Few Health Reform Options Could Have Insured More at Less Cost

RAND Review News for Summer 2010

The recently enacted federal health care reform law provides health insurance coverage to the largest feasible number of Americans, while keeping government costs as low as possible, according to RAND research published in the June edition of Health Affairs.

“The new law appears to have landed on a distinctive plain of the policy frontier.”

“The only alternatives that would have covered more Americans at a lower cost to the federal government appeared to be politically untenable, involving substantially higher penalties for those who don’t comply with mandates, along with lower government subsidies and less-generous Medicaid expansion,” said Elizabeth McGlynn, the study’s lead author and codirector of RAND’s COMPARE initiative.

According to the analysis, 28 million Americans will be newly insured by 2016 under the provisions of the Patient Protection and Affordable Care Act. The law builds on the existing structure of health insurance in the United States — a combination of private and public sources of coverage.

The study examined how the outcome of health care reform would differ if components of the law were structured differently. Researchers simulated more than 2,000 alternative policy scenarios using RAND COMPARE, a microsimulation model designed to evaluate how health reform proposals would affect the American health care system.

Only a Few Policy Scenarios Would Insure More People at Less Cost Than What Is Expected Under the New Health Reform Law

Only a Few Policy Scenarios Would Insure More People at Less Cost Than What Is Expected Under the New Health Reform Law
SOURCE: “Could We Have Covered More People at Less Cost? Technically, Yes; Politically, Probably Not,” Health Affairs, Vol. 29, No. 6, June 2010, pp. 1142–1146, Elizabeth A. McGlynn, Amado Cordova, Jeffrey Wasserman, Federico Girosi.

The figure delineates the “policy frontier,” which contains the results of more than 2,000 scenarios simulated for the study. Compared with the new health reform law (highlighted in red), only a few scenarios would produce better results (“more people insured at less cost”). Those scenarios represent only small improvements over what is expected by 2016. For example, 4 million more people would be insured with no additional cost to the federal government if the annual penalty for individuals who fail to purchase health insurance were increased to $1,200 per person from $750 (as the new law provides).

The analysis showed that a few strategies could cut federal spending by up to $20 billion a year without decreasing the number of newly insured. However, this would require placing a higher financial burden on the lowest-income segment of the U.S. population.

“On balance, the new law appears to have landed on a distinctive plain of the policy frontier where the costs and coverage levels achieved were reasonable enough to secure passage of the law,” said McGlynn. square