Health insurance

2011-2

1. (8) The PPACA requires that employer health insurance costs above $27,500 annually for family coverage and $10,200 for individual coverage be subject to a tax of 4%0 percent. This is the “Cadillac Tax.” Some have argued that this is one of the few elements of the legislation that has the potential to “bend the cost curve.” Explain the argument that leads from taxes on employer sponsored health insurance to lower health care costs. What evidence is there to support this?

2. (6) A. Describe how the “backlash against managed care” may have resulted in higher health insurance premiums. B. Describe how “provider consolidation” may have resulted in higher health insurance premiums.

3. (8) Dr. Bentley, Alabama’s new governor, is a proponent of Consumer Directed Health Plans (CDHP) and has as yet undisclosed plans to encourage their use in the state. In anticipation of these plans, please do the following:

A. Briefly summarize how a CDHP operates.

B. Describe how such plans are supposed to achieve health care cost savings.

C. Summarize the extent of the evidence on how effective these plans have been in reducing health care spending.

D. Discuss the nature of the adverse or favorable selection that may arise in these types of plans.

4. (8) It has been argued that larger out-of-pocket employee premium contributions are the result of more two-earner households in the labor market. Sketch out the economics argument that leads to this result.

2011-3

1. (8) Answer all of the following:

A. How is the Medicare Hospital Insurance (HI) Trust Fund financed?

B. How is the Supplemental Medical Insurance (SMI) Trust Fund financed?

C. The Medicare program is often said to be in crisis by the year 2020 or so. How do the HI and SMI Trust Funds affect this crisis? How do they affect the broader issue of government spending on entitlements?

2. (7) Your widowed grandmother is 70 years old and is currently covered by Medicare. Her health has been good but she worries about ending up in a nursing home. She asks you if she should buy long term care insurance. What do you advise her? (Be sure to explain your advice.)

3. (8) Your aunt will become eligible for Medicare later this year. She is reasonably healthy. She understands Medicare Part A and knows she will have to pay a premium for Part B coverage. However, she is a bit unclear about Part D, Medicare Advantage and Medigap coverage. In a brief note to her, summarize these programs and offer her some advice on whether she should take any or all of these. She is a smart lady and will expect you to justify your recommendations.

4. (7) Suppose the opticians in Alabama want the state to enact legislation requiring that all private health insurance plans in the state include coverage for eye exams, eyeglasses and contact lenses. You are the health policy analyst for the governor. Prepare a short memo discussing the extent to which such legislation will actually expand insurance coverage for these services and why.

2012-2

Answer all questions in the space provided. Point values are in parentheses.

1. (6) Information on the quality of health plans is valuable in its own right. However, knowledge of health plan quality is argued to increase employee price sensitivity with respect to health plans as well. How is this so? What evidence do you have for this effect?

2. (6) Some have argued that larger out-of-pocket employee premium contributions are the result of more two-earner households in the labor market. Sketch out the economic argument for this result.

3. (6) A number of managed care plans have identified “centers of excellence” for the provision of high cost surgical procedures. In some cases the managed care plans agree to pay travel costs for the patient and a caregiver to go several hundred miles to undergo the treatment. Discuss these practices in the context of the principles of selective contracting.

4. (6) Many health policy analysts have argued that the tax treatment of employer sponsored health insurance is one of the fundamental reasons for high health care costs in the U.S. Trace the economic logic that leads from taxing employer-sponsored health insurance as income to reducing health care costs. What evidence can you bring to bear on this issue?

5. (6) The advocates of consumer directed health plans (CDHPs) argue that they will reduce health care spending and make people more effective consumers of care. Describe the key elements of a CDHP and sketch the argument for how it results in lower spending. Summarize the evidence to date on the effectiveness of these plans.

2012-3

Answer all questions in the space provided. (Point values in parentheses.)

1. (6) Many states are concerned about the pension and retiree health benefits obligations that arise from the promises that the states have made to state employees. Suppose the governor asked you to summarize the options for reducing the state’s obligations for retiree health insurance.

