Health Reform's Best-Kept Secret

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By Meg Murray and Jenny Babcock, Association for Community Affiliated Plans

The Basic Health Program could bring more affordable, more reliable coverage to millions of adults--and improve access to care for children, too

For all the attention devoted to the Affordable Care Act, scant consideration has been paid to a little-known part of it called the Basic Health Program. It's an option for states that could, if implemented nationwide, make health care coverage more affordable and accessible for more than 5 million adults and bring health coverage to more than 600,000 who would not otherwise have it.  Because many of these adults are likely parents of Medicaid- and CHIP-eligible children, the Basic Health Program could improve coverage and access to care for low-income children as well.

Most Say Ahhh! readers likely know how it works, but here's a quick recap of the Basic Health Program: under health reform, low-income people without health coverage will receive federal subsidies starting in 2014 to buy health insurance through Exchanges. States that implement the Basic Health Program in addition to an Exchange would contract with health plans or networks of doctors and hospitals to provide health care to people with incomes up to twice the Federal poverty line--just under $22,000 for a single adult--who don't qualify for publicly-financed programs such as Medicare or Medicaid. The Basic Health Program would replace subsidized coverage through Exchanges for this lower-income population. Washington would pitch in by providing states with 95 percent of the tax credits and subsidies that would have otherwise been provided through health reform.

According to an Urban Institute paper commissioned by our organization, the Association for Community Affiliated Plans, costs for subsidized health coverage through the Exchange are projected to cost low-income individuals more than $1,650 per year in premiums, copays and deductibles. For most people, that's a terrific deal. But for someone making $22,000 a year, $1,650 is nearly a month's pay. Many could well forgo coverage through the Exchange, pay a tax penalty of up to $700 and apply the difference to food, rent, or electricity. While health reform goes a long way towards making coverage more affordable through Exchanges and subsidies, health coverage may remain out of reach for some people with low incomes.

But if states were to implement the Basic Health Program to provide coverage modeled on Medicaid and CHIP, the Urban Institute estimates that annual premiums and out-of-pocket costs for adults would drop from a combined $1,650 to just under $200. At that level of affordability, paying the tax penalty makes no sense. The Urban Institute estimates that 600,000 people who would otherwise not purchase insurance would do so if all states ran a Basic Health Program. That's reason for cheer on its own.

Better still, the Basic Health Program could help more children access coverage and care in two ways. First, covering more adults will help children. While the Basic Health program would primarily cover adults in 2014 (Medicaid and CHIP handle low-income children), the lower premiums and reduced cost-sharing that could happen under BHP for adults would help children, as research has suggested a link between parents' insurance status and their children's access to care.

It could also serve as a backstop: should Congress not authorize new funding for CHIP in 2015, the Basic Health Program could serve as a bridge program for children, providing them with CHIP-like coverage rather than coverage through an Exchange. Finally, children who are prohibited from receiving Medicaid or CHIP coverage because of the 'five year bar' could be covered by the Basic Health Program. CHIPRA in 2009 gave states the option of covering these kids, but only six states had done so as of January 2011.

The Basic Health Program remains a work in progress, and there's work yet to be done: the Department of Health and Human Services must provide states guidance on several issues that will affect how states tailor their Basic Health Programs--notably, clarification of the mechanisms for calculating and delivering Federal funds. States must ensure that reimbursement levels for health plans and providers are high enough to attract an adequate number of participating physicians to meet demand for services generated by the program. While some analysts have questioned whether the Basic Health Program could adversely impact Exchanges, policy solutions could be found to address these impacts if they do occur.

The Basic Health Program represents the best health reform has to offer: more affordable and accessible care for millions of Americans, including parents and their children, and up to 600,000 fewer uninsured.

Given the financial pressures felt in statehouses across the country--and the professed desire by leaders on both sides of the aisle for affordable health options--the Basic Health Program deserves a long, close look. Governors, Medicaid directors and state legislatures across the country owe it to the people they serve to give Basic Health Program serious consideration.

Because this program is simply too promising to be kept a secret.

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