1. Stretching Scarce Resources: State Strategies to Design Effective, Affordable Benefit Packages Anne Markus, J.D., Ph.D. Senior Research Scientist The George Washington University Medical Center

2. Definitions Premium: Set amount of dollars per defined payment period (usually monthly) paid to obtain health insurance coverage. Cost-sharing: Patient exposure to out-of-pocket costs associated with health service delivery. Includes: Deductible Coinsurance Copayment

3. Purposes of Cost-sharing General reasons: –Enticing families to be more cost conscious in seeking care –Fostering a sense of ownership/personal responsibility –Directing consumers toward more cost-effective care –Deterring unnecessary utilization –Raising revenues to reduce sponsor costs of health care coverage

4. Purposes of Cost-sharing (cont.) Additional reasons for states: –Making public health insurance programs aimed at the poor look more like private insurance –Limiting substitution and crowd-out of private insurance

5. Recent Trends Private sector –No significant changes to contribution strategies, but changes to benefit structure Medicaid/SCHIP –HIFA initiative Medicare –Pharmacy Plus initiative

6. Cost-sharing Rules in Public Programs Medicaid –Premiums prohibited with some exceptions –“Nominal” cost-sharing allowed with some exceptions –No overall cap specified SCHIP –Premiums allowed –Cost-sharing allowed –Overall cap of 5% of family income State employee benefit plans –Premiums allowed –Cost-sharing allowed –May or may not impose overall cap

7. Medicaid and SCHIP Waivers Medicaid cost-sharing waivers: (1) inappropriate use of ER (2) 2 year demonstration program Section 1115 waivers: (1) waiver of Medicaid and/or SCHIP cost-sharing requirements as part of a 5-year demonstration program (2) streamlined waiver process and increased flexibility to design cost-sharing rules under HIFA

8. Effect of Premiums Premiums influence participation in insurance programs As premiums increase, participation rates decrease

9. Effects of Cost-sharing Use of services –Cost-sharing influences the use of services –As cost-sharing increases, use of services decreases outpatient care inpatient care prescriptions preventive services emergency room Health outcomes –Cost-sharing may have an effect on health outcomes –In general, cost-sharing has been found to have a minimal or no effect on health outcomes except for the poorest populations

10. Effect Across Population Groups Research shows that cost-sharing has a deterrent effect across the board: –children and adults –people who are healthy and people who have chronic conditions –rich and poor Existing body of knowledge also suggests that cost- sharing may have a more pronounced negative effect on low income people: –studies on premiums in state programs –non-Medicaid studies on cost-sharing –Medicaid studies on cost-sharing

11. SCHIP Experiences All States with separate SCHIP programs have some form of cost-sharing Research in this area thus far focuses on the effect of premiums on initial participation but also on continued participation in program Anecdotal evidence also suggests that collecting and processing premiums and other cost-sharing contributions is administratively burdensome and/or not worth the cost

12. Implications Income-related, sliding scale for premium and cost-sharing schedule Low premiums Limited cost-sharing Broaden the definition of preventive services exempt from cost-sharing Individuals with special needs

13. HIFA Cost-sharing Rules Mandatory eligibility groups (e.g., all children up to 100% FPL): same rules as Medicaid Optional eligibility groups (e.g., children beyond the mandatory eligibility levels): no cost-sharing rules specified other than an annual cap of 5% of family income for deductibles, copayments and coinsurance “Expansion” eligibles (e.g., nondisabled single working age adults, childless couples): no cost-sharing rules specified

14. Examples of State Flexibility Under HIFA Arizona (approved HIFA waiver): –Childless adults <100% FPL: same cost-sharing as Medicaid, i.e., $1-$5 except prenatal care, EPSDT services, family planning –Parents of SCHIP and Medicaid children 100-200% FPL: same cost-sharing as SCHIP, i.e., family premiums up to $25 per month, $5 non-emergency use of emergency room, overall limit of 5% of annual family income California (approved HIFA waiver): –Parents of SCHIP and Medicaid children <200% FPL: similar to cost-sharing under SCHIP, e.g., monthly premiums of $10 or $20, copays