Should health care benefits be limited or comprehensive?

The Washington, DC-based Economic and Social Research Institute’s report on possible approaches to expanding health coverage for the uninsured notes that one of the contentious issues is defining the benefit package to be provided. The authors say that some proponents of coverage expansion contend that subsidies should finance relatively comprehensive benefits, comparable to traditional employer-sponsored health insurance, while others advocate more limited coverage and higher cost sharing. Arguments for each side are shown. The ESRI report says the tax credit approach it suggests would provide affordable access to both types of coverage.

Limited benefits and high cost sharing

  • Controls costs by increasing consumer incentives to limit use of services.
  • Health coverage more closely resembles true insurance, which protects against large and unforeseeable losses.
  • Increases the number of uninsured who can be helped with a fixed amount of funding by lowering per-capita costs of coverage.
  • Coverage of catastrophic costs addresses the worst financial consequences of uninsurance.
  • Reduces employee incentives to leave employer- sponsored coverage for subsidies.
  • High cost sharing tries to control health spending without HMO-style limits on provider networks and covered services.
  • It makes sense to begin with basic benefits, adding more coverage if revenue grows or individuals are willing to pay more.

Comprehensive benefits and low cost sharing

  • Achieves medical advantages of coverage by encouraging early detection and treatment of illness.
  • High cost sharing causes even middle-income consumers to avoid both necessary and unnecessary care.
  • High cost sharing causes low-income consumers, particularly adults with chronic illnesses and children, to defer care, sometimes suffering serious health harm.
  • When offered limited benefit plans, very few employers or individuals have enrolled.
  • Individuals buying uncovered care can pay inflated charges that exceed prices paid by insurers, which have the trained staff and leverage to extract concessions from providers.
  • Unlike individuals buying uncovered care, plans can monitor providers’ quality of care using data about services to multiple patients and can use payment arrangements to reward quality care.