Saturday, October 6, 2018

Universal Catastrophic Coverage FAQs


Please feel free to submit your own questions to this expandable list of Frequently Asked Questions about Universal Catastrophic Healthcare Coverage (UCC). I will do my best to answer them.

What is Universal Catastrophic Coverage? Universal Catastrophic Coverage, or UCC, is a health care insurance plan that uses income-based deductibles to ensure that everyone pays their fair share of health care costs, but not more than their fair share. Under UCC, the poorest families would get full coverage without deductibles, middle-class families would face deductibles similar to those they pay under the ACA, and high-income families would be responsible for all but truly catastrophic medical expenses.

How would deductibles be determined under UCC? The exact formula for setting UCC deductibles would be determined when legislation was drafted. The formula would begin with a low income threshold below which the deductible is zero. For for the sake of discussion, we can use official federal poverty guidelines, which specify a threshold of about $25,000 for a family of four, as of 2018. For families below the threshold, the deductible is zero, so that all health care costs are covered in full. For other families, the deductible is set as a percentage of eligible income, that is, total income minus the low-income threshold. For example, if the deductible rate is 10 percent of eligible income, a family of four with $75,000 annual income would face a deductible of $5,000; a family with $125,000 income would have a deductible of $10,000, and a family with $1 million of annual income would have a deductible of $97,500. The exact formula would be set by Congress and could differ from these values. (For more on the formula for deductibles, see Could We Afford Catastrophic Health Coverage?)

How would household income be calculated for determining deductibles? The short answer is that deductibles would be based on income as reported to the IRS on an individual’s or household's income tax return. However, many technicalities would have to be determined in the process of drafting legislation. Legislation would have to balance ease of reporting against fairness. Keep in mind that a great many people would not use their entire deductible in any given year, so the issues discussed below would not directly affect them. The following are examples some of the technicalities that would need to be addressed by legislation.

Looking backward. The simplest method, which could be the default method for people with stable or gradually increasing incomes, would be to base this year’s deductible on last year’s income as reported to the IRS. This would require a minimum of paperwork and would mean that people would know their deductible with certainty for the coming year.

Annual or monthly? Since deductibles would be set on an annual basis, annual income would be used, rather than monthly income (as is required in many cases for Medicaid).

Variable income. Some people’s income varies greatly from year to year. It would make sense to allow those people to use income averaging over a period of several years, as the IRS currently permits for farmers and fishers. Income averaging would not be compulsory. People would have to file additional paperwork to qualify.

Sudden decreases in income. A sudden decrease in income, such as loss of a job, inability to work due to poor health, death of a spouse, or divorce, could leave a person facing a high deductible in the first year of low income. Legislation could include a provision for forward-looking income estimates in cases of hardship. Applying for such a provision would require additional paperwork and might be subject to repayment if higher income resumed, somewhat like the system of advance income estimation now used in calculating premium subsidies for policies purchased on ACA exchanges.

Churning. The current system of Medicaid, ACA exchanges, employer-sponsored insurance, and other types of insurance creates a lot of “churning,” as changes in income, employment status, or family status force people to lose coverage or move from one source of coverage to another. There would be no churning under UCC, since everyone would be covered by the same program all the time regardless of income, even though deductibles could vary from year to year. There would be no “cliffs” where coverage was lost. For example, people moving from below poverty level (zero deductibles) to slightly above poverty level would retain continuous coverage, subject to very small deductibles.

What types of income? Legislation would have to specify the exact income definition. Adjusted gross income as reported to the IRS would be an obvious possibility, but some form of modified adjusted gross income could be used instead, something like the definition now used for Medicaid.

Savings. Most people with middle and higher incomes could be expected to deal with variations in annual income through savings, in the form of either ordinary savings or tax-advantaged health savings accounts. 
Would people have to pay out of pocket for preventive care? No. A standardized package of cost-effective preventive care would be exempt from deductibles for everyone, regardless of income. (For more on preventive care under UCC, see The Role of Prevention in Health Care Reform.)
Would UCC require co-pays? In its simplest form, UCC would not require any copays. In principle, however, it would be possible to add copays over some range of expenses. Adding copays would make it possible to raise the low-income threshold or to lower deductibles without increasing the overall cost of the program. See Could We Afford Catastrophic Health Coverage? for a further discussion of copays in a UCC system.
Would UCC require payment of a premium? In its simplest form, UCC would not require a premium. In principle, however, it would be possible to add an income-dependent premium for middle- and upper-income beneficiaries. Adding premiums would make it possible to raise the low-income threshold or to lower deductibles without increasing the overall cost of the program. See Could We Afford Catastrophic Health Coveragefor a further discussion of premiums in a UCC system.
Who would issue UCC policies? Congress would have to decide who would issue UCC policies. The Centers for Medicare and Medicaid Services would be one possibility. Private companies operating under rules similar to those for Medicare Advantage would be another possibility.
How does UCC differ from Bernie Sanders Medicare for All plan? Both Medicare for All and UCC would cover everyone, and both plans would guarantee basic health services at no cost to people with low incomes. The principal difference between the two approaches is the way they would ensure that everyone pays their fair share of health care costs. Sanders’ plan would raise taxes on middle- and upper income taxpayers and use the revenue to provide health care without cost at the point of service to everyone. UCC would use income-based deductibles to ensure that middle- and upper-income households paid an affordable share of their own care. The two approaches would have similar impacts on the overall distribution of income when both taxes and services provided are taken into account. (See this post for further comparison of UCC with Sanders' plan.)
Would UCC require new taxes? Because middle- and upper-income consumers would pay for most of their own routine health care services, up to the limit of their deductibles, it would be possible to implement UCC without new taxes. If the low-income threshold and deductibles of a UCC plan were set properly and appropriate cost-saving measures were implemented, the funds that the government currently spends of health care, including the cost of tax subsidies for employer-provided health insurance, would be sufficient to cover costs of the program. . (For more on taxes and financing, see Could We Afford Catastrophic Health Coverage?)


No comments:

Post a Comment