Executive Summary

Key Findings We used a micro-simulation model to estimate the effects of the Medicare-X Choice Act 1 on health insurance coverage and healthcare spending. Medicare-X Choice would make a public health insurance plan fully available on the health exchanges beginning in 2024 and reimburse providers using Medicare rates.

on health insurance coverage and healthcare spending. Medicare-X Choice would make a public health insurance plan fully available on the health exchanges beginning in 2024 and reimburse providers using Medicare rates. We project public plan enrollment of 40.7 million in 2024, with approximately 90 percent of enrollees coming from individuals currently insured on the non-group market or through employer-sponsored insurance (ESI).

Of the 29.0 million currently uninsured, Medicare-X Choice would result in 5.5 million gaining coverage. By comparison, additional support of the Affordable Care Act would result in 9.1 million uninsured persons gaining coverage.

Nationally, healthcare spending would be reduced by $1.2 trillion (7%) over the 10-year period from 2024 to 2033, with spending for hospital services being cut by $774 billion -accounting for almost two-thirds of the total spending reduction.

The Medicare-X Choice reductions in healthcare spending and increases in coverage would be financed through reductions in provider payments, given that Medicare rates are significantly less than payments by commercial payers.

Medicare-X Choice would compound financial stresses already faced by the nation’s hospitals, potentially impacting access to care and provider quality. MedPAC estimates Medicare hospital margins will be -11 percent in 2018. Moreover, the Congressional Budget Office has projected that between 40 and 50 percent of hospitals could have negative margins by 2025 under current law.

While Medicare-X Choice would increase insurance coverage, the gains are modest relative to what could likely be achieved through strengthening existing components of the Affordable Care Act.

Access to affordable health care coverage continues to be a major public concern. While many Americans have gained coverage since the enactment of the Affordable Care Act (ACA) through, for example, health insurance marketplaces and state Medicaid expansions, approximately 27 million non-elderly individuals living in the U.S. remained uninsured in 2017, up slightly from 2016.2 In 2017, Members of the 115th Congress introduced eight legislative proposals to expand public health insurance coverage. Seven of the eight proposals would make Medicare or a Medicare-like public plan option available to a larger population than currently has access to Medicare or other public insurance. The other proposal (Medicare-for-All) would create a single-payer healthcare system.

In this study, we model the effects of the Medicare-X Choice Act on coverage and healthcare spending. Although not as expansive as Medicare-for-All, Medicare-X Choice would allow any individual to voluntarily enroll in a public plan offered on each health exchange. As a result, the Medicare-X Choice public plan’s reach would be broader than Medicare “buy-in” proposals that only allow certain age groups (e.g., age 55-64) to purchase Medicare. Under Medicare X-Choice, the public plan would reimburse providers using Medicare rates, which are significantly less than commercial rates and, for hospitals, fall below the cost of providing care.3 We assess the impact of Medicare-X Choice on coverage and healthcare spending by projecting the take-up of the new public plans among the uninsured and those with commercial health insurance.

Methods

We used the KNG Health Reform Model (KNG-HRM) to estimate individual and family insurance coverage decisions. The KNG-HRM is a microsimulation model that uses a parameterized utility function to determine individual insurance coverage choices. The model is based on data from the 2017 U.S. Census Bureau’s American Community Survey (ACS), which is a large national survey of households. In the model, individuals consider several coverage options, maximizing utility for their family or “health insurance unit (HIU).” For the non-group market and those uninsured at baseline, changes from the status quo policy trigger a dynamic, iterative process with HIUs selecting new coverage choices and premiums being recalculated until a new equilibrium is reached. For this study, we expanded the KNG-HRM to incorporate coverage decisions of individuals on employer-sponsored insurance (ESI). For individuals receiving coverage through their employer, we used baseline premiums for ESI (updated over time for cost inflation) and assumptions on employer-covered share of premiums to model the decision to stay on ESI or select an alternative coverage option. Each individual’s utility is a function of healthcare consumption; out-of-pocket spending including premiums, cost-sharing reduction (CSR) subsidies and tax credits; and variance in out-of-pocket spending (to capture the value of insurance to mitigate risk of unexpectedly high healthcare expenditures). We do not model competition among health plans and, instead, assume that the availability of plans would be unaffected by the introduction of a public plan on the exchanges.

We estimated healthcare utilization based on an individual’s demographics and imputed health status, including general health, presence of select chronic conditions, physical function, and cost-sharing requirements. We convert healthcare utilization into total and out-of-pocket spending by multiplying use rates by prices. Commercial insurer prices were obtained from publicly-available data from the Health Care Cost Institute (HCCI). We developed comparable Medicare prices using studies from the Congressional Budget Office (CBO) and other sources that compare commercial provider payment rates to Medicare rates.

Key Findings

We find that national enrollment in the public plan would be 40.7 million in 2024 and would increase slightly to 42.3 million by 2033 (Table ES1). Under Medicare-X Choice, the number of uninsured and the commercially insured on the non-group market would fall by 5.5 and 12.6 million in 2024, respectively, while enrollment in employer-sponsored insurance would fall by 22.6 million. About ninety percent of the enrollment in the public plans would comprise individuals who were either covered under ESI or on a commercial non-group plan in the baseline. While most of the enrollment in the public plan comes from those previously with ESI, the public plan take-up rate is highest (67%) among those with commercial non-group insurance.

We compare estimated reductions in the number of uninsured under Medicare-X Choice in 2024 to the impact of a fully-implemented ACA (Figure ES1). Specifically, we update estimates reported by the Urban Institute on insurance coverage in 2019 and the impact of Medicaid expansion in non-expansion states and insurance coverage policies in effect during the 2018 Open Enrollment Period (OEP) as compared to the 2017 OEP. 4,5 We used estimates directly from the Urban Institute studies but updated for projected population growth between 2019 and 2024. We find that a fully implemented ACA would result in a reduction of 9.1 million in the uninsured, while Medicare-X Choice would result in a reduction of 5.5 million.