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4 Principles to Guide the Extension of Coverage The Committee believes the United States should not be bound by the limited successes and considerable difficulties encountered in past attempts to significantly extend health insurance coverage. The problems caused by uninsurance are too serious to be left unsolved. The overview of the Committee’s previous reports and findings clearly shows that uninsured people have poorer health and die prematurely, compared with their insured counterparts. Having an uninsured family member can destabilize the whole family financially and threaten its well-being. Communities and their health care providers are threatened, too, when faced with large numbers of residents who do not have the financial means to pay for the care they use or need but go without. Also, the economic costs to society are large. In Chapter 2 the Committee presents the key findings and evidence of its first five reports. That and Chapter 3, with its historical review of efforts to extend coverage and discussion of more recent federal and state efforts, provide the foundation for the principles in Chapter 4. The earlier chapters describe and analyze the evidence on uninsurance and previous attempts to reduce it. The principles in this chapter rely on that evidence without repeating it here. Clearly, many more than 43 million people experience periods without cov- erage. There is constant movement into and out of insurance that results from the current collection of insurance mechanisms and their lack of coordination. Any solution that brings coverage to those without insurance cannot simply plug the gaps in the current “non-system.” At a minimum, it must reform many aspects of current health finance and will, inevitably, touch on aspects of health care delivery as well. Optimally, reforms to increase coverage will improve both health insur- 110

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111 PRINCIPLES TO GUIDE THE EXTENSION OF COVERAGE ance mechanisms and health care delivery. The first five reports of the Committee point to the need for a coordinated system of coverage mechanisms. In this chapter, the Committee prescribes its vision for reform and a set of principles to guide efforts to expand coverage to those without health insurance that are derived from its work in this and its previous reports. Each principle relates to problems the Committee identified in the current non-system of financ- ing care and outlines key aspects or criteria for our approach to health insurance in the future. Taken together, the principles provide a standard against which options to expand coverage should be measured. The IOM standards require a conservative approach in assessing available evidence and using it as a basis for policy recommendations. Because this study has focused primarily on the effects of uninsurance, it does not have sufficient evi- dence to address all aspects of extending coverage and does not attempt to set specific criteria for all elements of financial access reform. For example, designing effective cost containment mechanisms is critical. Controlling costs would benefit efforts to expand coverage by making it more affordable. The Committee also recognizes the need for reform of the health care delivery system, as discussed in Chapter 1, but does not prescribe principles or criteria for all important changes. The key goals of health care are to promote better health and well-being among individuals and to reduce the burden of disease of the populace. Based on the evidence reviewed and documented in previous reports, we posit a vision of health insurance for the country that is essential for achieving these goals. VISION STATEMENT The Committee on the Consequences of Uninsurance envisions an approach to health insurance coverage that will promote better overall health for individuals, families, communities, and the nation by providing financial access for everyone to necessary, appropriate, and effective health services. Although insurance coverage is critical, it is not the only element of any plan to improve access to health care nationally. However, the independent and direct effect of health insurance coverage on access to health services has been docu- mented in the Committee’s previous reports. Insurance remains the key to open- ing the door to needed services. The Committee on the Consequences of Uninsurance has formulated five principles to guide the creation of an insurance system that will help achieve its vision. These principles are intended to: • consolidate all the Committee’s evidence, findings, and conclusions into clear, simple statements; • provide useful guidelines for policy makers and the public as they assess various proposals for extending health care coverage; and

