Key Issues in Analyzing Major Health Insurance Proposals

Much of the health care provided in the United States confers tremendous benefits, extending and improving lives. But the high and rising costs for health care in this country impose an increasing burden on individuals, businesses, states, and the federal government, and a substantial number of people may have trouble paying for that care because they do not have health insurance. Those issues are related: Rising costs for health care make health insurance policies more expensive and thus more difficult to afford. Lack of insurance can limit access to care, but having insurance can increase spending by encouraging the use of services that provide limited health benefits. More generally, despite spending more per capita than other countries, the United States lags behind lower-spending countries on several metrics, including life expectancy and infant mortality. Indeed, evidence suggests that a substantial share of spending on health care contributes little if anything to the overall health of the nation, but finding ways to reduce such spending without also affecting services that improve health will be difficult.

Main Conclusions

Concerns about the number of people who are uninsured and about the rising costs of health insurance and health care have given rise to proposals that would substantially modify the U.S. health insurance system. The complexities of the health insurance and health care systems pose a major challenge for the design of such proposals and inevitably raise questions about their likely impact. To assist the Congress in its upcoming deliberations, this report seeks to provide useful background information as well as insights into how the Congressional Budget Office (CBO) would estimate the effects of such proposals on the federal budget, the number of people who have health insurance coverage, and spending for health care. Some of its main conclusions are as follows:

• The rising costs of health care and health insurance pose a serious threat to the future fiscal condition of the United States. Under current policies, CBO projects that federal spending on Medicare and Medicaid will increase from about 4 percent of gross domestic product (GDP) in 2009 to nearly 6 percent in 2019 and 12 percent by 2050. Most of that increase will result from growth in per capita costs rather than from the aging of the population.
• Without changes in policy, a substantial and growing number of nonelderly people (those younger than 65) are likely to be without health insurance. CBO estimates that the average number of nonelderly people who are uninsured will rise from at least 45 million in 2009 to about 54 million in 2019.
• Those problems cannot be solved without making major changes in the financing or provision of health insurance and health care. In considering such changes, policymakers face difficult trade-offs between the objectives of expanding insurance coverage and controlling both federal and total costs for health care.
• By themselves, premium subsidies or mandates to obtain health insurance would not achieve universal coverage. Proposals could, however, achieve near-universal coverage using a combination of approaches.
  • One option would establish an enforceable mandate for individuals to obtain insurance and would provide subsidies for lower-income households to help them pay their required premiums.
  • Another option, under a voluntary system, would provide subsidies that cover a very large share of the expected costs of insurance for every enrollee and establish a process to facilitate enrollment (as is done in Medicare).
  Other policies could achieve substantial reductions in the number of people who are uninsured at a lower budgetary cost.
• Serious concerns exist about the efficiency of the health care system, but no simple solutions are available to reduce the level or control the growth of health care costs. Steps to restructure the insurance market and to encourage people to purchase less extensive coverage could reduce the use of treatments that provide minimal benefits, but enrollees would face higher cost sharing or tighter management of their care.
• Other approaches—such as the wider adoption of health information technology or greater use of preventive medical care—could improve people's health but would probably generate either modest reductions in the overall costs of health care or increases in such spending within a 10-year budgetary time frame.
• In many cases, the current health care system does not give doctors, hospitals, and other providers of health care incentives to control costs. Significantly reducing the level or slowing the growth of health care spending would require substantial changes in those incentives.