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This report uses the Health Insurance Policy Simulation Model (HIPSM) to quantify the intermediate and longer-term implications if America’s health care system is not significantly overhauled. Under a range of economic scenarios, the analysis shows an increasing strain on business owners and their employees over the next decade if reform is not enacted. There would be a dramatic decline in the number of people insured through employers, and millions more could become uninsured. There would be large growth in Medicaid/CHIP enrollment and spending, and increased spending on uncompensated health care. Middle-income working families would be the most affected.
This paper analyzes the intermediate and long-run implications of failure to enact health care reform. Several observers have argued in recent weeks that health reform is not feasible because of the serious recession, declining tax revenues and the ballooning federal deficit. However, in the absence of reform, health care costs, health insurance premiums, and out-of-pocket spending are likely to continue to grow, though perhaps initially at a slower rate because of the poor economy. But as the economy improves, there is reason to believe that health care costs, insurance premiums and out-of-pocket spending will continue to increase at rates similar to those we have experienced in recent years, such as health care cost rising two percentage points faster than Gross Domestic Product (GDP).1 To the extent health care costs and premiums grow faster than incomes, employers will be less likely to offer coverage and individuals will be less likely to take up coverage when offered. The likelihood of enrolling in non-group coverage will be negatively affected by rising costs, though perhaps positively affected by reduced access to employer-based coverage. Those eligible for Medicaid would be more likely to enroll due to the rising costs of private options and higher out-of-pocket costs.
Medicaid and CHIP will become more attractive to those already eligible for the programs under current rules due to expected declines in employer coverage and increased out-of-pocket costs when uninsured. Continued increases in income inequality will also lead to greater Medicaid enrollment. Both forces will increase both federal and state spending under the public insurance programs. Erosion of ESI and declining real incomes at the low end of the income distribution will also result in an increase in the number of uninsured, as only a fraction of the low-income population is eligible for public insurance. This will mean increases in the amount of uncompensated care and increased spending by state and local governments for those without coverage. The end result is that there are likely to be significant changes in the distribution of health insurance coverage and increases in spending, both privately and publicly.
In this paper we use the Urban Institute’s Health Insurance Policy Simulation Model (HIPSM) to estimate the likely changes in coverage and health care costs that the nation will face in the absence of health insurance coverage reforms. We make estimates under three alternative scenarios (including assumptions about health care costs and premium growth, unemployment, income growth and changes in income inequality) for 2014 and 2019 – in the absence of health reform – to answer the following questions:
- How will the level of health insurance premiums change for employer-sponsored insurance and for non-group coverage?
- How many people will have employer-sponsored insurance in 2014 and 2019? How will this vary among children, parents and non-parents and by income group?
- How many people will obtain coverage under Medicaid given changes in income distribution and declines in employer coverage? How much will spending on public insurance (e.g., Medicaid and CHIP) increase? How much will government spending increase relative to aggregate personal incomes?
- What will happen to employer spending on premiums, and how will premiums change as a share of worker compensation?
- What will happen to family spending for health insurance premiums and out-of-pocket costs relative to family incomes? How will this vary by income group?
- How many people will be uninsured in 2014 and 2019; how will this vary by family income level? Will the growth in the uninsured be different for children, parents and non-parents? How will the cost of uncompensated care change
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