Projected Impact of Senate Health Reform Bill; Estimates of Alternative Designs

As federal lawmakers prepare for a summit on health care, researchers from the RAND Corporation have released a new analysis showing that health reform legislation passed by the U.S. Senate would cut the number of uninsured Americans by about half and cost the federal government about $899 billion by 2019.

The study, released today at www.randcompare.org, examines the impact of changes in the combination and design of coverage-related policy options on the number of uninsured and the cost of health care.

The study details across a range of scenarios the impact of frequently proposed strategies such as expanding Medicaid eligibility, imposing insurance mandates for individuals, penalizing employers that do not offer insurance and whose employees obtain federal subsidies, and creating insurance exchanges to increase the options available to individuals purchasing coverage.

"Our analysis offers an independent assessment of the impact and cost of the Senate bill to expand coverage to the uninsured," said Elizabeth A. McGlynn, associate director of RAND Health and co-leader of the RAND COMPARE initiative. "This analysis and the other work done by RAND COMPARE can help the Congress and the public evaluate alternative approaches to increasing the number of people with health insurance and understanding what those programs might cost."

The analysis was done using a micro-simulation model created as a part of RAND COMPARE, an ongoing effort to provide decisionmakers and the public with objective information about health care reform. The project also has published an analysis of the coverage-related provisions of the health reform bill passed by the House and a summary comparing the two bills.

The study finds that health care legislation passed by the Senate in December would cut the number of uninsured Americans to 25 million by 2019 (a 53 percent decrease) and increase overall national spending on health care by about 2 percent cumulatively between 2013 and 2019.

In addition, the study finds that under the Patient Protection and Affordable Care Act (H.R. 3590) cumulative federal spending to subsidize health insurance premiums for low-income people obtaining individual insurance would total $400 billion by 2019 and federal spending on Medicaid would increase by $499 billion over the same period.

"While our forecast concludes the Senate plan would cover slightly fewer people than the legislation passed by the House, the costs of the Senate bill also would be lower," McGlynn said.

The RAND conclusions generally are consistent with estimates about the impact of the Senate bill provided by the Congressional Budget Office, the nonpartisan legislative office that provides the official analysis of Congressional legislation.

While the RAND analysis shows that the Senate plan would cause overall health spending to increase by 2 percent because of increased utilization among newly insured people, it would help drive down insurance premiums. Researchers estimate that premiums in the employer-sponsored market in 2019 would be 2 percent lower and premiums paid by individuals buying insurance through exchanges would be 3.7 percent lower than otherwise expected.

The RAND analysis finds that by 2019, about 28 million people would purchase insurance through the Health Benefit Exchanges mandated by the legislation. The Exchanges would be state-run organizations through which private companies would sell health insurance to individuals. Researchers estimate that 15 million of those who use the exchanges would qualify for government subsidies to help pay for their insurance.

The RAND forecast predicts that among the 25 million Americans who would remain uninsured in 2019, about one-third (9 million) would be eligible for Medicaid but not enroll. There may be opportunities to further increase coverage by conducting outreach efforts to improve the enrollment in Medicaid among those newly eligible, according to researchers.

Additional findings from the analysis of the Senate plan include the following:

• The individual mandate plays the largest role in increasing insurance coverage; it alone would reduce the number of uninsured by 21.5 million (41 percent). The employer penalties and Medicaid expansions by themselves would reduce the number of uninsured Americans by 1.5 million and 8 million, respectively.
• If eligibility for Medicaid were set at 150 percent of the federal poverty level rather than 133 percent as it is in the Senate bill, the number of people on Medicaid would increase by about 2 million but the number of uninsured would decrease by only about 600,000. Reducing Medicaid eligibility to 100 percent of the federal poverty level would result in 4 million fewer people enrolled in Medicaid and 1 million more people uninsured than under H.R. 3590.
• Subsidies and penalties associated with the individual mandate are essential to the success of the policy option. In the absence of penalties for individuals who do not purchase insurance, 10 million more people would be uninsured. In the absence of subsidies to offset the costs of insurance, 13 million more people would be uninsured.
• Eliminating penalties for employers that do not offer insurance and who have at least one employee who obtains a federal subsidy would increase the number of uninsured by 700,000 and would increase cumulative federal spending between 2014 and 2019 by $98 billion.

RAND developed COMPARE to provide objective facts and analysis to inform the dialogue about health policy options. Individuals, corporations, corporate foundations, philanthropic foundations, and health system stakeholders have funded COMPARE. The new analysis is presented on the Web site's "What's New" section (see www.randcompare.org).

RAND Health, a division of the RAND Corporation, is the nation's largest independent health policy research program, with a broad research portfolio that focuses on quality, costs and health services delivery, among other topics.