace current program revenues per enrollee.
  • The resulting additional revenue required ranges from $343 million (with 70-percent enrollment and Medicare reimbursement levels) to $667 million (with 100-percent enrollment and commercial reimbursement levels).
  • Given Medicare reimbursement rates, the new tax rates in the three financing strategies that were modeled range from a 2.5–percentage-point additive increase in the income tax schedule (for the 70-percent enrollment scenario) to a 3.9–percentage-point increase in the payroll tax (for the 100-percent enrollment scenario).

Table of Contents

  • Chapter One

    Introduction

  • Chapter Two

    Approach

  • Chapter Three

    Results

  • Chapter Four

    Discussion

  • Chapter Five

    Conclusions

  • Appendix

    Detailed Approach

Research conducted by

The research described in this report was sponsored by the State of Vermont, Agency of Administration and conducted by RAND Health.

This report is part of the RAND Corporation research report series. RAND reports present research findings and objective analysis that address the challenges facing the public and private sectors. All RAND reports undergo rigorous peer review to ensure high standards for research quality and objectivity.

Permission is given to duplicate this electronic document for personal use only, as long as it is unaltered and complete. Copies may not be duplicated for commercial purposes. Unauthorized posting of RAND PDFs to a non-RAND Web site is prohibited. RAND PDFs are protected under copyright law. For information on reprint and linking permissions, please visit the RAND Permissions page.

The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.