Category Archives: Uninsured

Financial incentives for an individual mandate

A recent PBS discussion between Ron Pollack with Families USA, healthcare blogger Robert Lasczewski, and Thomas Mann with the Brookings Institute ranged over several significant reform topics, including the cost of the uninsured. Here is an excerpt from Pollack’s remarks:

If we fail to link improved coverage affordability and expansion with a prohibition on pre-existing condition exclusions, the older and sicker portion of the population will enroll in coverage and the younger and healthier part of the population will drop such coverage — thereby leading to a skyrocketing premium cost spiral.

Doing this will provide significant relief to people and businesses that purchase health coverage today. This is because premiums for health coverage contain a “hidden health tax” that substantially increases the premiums to underwrite the uncompensated health care costs of the uninsured. A report by Families USA, based on data developed by the well-respected actuarial firm Milliman, Inc., found that the average premium for family health coverage contained an average “hidden health tax” of $1,017 in 2008 — a figure which is no doubt higher today. Hence, the extended health coverage to more than 30 million uninsured people, as envisioned in the Senate and House bills, will provide premium relief for America’s families as well as businesses that currently offer coverage for their workers.

See the full Families USA study here.  See more on the individual mandate here.


Utilization in Indiana

A new article in Modern Healthcare looks at the Healthy Indiana Plan, a Medicaid expansion program that has yielded some interesting results. Here’s an excerpt from the Modern Healthcare piece:

While the jury is still out on how well the health savings account and preventive-care incentive are working, analysts have looked at utilization trends among the newly insured and found that those signing up for the program are sicker and more frequent users of healthcare than those enrolled in commercial, employer-sponsored health plans.

The Healthy Indiana Plan “population used more care than the typical commercial population in Indiana with the same age and gender characteristics,” says Rob Damler, principal at Milliman, a consulting and actuarial firm. Damler is the consulting actuary to the state of Indiana on the health plan.

Childless adults enrolled in Healthy Indiana, for instance, had nearly three times as many inpatient services as private plan members in the first year. And pharmacy use was nearly 50% higher than a typical commercially insured population.

This newly enrolled group was also sicker than the general population. Their relative morbidity was 65% greater than their peers covered by private health insurance. The earliest enrollees to the program also proved to be the sickest, with the highest healthcare costs, Damler says.

This phenomenon is called anti-selection, where the least healthy population seeks healthcare coverage available to them, driving up the costs to insurers and the population covered.

The Healthy Indiana Plan offers some considerations for national reform, Damler says. “One of the issues that needs to be understood is pent-up demand,” he says. “We need to be prepared that the newly insured may cost more in the first 12 to 24 months than the insured population.”

Not surprisingly, insurance companies say that without a federal law requiring everyone to carry health insurance, national healthcare reform won’t work because the chronically ill will sign up for coverage in large numbers, driving up costs, while the healthy will stay on the sidelines.

“It only works if everyone’s covered,” says Alissa Fox, senior vice president of policy at the Blue Cross and Blue Shield Association.

Healthy Indiana Plan: Enrollee utilization

The Healthy Indiana Plan (HIP) is a Medicaid expansion program that offers perspective on the cost and utilization patterns of the uninsured as they enroll for coverage and access care. What follows is an analysis of the experience data from this program.  


Illustrating cost patterns during initial period of enrollment

The HIP populations also followed a particular pattern of utilization during the initial enrollment period. Figures 7 and 8 show measurements of inpatient, outpatient, pharmacy, and physician expenditures relative to average PMPM costs, first for caretakers and then for non-caretakers (for explanation of these populations, see the full paper). The 100% line measures the average PMPM for the first year of coverage for the population represented.


Figure 7: Caretakers



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Two perspectives on the public plan

As the country continues to sort through the question of how best to reform healthcare, a number of experts are using Milliman research to articulate distinct opinions. Here are two perspectives on the proposed public plan:

  • Prof. Uwe Reinhardt of Princeton has penned an assessment of the president’s speech last week on the Health Affairs blog:

While we’re on the subject of private insurance and cost control, the opponents of a public health plan frequently argue that such a plan would “underpay” hospitals and doctors, forcing the latter to recover the shortfall from private insurers through a cost shift estimated by Milliman Inc. to be around $90 billion a year.

If that is true, however, then one may ask the following question: If the private plans cannot resist increased prices as a result of this particular cost shift, how then can they resist any price increases justified to them by any cost, whatever its origin? How, for example, could they resist picking up the tab for the so-called medical arms race by which hospitals compete? I find this an intriguing question and invite comments thereon.

Let’s be honest. The United States has unsustainable health-care costs. The Milliman Medical Index puts the cost of a typical family plan at $16,700 in 2009, up by more than $1,100 in one year. If premiums continue to rise annually by 8 percent, within 10 years the typical family health insurance plan will cost $36,000. What businesses or families will be able to afford health insurance at $36,000 a year?

Controlling cost needs to be the focus of the health care debate, because it is the only way that we can preserve health insurance for those fortunate enough to still be insured, and to achieve health coverage for all Americans. The public plan option has many advantages, particularly if it is designed properly. It would be grossly unfair, however, to the millions of uninsured Americans to frame the debate as public plan or nothing.

And for those who oppose the public plan, the ball is in your court. What are your measures to reduce $3 trillion of health care costs over the next 10 years?

More on the Healthy Indiana Plan

HC Pro has published an article about the Healthy Indiana Plan, with insight from Milliman principal Rob Damler. Here is an excerpt from the HC Pro article:

Anyone creating a health reform plan must understand that the first year (especially the first few months) will bring in people with the most serious medical problems and who will require the most expensive medical care, says Rob Damler, FSA, MAAA, principal and consulting actuary at Milliman in Indianapolis.

Milliman compared Indiana’s HIP population against the typical commercial population and found much higher inpatient services, ER visits, and pharmacy costs. Milliman discovered the HIP population was more likely to have chronic diseases, such as asthma, depression, and diabetes, than the typical commercial population. The first people to enroll in the program in the first few months had a higher morbidity rate.

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