A. Describe the nature of retiree health benefits typically provided to retirees by large public and private employers.

B. Suggest two proposals to reduce these costs to government. Briefly indicate why/how each proposal would save money.

C. What are the labor market consequences, if any, of your proposals in B?

2. (8) Earlier this month the trustees of the Medicare Trust Fund presented their annual report and indicated that the Trust Fund will be exhausted by 2024, the same date as last year.

A. What does it mean to say that the “Trust Fund will be exhausted”?

B. Over the years, people on each side of the political aisle have proposed a “premium subsidy” plan to try to control Medicare’s spending. What are the key features of a premium subsidy plan? How is it supposed to reduce Medicare spending?

3. (6) Your aunt is 60 and thinking about her retirement. Her health is good, but she is on her own and wonders if she should buy a long term care policy. What do you advise her? (Be sure to explain your advice.)

4. (10) The Patient Protection and Affordable Care Act (PPACA) gives states the opportunity to establish health insurance exchanges.

A. Describe three key decisions (of many) that the states have to make. Which option do you tentatively recommend for each decision? Why?

B. Discuss three options the states have for paying for the costs of running their exchange.

2013-2

Answer all questions in the space provided. (Point values are given in parentheses.)

1. (6) In recent weeks there have been press reports that health care plans offered in the exchanges are likely to be dominated by managed care plans with narrow panels of providers. What advantage would a narrow panel managed care plan have in the health insurance market? Why? What disadvantages? Why?

2. (8) Some have argued that concentration in the health insurance industry has led to lower provider prices. Others have argued that hospital and physician consolidation in the last decade has led to higher insurance premiums. Discuss the economic rationale underlying each view point. Briefly summarize the empirical evidence supporting or refuting each perspective.

3. (6) You are a small employer with 120 full time employees. You currently offer health insurance to your employees. Under the Patient Protection and Affordable Care Act (PPACA) you, of course, are required to continue to offer coverage or pay a penalty of $2,000 per worker (after the first 30). Some have argued that a small employer like you will simply stop providing health insurance and pay the penalty. Does this make good economic sense? Provide an analysis.

4. (6) Former head of the Council of Economic Advisors, Martin Feldstein, has proposed that the federal tax code be revised to cap the total amount of deductions and exemptions at, say, 2 percent of adjusted gross income. Employer-sponsored health insurance is included among the exemptions. If this proposal were to be implemented, what effect would it have on: (A) the amount of health insurance obtained through employers? (B) health care spending? (C) on money wages provided as compensation? In each instance indicate why such an outcome is expected.

5. (4) Consumer directed health plans, i.e., high deductible health plans with a health savings accounts (HSAs), are supposed to reduce health care spending. What are the mechanisms whereby this occurs? How big are the estimates of savings?

2013-3

Answer all questions in the space provided. Point values in parentheses.

1. (6) Earlier this month the Birmingham Business Journal reported that many small businesses in Alabama were converting to self-insurance in anticipation of the implementation of the Patient Protection and Affordable Care Act (PPACA). If a small employer wanted to continue to offer health insurance to his/her employees, what advantages does self insurance give them? Would such a shift be of concern to a small business (SHOP) exchange? Why? Aren’t small employers too small to be self-insured?

2. (6) Most states have chosen (or defaulted) into the “market facilitator” model of the individual health insurance exchange. What are the key functions of this model? What is the mechanism that is supposed to allow them to control the rate of increase in health insurance premiums?

3. (8) In a report released this spring, the Society of Actuaries estimated that the implementation of the exchanges, as required by the PPACA, would lead to very different levels of premium increases in different states. Ohio and Wisconsin, for example, were predicted to have average premium increases in the neighborhood of 80 percent. In contrast, New York and Vermont were predicted to have average premium decreases of about 12 percent. Discuss two reasons why these states may see such wide differences in the average premiums in their non-group (i.e., individual) insurance markets.

4. (6) Your aunt will become eligible for Medicare later this year. She is reasonably healthy. She understands Medicare Part A and knows she will have to pay a premium for Part B coverage. However, she is a bit unclear about Part D, Medicare Advantage and Medigap coverage. In a brief note to her, summarize these programs and offer her some advice on whether she should take any or all of these. She is a smart lady and will expect you to justify your recommendations.

