Good Times, Declining Coverage

1
Good Times, Declining Coverage

• Explaining the paradox
• Michael Chernew
• University of Michigan

2
Coverage Trends
Source 1987-2000 Paul Fronstin. Sources of
Health Insurance and Characteristics of the
Uninsured Analysis of the March 2001 Current
Population Survey. EBRI Dec. 2001. Estimates for
2001 based on data in Paul Fronstin EBRI notes
23(11) Nov. 2002.
3
Nonelderly Coverage Rates for 124 MSAsLate 1980s
vs. Late 1990s
Rates Fluctuate Geographically
Data March 1989-91 and March 1998-00 CPS
4
Describing Trends

• By source
• Public
• Employer
• Individual Purchase
• By demographic category
• Income
• Citizenship Status
• By employer category
• Industry
• Firm Size
• By behavioral traits
• Firm offers
• Employee take-up

5
Research Can Inform Policy by

• Explaining the Past
• Identify the causes
• Quantify the size of the relationships
• Predicting the future
• Behavioral relationships key

6
Explanations for Falling Coverage

• Industry and demographic changes
• Expansion was not as vigorous in some demographic
  groups
• Working spouses more common
• Tax code changes
• Rising premiums

7
Premium Effect not Obvious

• Underlying negative relationship between demand
  and premiums
• However, demand for financial protection
  increases with rise in health care costs
• Ex Pharmaceuticals

8
Research Findings

• Rising premiums were the primary explanation of
  falling coverage
• Explain about 50 of the drop in any coverage
• Effect on private, not public, coverage
• Expanded public coverage increases overall
  coverage rate
• Reduces private coverage
• Higher tax rates encourage private coverage
• More working spouses discourage private coverage

9
Implications

• Cost to employees is crucial
• Total costs are a fundamental driver
• Limit cost growth
• Deal with consequences
• Short term vs long term solutions
• Unintended consequences
• Tax rates
• Public coverage policies