Coverage in the U.S.

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How to best provide health insurance coverage in the United States is a complicated and controversial public policy issue, often fueled by deep philosophical and political differences. Regardless of political ideology, policymakers and advocates agree that the escalating cost of health care is a major contributor to the high levels of uninsurance in the United States. Among the many stakeholders that play a major role in the issue of health insurance coverage, states are one of the most critical. Not only do states regulate their own insurance markets, they also are providers and purchasers (e.g., through Medicaid and also by providing health insurance coverage to state employees as a large employer). Consequently, states have always been a part of the coverage debate as they struggle to maintain their public programs and effectively serve as the laboratory for new coverage models.

States & Public Insurance
Medicaid is a jointly funded federal-state program that provides health insurance coverage to low-income individuals. To be eligible for Medicaid, individuals must both meet financial requirements and fall into certain eligibility categories (e.g., children, pregnant women, individuals with disabilities, elderly). Medicaid plays a critical role as a safety net for low-income populations. As people lose employment in times of economic downturn, incomes fall and health insurance is lost. Medicaid enrollment has grown by nearly one-third since the beginning of 2001, covering many people who would have otherwise been uninsured. Medicaid and SCHIP have been responsible for the falling rate of uninsurance among children over the last few years. However, these programs have been unable to stem the decline in coverage among adults due to limited state budgets and low eligibility levels in most states for adults. State Medicaid programs are adversely affected by the confluence of rising unemployment which increases the caseload, decreasing tax revenues during economic downturns, and health care costs that continue to increase several times faster than inflation. Medicaid spending in recent years has outpaced spending growth in other state programs and state tax revenue and no states have been spared from budget shortfalls. Medicaid spending grew 2.8 percent from 2004 to 2005. This is the lowest rate of growth in Medicaid spending since 1996 and for the first time since 1998 that state revenues on average grew faster than total Medicaid spending. This is lower than the growth in private insurance premiums, which grew by 7.7 percent during the same time period. Aggressive Medicaid cost-containment activities on the part of states have largely been credited for this lower rate of growth. However, some analysts have speculated that cost-containment activities, which often focus on reducing and freezing provider payments, have resulted in cost shifting to the private sector (i.e., providers increase charges to private insurers to compensate for lower payments from public programs). In addition to state cost containment mechanisms, the Deficit Reduction Act of 2005 (DRA) imposed mandatory identity and citizenship documentation requirements for Medicaid enrollees. The provision took effect in 2006 and many states anticipate it will reduce enrollment and increase administrative costs.

States & The Private Insurance Market
More than 80 percent of the uninsured are workers or members of families with at least one worker. Small firms are less likely to offer health insurance; therefore, states have focused on making the purchase of affordable insurance through the small group market a priority. In 2003, the National Institute for Health Care Management published The Uninsured: A Study of Health Plan Initiatives and Lessons Learned, which examined 13 private health plan initiatives designed to attract people without insurance. It found that health plans that were successful in reaching the uninsured developed products that were attractive (e.g., used innovative product design, flexible and reduced benefits, enhanced cost sharing) and affordable and marketed them aggressively. Although policymakers and advocates share the goal of improving the health status of the population, how exactly to do this is a significant challenge. The debate whether government should play a central role in providing health care, or whether that role is better left to the private insurance market, has raged for decades. Proposals to improve rates of coverage range from government-financed universal health care systems that would be available to all U.S. residents, to strategies designed to encourage businesses to offer (and individuals to sign up for) insurance in the private market. Others question whether employer-sponsored insurance is the vehicle by which coverage should be purchased at all. For example, some argue that the health care safety net should be broadened to improve and ensure access to care.