Rhode Island Can Afford Health Care for All Appendix

Appendix I HIGHLIGHTS AND OUTLINE OF MODEL AND ESTIMATES We summarize here the major steps involved in reaching our bottom line conclusion— that Rhode Island can win comprehensive health care for all while saving money. These highlights of our estimates offer a few examples of the evidence and assumptions used, to convey a sense of the types of issues involved. 21 This material intentionally overlaps that presented in the Findings, but offers a different look, emphasizing the way the analysis was done as much as its results. A brief comment on precision: Cost and savings estimates are presented in billions of dollars and tenths of billions— $0.6 billion, for example, or the equivalent, $600 million. Often, individual estimates and their components were calculated using available data in millions of dollars. But because of the incompleteness and approximate nature of many health care cost data, we wish to avoid over-stating the precision of these estimates. We therefore round here to the nearest $10 million. While $10 million is certainly a large sum, it is less than two-tenths of one percent (0.13 percent) of the estimated $7.47 billion in health spending for Rhode Island residents and workers in 2002. What coverage is proposed? This plan would provide all Rhode Island residents and workers with comprehensive, equal health care benefits, including dental and long-term care. Besides insuring people who are now uninsured, this plan fills in the gaps in coverage for today’s insured, giving substantial new benefits to all. It would cover the cost of all medically necessary health care, excluding only nonprescription drugs and non-durable medical supplies (unless prescribed), and some of the housing costs of nursing home care. By filling gaps in benefits and ending most patient cost-sharing requirements, this plan would eliminate over three-fourths of out-of-pocket costs. The plan gives patients free choice of doctors, hospitals, and other caregivers. And it frees patients and caregivers from bureaucratic interference with decisions about the appropriate course of care. This coverage would rest on a system of health care financing without insurance companies, in which all caregivers are paid from one pool of funds. This could be either a traditional single-payor design or a “pooled multi-payor system.” In the latter, varied funding streams are combined to permit consistent, equitable caregiver payment methods, budgeting and cost control instead of cost shifting, gaining many of the benefits of traditional single payor. This coverage plan also includes a range of financing and delivery reforms that would cut administrative and other waste. These will enable the people of Rhode Island to get much more care, while saving money. Who will be covered? The plan analyzed here would cover all Rhode Island residents and also out-of-staters who work in Rhode Island. This report refers to these groups, together, as “Rhode Island beneficiaries.” So all of the over one million people who live in Rhode Island would have coverage. In addition, our estimates assume that, for simplicity, efficiency, and workplace equity, the roughly 39,000 people who work in Rhode Island but live outside the state22 (and their dependents) would get the same coverage that Rhode Island residents receive. We also note that about one-seventh of working Rhode Island residents are employed outside the state.23 While the scope of this report does not permit addressing the various options for raising the money to finance universal coverage, we assume that many out-of-state employers would contribute to the state plan since that may well prove less costly than buying private insurance. (With such a large share of the workforce employed outside Rhode Island, the state might hope to raise $400 million or more in employer contributions from out of state.) Also available from outside of Rhode Island, we project, would be some limited additional federal funding, mainly because Medicare patients would use more care after removal of the access barriers now posed by requirements to pay deductibles and co-insurance. Ending under-insurance Many discussions of universal health insurance focus solely on the goal of providing some coverage to all. But besides insuring the uninsured, this plan is designed to eliminate the diverse problems of under-insurance, such as these. • As shown by the current debate over drug coverage for seniors and the lack of long-term care coverage for many who need it, people with today’s Medicare coverage are often among the under-insured. A recent national survey found that medical costs and premiums actually consumed at least 10 percent of income for fully half of families headed by seniors.24 • The same survey showed that medical costs and premiums actually consumed at least 10 percent of income for one-sixth of households headed by people under age 65. • Some analysts25 consider people to be under-insured if the gaps in their coverage leave them at risk of having to pay health costs out-of-pocket (excluding premiums) amounting to more than 10 percent of their family income. This is a broader definition because people need not have actually been sick enough to incur large bills to be deemed under-insured. Yet even this definition may be too restrictive. There are good reasons to consider far more of Rhode Island’s population under-insured: • Costs amounting to less than 10 percent of income may well keep many people from getting needed care. • Managed care plans’ incentives to limit care mean that most people risk having difficulty getting coverage for needed care. • Definitions of the under-insured which emphasize people incurring high costs or unable to obtain needed care fail to include the countless people with meager benefits who did not happen to fall ill in the year studied. A solution for the problems of the under-insured cannot target only those who will get sick, because that is not predictable. Thus, providing protection against the costs of care for everyone is manifestly the only way to fill the gaps for the under-insured people of Rhode Island. Outline of model • We first estimate the costs of care in 2002 absent reform—total health care spending, personal health care spending, and spending for each major type of care. (Details of how we have prepared those estimates are not presented here.) • Next, we estimate the costs of a) bringing uninsured people’s care to the private average, and b) filling gaps in benefits and eliminating cost-sharing for all patients. • We then estimate savings from a) administrative simplification, and b) financing and delivery reforms, to determine the post-reform cost of care. • Finally, we compare the costs of care for Rhode Island residents and workers after reform to today’s costs, and also to the cost of providing expanded coverage without reform.