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112 INSURING AMERICA’S HEALTH • describe the characteristics of a better insurance system toward which we should aim. The principles are based primarily on the Committee’s first five reports; some are supported by additional research presented in this report. The statement of each principle below is followed by a brief description and rationale. The first principle is the most important and basic. Each principle is a necessary component for reform. The remaining principles are not ranked by priority. The Committee recognizes that any particular strategy to achieve universal coverage will entail choices to balance among these principles and choices to balance goals even within a single principle. The principles are purposely presented at a general level because the balancing of choices and the specific operational definitions of the principles will be created through the political process. PRINCIPLES 1. Health care coverage should be universal. Coverage for individuals is important. The health, social, and economic costs borne by the uninsured, others living in the same communities, and the nation as a result of widespread uninsurance lead the Committee to conclude that everyone should be covered by health insurance. The Committee has documented the adverse impacts of being uninsured on the health and economic well-being of uninsured persons and their family mem- bers. Uninsured persons are less likely to get the timely and appropriate health care that they need. Compared with insured persons, the uninsured are sicker and die sooner. The Committee finds that the adverse health and financial effects of uninsurance on individuals and families can affect others in the communities in which they live, and that the financial burden of uninsurance is spread broadly, if unequally, across all American taxpayers. The quantifiable economic losses associ- ated with being uninsured are substantial. “Universal” means “everyone.” Everyone living in the United States should have health insurance. The Committee’s analysis of the extensive body of litera- ture concerning access to health services and health outcomes provides no evi- dence to support the notion that coverage should be limited based on citizenship or immigration status. There are several reasons why it is advantageous to have universal coverage include everyone in the community. Newcomers (immigrants) are substantially more likely to be uninsured than are U.S.-born citizens (Hoffman and Wang, 2003). Because newcomer (immigrant) populations are often concentrated in particular communities and geographic areas, their uninsured status can have a more severe impact on health service providers there, particularly on emergency departments, than might be expected from national averaged data (Associated Press, 2001; Taylor, 2001; Gribbin, 2002; MGT of America, 2002). Also, com-

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113 PRINCIPLES TO GUIDE THE EXTENSION OF COVERAGE munities with disproportionate levels of uninsurance have an added burden of disease and disability because uninsured people are likely to have poorer access to preventive care and worse health as a result. Vaccine-preventable and communi- cable conditions are of particular concern because they may affect many others regardless of insurance status if undetected and untreated (IOM, 2003a,c). At the family level, U.S-born children of newcomer parents may be eligible for coverage, but if their parents are ineligible, the children as well as the parents are less likely to use health care (IOM, 2002b). At the individual level, many newcomers are working, productive, taxpaying members of their communities. It is only equitable that they also participate in the universal coverage strategy. 2. Health care coverage should be continuous. There should be no breaks in insurance coverage or periods without coverage because even healthy people can experience injuries or other unexpected health events that necessitate the use of health services. In addition, continuity of cover- age promotes continuity of care, which improves quality (Weinick et al., 2000; Hargraves and Hadley, 2003). Having a regular provider of care, particularly for primary care and care of chronic conditions, is a generally recognized predictor of high-quality care and is also made more likely by continuous coverage. The Committee’s first three reports describe how easy it is to lose insurance coverage, as well as the frequency and negative effects of discontinuities in coverage for individuals and families. About 80 million people were without health insurance for at least a month during a recent two-year period (Short, 2001). Uninsured spells can lead to poorer health, greater risk of premature death, and exposure to significant financial risk. Employees and their families risk discontinuities because of a lack of effective portability of coverage when their job or work status or family relationships change. Much discontinuity in public coverage results from changes in personal circumstances as well as administrative difficulties related to enrollment and reenrollment. Some State Children’s Health Insurance Program (SCHIP) require- ments include having a prior period without coverage before becoming eligible to enroll. To achieve universal coverage, strategies to increase outreach and simplify enrollment and reenrollment will be necessary. 3. Health care coverage should be affordable to individuals and families. By “affordable,” the Committee means that no one should be expected to make contributions to their health care coverage that are so costly that they cannot pay for the other basic necessities of life or afford to access health services. Because patient cost sharing at the point of service can deter use, no one should face a level of cost sharing so high that it would interfere with obtaining timely, necessary health services (Newhouse and The Insurance Experiment Group, 1993; IOM, 2002b). Criteria for affordability must be linked to income. For example, Con- gress determined that families eligible for SCHIP should not have to pay more

