CBO presents options for covering the uninsured

In two recent reports, the Congressional Budget Office (CBO) took up the complex topic of the uninsured in the United States. The first report breaks down the population into meaningful subcategories; the second outlines what it will take to reduce their ranks.

CBO is one of the premier analytic agencies in the federal orbit. It is part of the legislative branch and does not report to the president. The agency is trusted by both parties in Congress in part because it does not take sides in policy debates; it offers analysis and data, not recommendations.

 

 

While its primary responsibility is to provide nonpartisan economic and budget projections, CBO also issues in-depth analyses of complex areas of public policy. Its latest reports on the uninsured are the most recent in a long series of useful examinations of difficult problems in U.S. health care policy.

In 2019, 12 percent of the nonelderly population — or about 30 million people — went without health insurance (Medicare provides near universal coverage for the population age 65 and older). According to CBO, a large segment of the uninsured was eligible but not enrolled in subsidized coverage.

  • 5.1 million people were eligible for either Medicaid or the Children’s Health Insurance Program (CHIP); coverage under these programs is essentially free for most participants, although some cost-sharing is required in certain states.
  • 5.5 million people were eligible for subsidized coverage offered through the exchanges created by the Affordable Care Act (ACA). The ACA caps premiums for eligible enrollees based on their annual incomes.
  • 9.4 million people were eligible for a plan offered through their employers. Federal tax law confers a subsidy on these plans, but, for the most part, workers still must pay premiums to enroll in them.

These three subgroups comprise two-thirds of the total uninsured population. Put another way, 20 million of the 30 million people designated as uninsured already are eligible for enrollment into health insurance, although the premiums they must pay may constitute a financial barrier in some cases.

The rest of the insured can be separated into three additional subcategories:

  • 4.0 million people are uninsured because they are residing in the U.S. without proper legal status; as such, they are ineligible for subsidized coverage.
  • 2.6 million people are ineligible for employer coverage but have incomes too high to qualify for subsidized premiums through the ACA exchanges; they could enroll in plans offered in the nongroup market but would be required to pay the full premiums themselves.
  • Finally, there are 3.2 million people who have incomes below the federal poverty line and live in states that did not expand Medicaid as allowed by the ACA. This group falls into a “coverage gap” in current law; their incomes are too low to qualify for subsidized premiums in the ACA exchanges and yet too high to qualify for Medicaid. The first priority of any future effort to cover the uninsured should be to ensure this population can enroll in either Medicaid or another alternative that requires no premium payment.

CBO’s second report notes that the U.S. could move closer to universal coverage with a single-payer reform. U.S. citizens and other legal residents could be enrolled in the plan at birth, or when re-entering the country after living abroad. Several other countries have adopted such an approach and achieved high levels of coverage. A single-payer reform would have other implications, however; the government likely would assume greater control over how hospitals and physicians are paid when providing care. Further, private insurance may be curtailed or eliminated.

Short of single-payer, CBO notes that it may be possible to achieve higher levels of insurance enrollment by creating a default plan for the uninsured. Instead of compelling citizens and legal residents to purchase a plan through an individual mandate, the federal government could create or coordinate a default plan into which the uninsured would be automatically enrolled.

Creating a default insurance option for the uninsured would be complex administratively. It likely would involve using the federal tax system to both identify the uninsured and to collect premiums to pay for its costs. Default coverage could utilize existing private plans or rely on a new publicly-run plan with government-determined rates for paying providers. Congress also may need to establish rules for either restricting, or facilitating, migration from employer coverage into the default option.

A major motivation for the ACA was expansion of insurance enrollment in the U.S. The law reduced the size of the uninsured population but did not solve the problem entirely, which is one reason that calls for Medicare for All have intensified in recent years.

CBO’s new reports explain why, ten years after the ACA was adopted, 30 million people remain uninsured. They also identify the tradeoffs involved in making further progress. Creating a universal, single-payer plan is certainly one option for universal coverage. But it is not the only option. As CBO’s analyses make clear, there are other ways to cover the uninsured that would entail less disruption for everyone else.

James C. Capretta is a columnist for State of Reform and holds the Milton Friedman Chair at the American Enterprise Institute.