What’s Covered under Different Public Health Care Plan Proposals

One of the most common questions about public health plans and the policy proposals that shape them is: “What is in it for me?”

This makes perfect sense: enrollees want to know whether their health plan covers a particular service, as well as how much they owe when the service is used (that owed remainder is called “cost sharing”). Covered benefits and cost sharing affect people’s willingness to get needed care, especially when that care’s costs could wipe out their savings. As such, a plan’s coverage parameters can increase or decrease the use of particular health care services. For example, covering effective preventive services with no cost sharing has contributed to increased early detection of breast cancer. And some states have banned coverage for abortion services to decrease their use. The level of covered benefits and cost sharing affects financing as well. It is reflected in what enrollees and employers pay in monthly premiums and what the government pays when it subsidizes health coverage. For these reasons, all Americans’ health benefits and cost sharing are touched by federal and state policy (see Table 1).

Table 1

This commentary examines the covered benefits and cost sharing policies in public health plan proposals, digging into this one of several points of difference across such proposals.¹ In particular, comparisons are made between: Medicare for All (S. 1804) which largely replaces private coverage; Medicare Part E (S. 2708, H.R. 6117) which gives people not eligible for Medicare or Medicaid access to a public plan option; the Medicaid option (S. 2001, H.R. 4129) with provides a similar eligibility group a Medicaid-based plan; Medicare X (S. 1970, H.R. 4094) which targets people in the individual and small group markets starting in underserved areas; and the Medicare buy-in for people ages fifty to sixty-four (S. 1742, H.R. 3748).² As described below, except for Medicare for All, these proposals adopt the Affordable Care Act (ACA’s) essential health benefits, Medicare’s benefits, or the best of both. With the same exception, they build on the ACA’s cost sharing policies. This reflects their aim to fit new plans into the existing array of health coverage options. This incorporation of the ACA also avoids the perils of deciding anew on what’s to be covered: a policymaker’s affirmative decision to not require coverage of a particular service or drug would likely be labeled as “rationing” by the people who need it. That said, these defined benefits and cost sharing rules differ sharply from conservatives’ approach to the issue, which would delegate benefits policy to states, or remove such standards altogether.

Benefits

The boundaries of benefits covered by health plans has changed over time. In the 1950s and 1960s, health plans covered “major medical” benefits, such as hospitalization and physician and laboratory services—but little else. Today, the scope of health plans is broad, frequently including services not typically considered health care, such as exercise programs designed to tackle the “social determinants of health.” Sometimes, benefit trends are issue-specific, such as the recent coverage of medication-assisted treatment for people with opioid addiction. Benefit exclusions, as well as inclusions, also reflect shifting medical knowledge and public priorities about the relative benefits and costs of particular services, drugs, or devices. For example, coverage shifted from institutions to communities for mental health care in the 1970s out of a concern for quality of care and human rights. Because this shift may have gone too far, coverage policy is changing: nearly half of states have or are seeking Medicaid waivers to cover institutional care for adults with certain mental health problems. Covered benefits also tend to exclude items with relatively low and regular costs, such as over-the-counter medicines and contact lenses.

Public policymakers have long discussed how to determine what should or should not be covered by health insurance, and which policy tools are the most effective in implementing those determinations. States, which have the primary role in regulating fully insured health plans, have passed hundreds of “benefit mandates” that range from coverage of Lyme’s disease to infertility treatment. “Parity” laws require private insurers to provide equal coverage of benefits (and cost sharing) for mental health and substance use disorders as they do for other conditions. Benefits covered by programs like Medicare and Medicaid are set publicly: they tend to reflect enrollees’ health needs. Medicare, which covers 94 percent of seniors, pays for home health and hospice care, for example. Medicaid, which, along with the Children’s Health Insurance Program (CHIP), covers 42 percent of children, provides services ranging from vaccinations to intense support services for children with complex health needs through its Early and Periodic Screening, Diagnosis, and Treatment (EPSDT) benefit.

Covered benefits also change with the times. In part these changes have come in response to fluctuations in the coverage offered in the private sector. For instance, today, Medicare has separate hospital (Part A) and outpatient (Part B) coverage, which were the norm in the 1960s Blue Cross and Blue Shield plans. Medicare also has limits on “amount, duration, and scope,” such as its coverage of a limited number of hospital days per year. The ACA prohibited similar arbitrary constraints—annual and lifetime limits—for all private health insurance plans. To prevent the ossification of covered benefits, policymakers have also built in automatic updates. CHIP and the ACA’s essential health benefits, for example, align the scope of their covered benefits to “benchmarks,” or private health plans that are modified regularly. Further revisions come from the linkage between the ACA’s preventive services coverage and the periodic recommendations and updates issued by the U.S. Preventive Services Task Force. Political and social trends matter as well. Concerns about the ACA covering “death panels” (Medicare payment for end-of-life counseling) nearly derailed the legislation in 2009, while a similar policy was implemented with limited drama in 2016. Controversy over coverage of abortion, however, persists.