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114 INSURING AMERICA’S HEALTH than 5 percent of their income on medical costs, including premiums, copayments, and deductibles (KCMU, 2002b). The Committee finds that the main reason most people are uninsured is that they perceive insurance to be unaffordable, regardless of whether the employer makes a contribution or insurance is available through the individual (nongroup) market. Uninsurance among families is strongly associated with relatively low income. Lower income families do not have much leeway in their family budgets to pay for insurance coverage and health services. Many experience hardships covering their food and housing costs, and low-wage workers are less likely to be offered health insurance on the job (IOM, 2001a, 2002b; Long, 2003). For ex- ample, without an employer’s contribution, a family insurance policy comparable to the average employment-based coverage would require an expenditure of roughly 25 percent of pretax family income for a family at 200 percent of the federal poverty level (approximately $36,800 annually for a family of four). Although some individuals and families with low incomes manage to pur- chase health insurance, the overwhelming majority would need a substantial em- ployer contribution, government subsidy, or tax incentive to purchase private insurance or would need access to a nearly free public program. As a matter of equity as well as affordability, people who are at risk of using or needing substantially more health care services than average should not have to bear the full burden of an extremely high out-of-pocket premium to cover those extra costs; the risks should be spread broadly. More than half the states have recognized this issue of equity and affordability and created high-risk pools as an alternative to community rating. The limited number of high-risk individuals in the pools and the level of premiums offered them in the individual insurance market indicate an affordability problem only partially ameliorated by the existing pools and more than 20 states lack even that mechanism (U.S. General Accounting Office, 1996; Achman and Chollet, 2001). 4. The health insurance strategy should be affordable and sustainable for society. There is no analytically derivable figure of what is affordable to society. While people in Finland, for example, might be happy and healthy with total health spending at 6.6 percent of gross domestic product, it does not mean that the 14 percent that the United States spends is too high or that more would be unaffordable. Affordability will be determined through the political process and economic decisions made by individuals, families, and employers, depending on the coverage approach. The total costs of the benefit packages, subsidies, and administrative structures needed to support the health insurance approach should be affordable to society as a whole. The sustainability of a given coverage strategy will depend, to a large extent, on the inflation rates for health care and health insurance and the ability to keep spending under control. During the past two years, high rates of increase in the cost of health insurance have contributed to employers shifting costs to employees,

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115 PRINCIPLES TO GUIDE THE EXTENSION OF COVERAGE employees dropping coverage that became too expensive, and states struggling to maintain enrollment, service, and payment levels in the face of rapidly increasing health budgets. A major reform to produce universal, continuous insurance cover- age will need mechanisms to control inflation and utilization. Sustainability also depends on a stable revenue source. The discussion of various federal and state expansions of coverage in Chapter 3 highlights the necessity of having sufficient and stable revenue to fund the expansion of coverage that can withstand economic downswings. This issue is a serious problem cur- rently in states such as Massachusetts, Tennessee, and Oregon, not just historically. With increasing pressures on state budgets, many states are proposing, and some are implementing cutbacks in eligibility and benefits. The revenue issue is beyond this Committee’s charge and further discussion of it is limited. The Committee has reported previously the range and substantial amount of spending related to uninsurance, particularly by the public sector, and the dangers posed to the health care system by instability in public and private funding streams. Financing for the national health insurance strategy should be sustainable eco- nomically and politically in order to avoid the risk of coverage gaps and cutbacks in benefits. Any new approach to health insurance should strive for cost effectiveness. To promote affordability and sustainability, the benefit package should encourage the use of cost-effective services and products through mechanisms such as variable patient cost-sharing and provider payment levels. Services proven ineffective should not be covered. Because of the costliness of health care and because all members of society can expect to benefit from health insurance coverage, all persons should contribute affordable amounts through taxes, copayments, deductibles and premiums. A new approach to health insurance should also strive for simplicity and administrative efficiency. In its previous reports, the Committee has found that the complexities of the current health insurance system make it difficult for people to use the system appropriately and obtain needed care. Some aspects of the current arrangements such as complex eligibility rules, underwriting, billing procedures, and regulatory requirements impede efficient administration. A new, simplified insurance strategy creates opportunities for efficiency and cost saving while main- taining the necessary administrative structure and control. 5. Health insurance should enhance health and well-being by promot- ing access to high-quality care that is effective, efficient, safe, timely, patient-centered, and equitable. The Committee endorses the recommendations of the Committee on Qual- ity of Health Care in America that care and the health delivery system be designed to enhance the six aims for care mentioned above: care that is high-quality, effective, efficient, safe, timely, patient-centered, and equitable (Kohn et al., 1999; IOM, 2001b; Corrigan et al., 2003). To the extent that care is delivered more efficiently and effectively, the financing for it will become more affordable and

