There is evidence, however, that cost-sharing affects consumer health care purchasing decisions. For example, in a recent study of premium levels and participation in state-subsidized health insurance programs, Urban Institute researchers found that when families were charged 1 percent of their income, 57 percent joined a subsidized program; when the charge was 3 percent of income, 35 percent joined; and when the charge was 5 percent of income, only 18 percent joined (Ku and Coughlin, 1997).
Methodological differences across surveys have made it difficult to derive an exact estimate of the extent of crowd-out or coverage replacement (Chollet et al., 1997; Cutler and Gruber, 1996, 1997; Dubay and Kenney, 1997). Among poor children, those up to 200 percent of poverty, there tends to be relatively little substitution of coverage because few are likely to have private coverage in the first place (Dubay and Kenney, 1997). As income levels increase, families are increasingly likely to have private coverage through their employers, and so there is a greater risk of substitution.
States that have already expanded coverage to medium-income families (i.e., up to 400 percent of poverty) have taken several steps, sometimes referred to as firewalls, to reduce incentives to obtain replacement coverage. California and Minnesota use waiting periods to discourage people from moving from a private program to a public one: a child must be uninsured for at least 4 months before an application can be submitted for the new program. Several states have cost-sharing requirements, usually monthly fees charged on a sliding scale starting at 200 percent of the federal poverty level (Children Now, 1997; Chollet et al., 1997). Most state officials believe that these types of measures are effective in deterring crowd-out without preventing eligible individuals from enrolling (Chollet et al., 1997).
Concern about crowd-out was reflected in the structure of the SCHIP legislation. In general, the program was designed to target uninsured children in families with incomes up to 200 percent of poverty. Eligible children are those who are not eligible for Medicaid (whether enrolled or not) and who are not covered by private insurance. Although states are free to design their own enrollment procedures and eligibility criteria, they are required to describe the procedures they will use to prevent substitution of coverage in the state SCHIP plans they submit to the Department of Health and Human Services for approval.
A recent study by the Urban Institute estimates that only about 2.9 million uninsured children will meet the income eligibility criteria set by SCHIP, and that the available funds could insure a total of nearly 6 million children (Ullman et al., 1998). In other words, there may be enough money in the SCHIP program to insure almost twice as many children as are eligible under the current program rules, and states may have difficulty finding enough eligible children to draw down their full federal allotments. For this and other reasons, the committee urges states to develop systems of accountability that will help to enroll as many eligible children as possible, track changes in enrollment and utilization patterns, and collect and analyze other information that will help to assess the impact of SCHIP over time (IOM, 1998).
Bennefield RL. 1996. Who Loses Coverage and for How Long? Current Population Reports P70-54. Washington, DC: Bureau of the Census, U.S. Department of Commerce.
Bureau of the Census. 1995. Current Population Survey 1995. Washington, DC: U.S. Department of Commerce.
Children Now. 1997. California's Working Families and Their Uninsured Children: A Big Problem With an Affordable Solution. Oakland, CA: Children Now.
Chollet DJ, Birnbaum ML, Sherman MJ. 1997. Deterring Crowd-Out in Public Insurance Programs: State Policies and Experience. Washington, DC: Alpha Center. [http://www.ac.org/]
Cutler D, Gruber J. 1997. Medicaid and Private Insurance: Evidence and Implications. Health Affairs 16(1):194-200.
Cutler D, Gruber J. 1996. Does Public Insurance Crowd out Private Insurance? Quarterly Journal of Economics 111:391-430.
Dubay L, Kenney G. 1997. Lessons from the Medicaid Expansions for Children and Pregnant Women: Implications for Current Policy. Statement for Hearing on Children's Access to Health Coverage, Subcommittee on Health, U.S. House Committee on Ways and Means, April 8, 1997. [http://www.urban.org/TESTIMON/dubay.html]