Most proposals to offer a public plan build off of existing ACA or Medicare benefits (Table 2). Medicare X, which is effectively a public plan offered on the same terms as private plans in the Health Insurance Marketplaces, would offer the ACA’s essential health benefits. Similarly, the Medicaid buy-in would extend to its enrollees the same Medicaid benefits as in the ACA’s expansion, which are benchmarked to the ACA’s essential health benefits. The proposal to allow people to gain Medicare coverage early, starting at age fifty or fifty-five, would adopt Medicare benefits unchanged. Medicare Part E would include the “best of” ACA benefits and Medicare benefits, along with reproductive health services including abortion. Medicare for All, which would replace virtually all other coverage, would have ten broad categories of benefits that roughly track the ten essential health benefits in the ACA, but would be more expansive (for example, covering oral health and visions services for all people, not just children).

Table 2

Cost Sharing

Typically, insured people pay some dollar amount to a health care provider when they use a service, an arrangement called cost sharing. These payments come in several forms: an annual deductible (amount spent before coverage begins), coinsurance (a percent of what the provider is paid), or co-pay (a nominal dollar amount, such as $10 for a primary care visit). Cost sharing is deployed to disincentivize unnecessary or excessive use of health care, promote price shopping for services, or steer patients toward higher value care (e.g., setting lower copays for a more effective drugs). It is also used by health plans to secure discounted prices from providers. Cost sharing and premiums are inextricably related: the higher the cost sharing, the lower the premium. Who pays, however, is not the same: high cost sharing is born by people with high health care needs, whereas high premiums are spread out across all enrollees.

Cost sharing and premiums are inextricably related: the higher the cost sharing, the lower the premium. Who pays, however, is not the same.

An aggregate measure of the amount of cost sharing for a plan is its actuarial value: the percent of the estimated average cost for a set of benefits paid for by the plan. In 2011, Medicare’s actuarial value was 80 percent, while a typical large employer plans was 86 percent. The ACA has standardized actuarial values in the individual and small group market. All non-grandfathered plans must offer cost sharing in “metal tiers,” with actuarial values of 60 percent (“bronze” plans) 70 percent (“silver” plans), 80 percent (“gold” plans), or 90 percent (“platinum” plans). The law also sets “minimum value coverage” as having an actuarial value of 60 percent, applicable to employer plans with fifty or more workers.

Beyond the overall level of cost sharing, policymakers have set specific cost sharing amounts per service or for overall covered benefits. The ACA requires non-grandfathered private plans to limit annual out-of-pocket costs for covered benefits to $7,350 for an individual plan in 2018. It requires the same plans to cover certain evidence-based preventive services with no cost sharing and to limit cost sharing for emergency care provided outside of the plan’s network. Medicare fully specifies cost sharing for its services, listing annually the deductibles, copays, and coinsurance for each major service category. Sometimes these specifications make less health policy sense than fiscal sense: Medicare’s drug benefit (also called Part D) in its first year included a $250 deductible, 25 percent coinsurance, and 5 percent coinsurance above $5,100 in total drug costs—but due to concerns about federal costs, offered no coverage between $2,250 and $5,100 in drug costs (the so-called the “donut hole”). The ACA expanded Medicare coverage to close the donut hole.

As with their choices on covered benefits, the authors of the public plan proposals tend to stick to cost sharing policies in existing programs. Older adults in the Medicare buy-in proposal would pay the same cost sharing for services as other Medicare enrollees. Medicare X would offer silver and gold plans, like other Marketplace plans, with the secretary of health and human services setting services’ specific cost sharing amounts within these actuarial values. Similarly, Medicare Part E legislation does not specify cost sharing amounts per service, but the plan’s overall level of cost sharing be equivalent to that of a gold plan (that is, 80 percent actuarial value). Separate from its creation of Part E, this legislation would limit annual out-of-pocket spending for Medicare enrollees. The Medicaid option would allow states to set cost sharing for services. Under Medicare for All, in contrast, there would be no cost sharing except for up to $200 in annual drug copays and potential cost sharing in Medicaid’s long-term care benefit.

