November 18, 2019

An Affordable Approach to Universal Coverage

A majority of Americans and virtually all Democrats believe in universal healthcare coverage and the federal government’s responsibility to make it happen.  The Affordable Care Act (ACA) had a strategy to achieve it.  But the progress stalled when congressional Republicans axed ACA’s penalty for going uninsured and the Supreme Court made the ACA expansion of state Medicaid programs optional. Today 12 percent of Americans – 40 million people — remain uninsured.

The next President and Congress can quickly approach universal coverage without overhauling Medicare, imposing new taxes on middle-class families, or forcing anyone to give up their current private coverage.  They can do it by simply adding a new option to the ACA that allows people to enroll in the Federal Employees Health Benefits program (FEHB).

This option will give the uninsured and others access to the same coverage available today to the Secretary of the Treasury, the Attorney General, the White House chief of staff, and other federal civilian employees.  The option also will attract many of those currently covered by non-group policies purchased through ACA exchanges, because the FEHB coverage provides better coverage at less cost. 

In a new study, we compared the coverage and costs under the FEHB’s standard BlueCross BlueShield policy and the standard BlueChoice Silver plan available on ACA exchanges.  A median-income family on the ACA Silver plan has monthly premiums of $1,206 to $2,804, an $11,250 deductible and maximum annual out-of-pocket costs of $13,700.  If that typical family switched to the FEHB’s BlueCross BlueShield policy, its monthly premiums would fall to $589 per month with a $700 deductible and maximum out-of-pocket costs of $10,000.

Compared to the FEHB standard plan, the ACA Silver plans also have higher copays to visit a person’s primary doctor or specialists and higher copays for every diagnostic or lab test, ultrasound, X-ray, EEG or therapy treatment.  Under the ACA Silver plans, patients also pay a larger share of the charges for surgical procedures and hospital admissions, as well as $40 for each maternity-related service compared to no charge under the standard FEHB policy.

Beyond these basic terms of service, how much people pay for healthcare depends on how sick or injured they are.  In any year, 50 percent of individuals and 42.5 percent of families remain healthy and so incur modest medical costs, and another 40 percent of individuals and 42.6 percent of families have medical issues that produce medium-sized medical bills.  However, most medical costs for individuals and their insurers involve the 10 percent of individuals and 15 percent of families with serious medical issues that produce high or very high bills.  

We analyzed people’s actual medical costs based on their incomes and whether they face low, medium, high or very high medical bills, under the two standard policies.  The results: Most people covered by the FEHB policy personally pay out much less than most people covered by the ACA policy. 

A family earning just over median income – here, 400 percent of the federal poverty line (FPL) – who incur low or medium medical bills would save an average of $6,663 (low bills) or $12,287 (medium bills) under the FEHB standard policy compared to the ACA Silver plan.  If their medical bills are high or very high, their savings under the FEHB plan average $7,318 and $7,294, respectively. The prospect of such savings should attract many of the uninsured, as well as ease the financial burdens on many families currently covered by ACA policies.

Based on the ACA’s large subsidies for lower-income people, some households earning from 100 percent to 250 percent of the FPL would not save by opting for the FEHB coverage.  They could stick with their ACA plan or, better, the new policy can include funds to offset anyone’s additional personal costs from choosing the FEHB coverage.  Better still, the plan could increase the government’s share of FEHB premium costs for lower-income individuals and families.

Sine the federal government now picks up 65 percent of premium costs for individuals under the FEHB standard plan and 65.7 percent for families so covered, this approach will inevitably increase the government’s costs.  The question is, by how much?

Let’s assume that the plan achieves universal coverage. If everyone who currently lacks group coverage, whether insured or not, opts for the standard FEHB policy, it would cost the federal government about $72 billion more in 2020, than if everyone were covered under an ACA Silver plan. If we also raised the government’s premium contributions for lower-income people to 86 percent, universal coverage would cost the government $90 billion in 2020.  For reference, the Sanders-Warren Medicare for All approach would cost $2 trillion to $3 trillion in 2020.

We could pay for this new option by merely rolling back one of President Trump’s recent tax giveaways.   He and the GOP Congress cut the corporate tax rate from 35 percent to 21 percent.  Congress could fund the FEHB option by resetting the corporate rate at 30 percent. That’s a deal that no Democrat (and some Republicans) can reasonably resist.