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116 INSURING AMERICA’S HEALTH sustainable for society. Payers, insurers, and those covered all have an interest in purchasing quality care, and the design of reforms in the insurance system should consider the impact on safety and quality of care. To the extent that reform of the insurance system affects health care delivery, it should promote those aims. The best clinically relevant research evidence should play a role both in defining the features of benefit packages and in the daily delivery of care. Al- though definitive medical evidence and practice guidelines are not available for all services generally covered by insurance, they should be used when available. The Committee has found that benefit packages that include preventive and screening services, outpatient prescription drugs, and specialty mental health treat- ment in addition to outpatient medical and hospital care are more likely to facilitate the receipt of appropriate care and better health than insurance that does not include these features (IOM, 2002a). The elements of the benefit packages should be updated as new clinical evidence becomes available. Each of the five principles described represents an objective or goal for a more rational and effective health insurance system. Maximizing each of the principles concurrently may be difficult because of limited resources and political realities. For example, creating coverage with an adequate benefit package that is readily affordable to all individuals and families, yet affordable to society, will be difficult. Also, increasing the effectiveness of care will not necessarily improve its efficiency or make it more patient-centered. The degree to which the various goals are achieved will depend largely on the values placed on them by the public and the trade-offs made politically. The Committee’s role is not to determine the particular balance of these principles, endorse an existing proposal, or design a blueprint. The balance among principles should be determined through the political process. We present these principles to contribute to the public debate about insurance, enable informed choices about policy alternatives, and promote major reform. We note that some organizations concerned with uninsurance have developed principles for expand- ing coverage, many of which are similar to those of this Committee. Other organizations have gone beyond a statement of principles to design their own proposals to expand coverage.1 The Committee recommends that the public and policy makers use the Committee’s evidence-based principles to assess current insurance arrangements, evaluate options to extend health coverage, and, most importantly, overcome the present political stalemate to achieve coverage reform. 1The Healthcare Leadership Council, American Public Health Association, American College of Physicians–American Society of Internal Medicine, Association of Academic Health Centers, AARP, and Rekindling Reform Steering Group have each promulgated a set of principles to guide health insurance reform policies. The American Medical Association, American Nurses Association, and Service Employees International Union have each developed or endorsed specific proposals to achieve health insurance reforms, and other organizations and stakeholder groups such as the American Hospi- tal Association, Catholic Hospital Association, and U.S. Chamber of Commerce endorse general strategies to extending health insurance coverage. See http://coveringtheuninsured.org/partners for further information on the policy positions of 17 organizations that support coverage extension.

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117 PRINCIPLES TO GUIDE THE EXTENSION OF COVERAGE The next chapter examines various prototypes of insurance systems that could achieve the Committee’s vision of health insurance that will promote better overall health for individuals, families, communities, and the nation by providing financial access for everyone to necessary, appropriate, and effective health services. It will assess each model against the principles pre- sented in this chapter.