1 THE COMMONWEALTH FUND The Building Blocks of

1 THE COMMONWEALTH FUND The Building Blocks of Health Reform: Achieving Universal Coverage and Health System Savings Cathy Schoen Senior Vice President, The Commonwealth Fund Alliance for Health Reform June 6, 2008

Key Findings • Under Building Blocks approach, 44 million people would gain coverage out of an estimated 48 million uninsured in 2008 • National Insurance Connector would offer new health insurance choices to individuals and small businesses for 30 percent less than what employers currently pay • New choices improve coverage or reduce premiums for 49 million currently insured people • Building Blocks would cause minimal disruption for people satisfied with their current coverage; any decisions to switch to the new coverage would be voluntary • The plan would result in only a marginal increase in total national health spending. • Coupling insurance with broad reforms - payment reforms, HIT, evidence-based medicine and public health -- could result in health system savings of $1. 6 trillion over 10 years. 2

Key Elements of the Building Blocks • New national insurance “connector” – Offer individual and small businesses a choice of private plans or a Medicare-Extra plan – Medicare-Extra would be nation-wide, self-insured with low administrative costs • Insurance market reform: premiums would not vary by health status • Tax credits to make sure premiums are affordable • Expansion of Medicaid/SCHIP to 150% of poverty for all adults and children • Require everyone to have insurance – automatic enrollment • Employer provide or contribute in insurance fund • Medicare: buy-in age 60 or older, , eliminate 2 -year wait for disabled, Medicare-Extra benefit option 3

Building Blocks for Automatic and Affordable Health Insurance For All 4 New Coverage for 44 Million Uninsured in 2008 11 m Employer Group Coverage TOTAL = 142 m 7 m 22 m National Insurance Connector TOTAL = 60 m 38 m 10 m Medicaid/ SCHIP TOTAL = 42 m 2 m 1 m Medicare TOTAL = 43 m 2 m Improved or More Affordable Coverage for 49 Million Insured Source: Based on analysis in C. Schoen, K. Davis, and S. R. Collins, "Building Blocks for Reform: Achieving Universal Coverage With Private and Public Group Health Insurance, " Health Affairs 27, no. 3 (2008): 646 -657 from Lewin Group modeling estimates.

Distribution of People by Primary Source of Coverage Under Current Law and Building Blocks Framework, 2008 Current Law (millions) Uninsured 48. 3 (16%) Other 13. 5 (4%) Medicaid/ SCHIP 37. 8 (13%) Medicare 40. 3 (14%) Employer 157. 9 (53%) 5 Building Blocks (millions) Other 7. 3 (2%) Medicaid/ SCHIP 42. 1 (14%) Uninsured 3. 7 (1%) Employer 141. 5 (48%) Medicare 43 (16%) New National Connector 60. 3 (20%) Total population = 297. 8 million Source: Based on analysis in C. Schoen, K. Davis, and S. R. Collins, "Building Blocks for Reform: Achieving Universal Coverage With Private and Public Group Health Insurance, " Health Affairs 27, no. 3 (2008): 646 -657 from Lewin Group modeling estimates.

Cumulative Impact on National Health Expenditures (NHE) of Building Blocks Approach Plus Selected Health System Reform Options Savings to NHE Dollars in billions Note: Selected individual options include improved information, payment reform, and public health. Source: Schoen et al. Bending the Curve: Options for Achieving Savings and Improving Value in U. S. Health Spending, The Commonwealth Fund, December 2007. 6

Savings Can Offset Federal Costs of Insurance For All: Federal Spending Under Two Scenarios Dollars in billions * Selected options include improved information, payment reform, and public health. Data: Lewin Group estimates of combination options compared with projected federal spending under current policy. . Source: Schoen et al. Bending the Curve: Options for Achieving Savings and Improving Value in U. S. Health Spending, The Commonwealth Fund, December 2007. 7

Total National Health Expenditures, 2008– 2017 Projected and Various Scenarios Dollars in trillions *Selected individual options include improved information, payment reform, and public health. Source: Schoen et al. Bending the Curve: Options for Achieving Savings and Improving Value in U. S. Health Spending, The Commonwealth Fund, December 2007. 8

Building Blocks for Insurance and Health System Reform: Access, Quality and Costs 9 • Insurance foundation essential: connector with public and private options offers base for more integrated, efficient coverage • Potential for positive competitive dynamic • Coupled with system reforms could achieve savings and value – Payment reform – Information systems – Population health • Important to start now and build consensus with focus on national gain. – Time to set up. Savings accumulate. THE COMMONWEALTH FUND

10 References • C. Schoen, K. Davis. S. Collins, “Building Blocks for Reform: Achieving Universal Coverage with Private and Public Group Health Insurance, ” Health Affairs, May/June 2008. • K. Davis, C. Schoen, S. Collins, The Building Blocks of Health Reform: Achieving Universal Coverage and Health System Savings, The Commonwealth Fund, May 2008 • Schoen, Guterman, Shih, et al. , Bending the Curve: Options for Achieving Savings and Improving Value in U. S. Health Spending, Commonwealth Fund, December 2007 Reports Available at www. commonwealthfund. org THE COMMONWEALTH FUND