Filling in the Gaps

Many health plans enrollees have second sources of coverage to fill in benefit gaps or reduce high out-of-pocket spending. About 86 percent of people with Medicare have “Medigap,” employer coverage, or some other form of secondary coverage. This supplemental coverage pays for both extra benefits (e.g., dental care) and cost sharing. Medicare’s drug benefit itself is offered as a separate plan (unless integrated into a Medicare Advantage plan). Lacking supplemental coverage puts seniors at risk of reduced access to care or excessive out-of-pocket costs: for example, out-of-pocket costs for cancer total nearly a quarter of the income of seniors covered only by Medicare. Additionally, overall, employers have moved toward high-deductible health plans, often offering health savings accounts and health reimbursement arrangements that employees may use to pay for this high cost sharing. Congress has created tax breaks for such accounts, arguing that they foster cost consciousness. However, research suggests such shopping is the exception rather than the rule. Moreover, these accounts favor high-income people who receive a greater tax break for such accounts than do low-income people, and who would spend their own money on services anyway. Having multiple health plans or programs paying for the same person’s health care also complicates coordination of care and pits the different sources of coverage against each other: a supplemental plan may not want to cover an expensive service that results in savings to the primary plan.

Having multiple health plans or programs paying for the same person’s health care also complicates coordination of care and pits the different sources of coverage against each other.

Some public programs also provide extra coverage for low-income people. Medicaid covers a wide range of benefits with little to no cost sharing because most of its enrollees are poor or disabled: for them, an uncovered service or high copay is tantamount to a denial of care. Medicaid from its start has wrapped around Medicare. It pays for long-term care services (Medicare’s benefit is limited) and Medicare premiums and cost sharing for low-income “dual eligible” enrollees, among others. Medicaid also provides “wrap-around coverage” for private insurance in certain circumstances. When creating the Medicare drug benefit, Congress decided to shift Medicaid’s role for low-income seniors to Medicare, integrating it into the subsidies to prescription drug plans that run the drug program. The ACA, similarly, requires insurers to reduce cost sharing for the subset of their Marketplace enrollees with low income (from 100 to 250 percent of poverty), called “cost sharing reductions.” However, because there are limits to the extent to which Marketplace plans could be bolstered, Congress chose to build on Medicaid rather than the Marketplace for coverage for the poorest Americans.

Only two of the public plan proposals address supplemental coverage. The Medicare buy-in proposal would allow older adults to access Part D, Medicare Advantage, and Medigap plans. And the Medicare for All proposal would direct Medicaid to cover long-term services and supports. Additionally, it would permit supplemental coverage for uncovered services, allow states to fund extra benefits, and support continued operation of the Veterans Administration systems and the Indian Health Service.

Similar to benefits, cost sharing for low-income enrollees would mirror what other enrollees in Marketplace plans receive in the proposals that would create Medicare X, Medicare E, the Medicare buy-in, and the Medicaid option. The House version of the Medicare buy-in bill and the Medicare Part E bill would separately increase the generosity of the Marketplaces’ cost sharing reductions, which would apply to these public plan options as well as private plan options. The Medicaid buy-in proposal would also increase federal funding for states to take the Medicaid expansion—the only proposal that explicitly addresses the Medicaid “gap.” The Medicare for All proposal would not set different cost sharing for low-income enrollees, since it largely lacks cost sharing for any U.S. resident.

Discussion

Policy related to health benefits and cost sharing is extensive and important for ensuring access to care and financial security. Most progressive proposals to create some type of public plan propose including existing health benefits and cost sharing policies from the ACA and Medicare. This approach would facilitate slotting these options into the current coverage system. The general adherence to these norms also comports with the politics of their proponents, which includes defending the ACA. However, the ACA’s benefit and cost sharing policies remain controversial. For example, its preventive benefits’ inclusion of contraceptive services has yielded clashes between religious and public health groups, with two Supreme Court decisions to date. Republicans have also opposed the ACA’s essential health benefits for requiring all people to share in the costs of benefits that some will never use. Some argue, for instance, that men should not have to buy coverage that includes maternity benefits. Yet having only women’s coverage include maternity benefits would make that coverage unaffordable, as was the case before the ACA. Nonetheless, the 2017 Republican bills to repeal and replace the ACA devolved benefit standards to states. And the Trump administration has expanded access to short-term plans which are not subject to these benefits requirements—or the law’s maximum out-of-pocket limit, actuarial value standards, and other consumer protections. Should benefit and cost sharing standards erode in the coming years, these components of the public plan proposals may increase in importance, especially among the people with health problems that need them most.

1. This commentary does not explore other features of benefit design such as provider networks and utilization management, which also affect premiums, access to services, and use of services.
2. A proposal to create a public plan for the individual and small group market (CHOICE Act, S. 194, H.R. 635) has the same benefit and cost sharing as Medicare X.