Cost Sharing Arrangements in Medicaid and SCHIP: Implications for Out-of-Pocket Spending Burdens Thomas M. Selden, Genevieve M. Kenney, Matthew Pantell, and Joel Ruhter AHRQ and The Urban Institute* *UI funding generously provided by the Packard Foundation

Overview Cost-sharing increasingly used in public coverage for children Cost-sharing increasingly used in public coverage for children – Premiums (reduce crowd out?) – Copayments (efficient use?) – Budgetary savings Simulate impact on family out-of-pocket spending burdens Simulate impact on family out-of-pocket spending burdens

Cost-Sharing Policies in 2007: Monthly Premiums Poverty Share of plans with premiums Median for 2 children (min-max) 151% FPL 24/51 $20 ($6-$216) 201% FPL 17/25$50($18-$210) 250% FPL 15/18$75($25-$282)

Cost-Sharing Policies in 2007: Monthly Premiums Poverty Share of plans with premiums Median for 2 children (min-max) 151% FPL 24/51 $20 ($6-$216) 201% FPL 17/25$50($18-$210) 250% FPL 15/18$75($25-$282)

Cost-Sharing Policies in 2007: Monthly Premiums Poverty Share of plans with premiums Median for 2 children (min-max) 151% FPL 24/51 $20 ($6-$216) 201% FPL 17/25$50($18-$210) 250% FPL 15/18$75($25-$282)

Cost-Sharing Policies in 2007: Copayments ($) Poverty Share with + Office Brand RX Inappr. ER 151%20/515(2-20)5(1-20)18(5-75) 201%9/255(5-20)5(5-25)25(10-50) 251%6/185(5-15)6(5-25)25(10-50)

Data & Methods Medical Expenditure Panel Survey (2003&2004) Medical Expenditure Panel Survey (2003&2004) – Children with full-year public coverage Percentage of children in families with out- of-pocket spending on premiums and care exceeding 10% of income Percentage of children in families with out- of-pocket spending on premiums and care exceeding 10% of income – Simulate a range of scenarios – Burdens reflect spending by children and other family members

Cost-Sharing Scenarios Family cap on (child) cost-sharing at 5% of income (ON/OFF) Family cap on (child) cost-sharing at 5% of income (ON/OFF) ScenarioPremAMBRXER “Zero”0000 LOW$10/$20$5$3/$5$5/$10 MOD$20/$40$10$5/$20$10/$50

Percentage of Publicly-Insured Children in Families with 10% or Larger Annual Burdens

Within-Year Concentration of Family Spending on Care for MCD/SCHIP Children

Percentage of Publicly-Insured Children in Families with 20% or Larger Quarterly Burdens

Prevalence of 10% Annual Burdens among Families with Special Health Care Needs Children

Even Higher Cost-Sharing? LOW and MOD have small impacts on burden prevalence above 150% FPL LOW and MOD have small impacts on burden prevalence above 150% FPL What about cost-sharing at maximum observed/allowed? What about cost-sharing at maximum observed/allowed? High A: $60/$80/$84 High A: $60/$80/$84 High B: 5% of income (no copayments) High B: 5% of income (no copayments)

Percentage of Publicly-Insured Children in Families with 10% or Larger Annual Burdens

Potential Budgetary Savings* *Assuming no reduction in enrollment or utilization! Scenario Applied to All Only over 150% FPL Low$2.0B$0.6B Mod$4.4B$1.3B Mod + Cap $3.8B$1.3B 5% Premiums $11.6B$6.6B

Potential Budgetary Savings* *Assuming no reduction in enrollment or utilization! Scenario Applied to All Only over 150% FPL Low$2.0B$0.6B Mod$4.4B$1.3B Mod + Cap $3.8B$1.3B 5% Premiums $11.6B$6.6B

Potential Budgetary Savings* *Assuming no reduction in enrollment or utilization! Scenario Applied to All Only over 150% FPL Low$2.0B$0.6B Mod$4.4B$1.3B Mod + Cap $3.8B$1.3B 5% Premiums $11.6B$6.6B

Potential Budgetary Savings* *Assuming no reduction in enrollment or utilization! Scenario Applied to All Only over 150% FPL Low$2.0B$0.6B Mod$4.4B$1.3B Mod + Cap $3.8B$1.3B 5% Premiums $11.6B$6.6B

Caveats Full enforcement Full enforcement – no hardship cases – providers do not waive copays Perfect application of family caps Perfect application of family caps – caps reflect current income No behavioral responses No behavioral responses – no dropped of coverage – no reductions in use

Conclusions Moderate cost-sharing, if fully imposed, would greatly increase burdens for families below 150% FPL Moderate cost-sharing, if fully imposed, would greatly increase burdens for families below 150% FPL Exempting such children greatly reduces budgetary savings and scope for efficiency gains Exempting such children greatly reduces budgetary savings and scope for efficiency gains Capping cost-sharing for children at 5% greatly reduces impact – if it can be implemented Capping cost-sharing for children at 5% greatly reduces impact – if it can be implemented