5. (4) Suppose the implementation of the exchanges in the PPACA had to be delayed for a year or two due to the complexity of establishing the exchanges. Instead, the Congress decided to continue the high risk pools that were intended to be a transition to the full PPACA. Summarize what we know about high risk pools. Who would be eligible for coverage? What sort of coverage would be available? What sort of premiums would be established? Would the premiums likely cover plan costs?

2014-2

Answer all questions in the space provided. (Point values in parentheses.)

1. (9) Discuss the four factors under which managed care firms were found to be able to negotiate lower prices with hospitals. Explain the concept of “reference pricing.” Discuss how it can be thought of as a form of selective contracting. Finally, explain how selective contracting could be employed in contracting for “centers of excellence.”

2. (8) Many economists have argued that a key element in “bending the cost curve” in health care is to change the tax treatment of employer sponsored health insurance. Discuss how changes in this tax treatment are supposed to lead to lower health care costs. Some have argued that the “Cadillac Tax” on generous employer sponsored health insurance plans is one of the few cost control devices in the Affordable Care Act. Describe this tax and how it’s supposed to control costs.

3. (6) The advocates of consumer directed health plans (CDHPs) argue that they will reduce health care spending and make people more effective consumers of care. Describe the key elements of a CDHP and sketch the argument for how it results in lower spending. Summarize the evidence to date on the effectiveness of these plans.

4. (7) You are a small employer with 120 full time employees. You currently offer health insurance to your employees. Under the Patient Protection and Affordable Care Act (ACA) you, of course, are required to continue to offer coverage or pay a penalty of $2,000 per worker (after the first 30). Some have argued that a small employer like you will simply stop providing health insurance and pay the penalty. Does this make good economic sense? Provide an analysis.

2014-3

Answer all questions in the space provided. Point values are in parentheses.

1. (9) A key function of the health insurance exchanges is to provide risk mitigation across the plans in the exchange. Even though the premiums are not allowed to reflect health status, the payments that the plans get will take risk into consideration. Please describe each of the mechanisms that the ACA requires to be used: transitional reinsurance, the risk-corridor program, and the formal risk adjustment process.

2. (8) In a report released this spring, the Society of Actuaries estimated that the implementation of the exchanges, as required by the ACA, would lead to very different levels of premium increases in different states. Ohio and Wisconsin, for example, were predicted to have average premium increases in the neighborhood of 80 percent. In contrast, New York and Vermont were predicted to have average premium decreases of about 12 percent. Discuss why these states may see such wide differences in the average premiums in their non-group (i.e., individual) insurance markets.

3. (6) Your widowed grandmother is 65 years old and is now covered by Medicare. Her health has been good but she worries about ending up in a nursing home. She asks you if she should buy long term care insurance. What do you advise her? (Be sure to explain your advice.)

4. (7) There is good empirical evidence of “crowd-out” as it affects Medicaid and CHIP [Children’s Health Insurance Plans]. Define crowd-out and discuss how it applies in states that have expanded their Medicaid programs as a result of the ACA. Do you think the ACA motivated effects for adults will be larger or smaller in magnitude than those seen for the earlier Medicaid and CHIP expansions for children? Why?

2015-2

Answer all questions in the space provided. Point values are in parentheses.

1. (6) A. Describe how the “backlash against managed care” may have resulted in higher health insurance premiums. B. Describe how “provider consolidation” may have resulted in higher health insurance premiums.

2. (6) Information on the quality of health plans is valuable in its own right. However, knowledge of health plan quality is argued to increase employee price sensitivity with respect to health plans as well. How is this so? What evidence do you have for this effect?

3. (6) Many health policy analysts have argued that the tax treatment of employer sponsored health insurance is one of the fundamental reasons for high health care costs in the U.S. Trace the economic logic that leads from taxing employer-sponsored health insurance as income to reducing health care costs. What evidence can you bring to bear on this issue?

4. (6) Consumer directed health plans, i.e., high deductible health plans with a health savings accounts (HSAs), are supposed to reduce health care spending. What are the mechanisms whereby this occurs? How big are the estimates of savings?

5. (6) The typical single-worker health insurance plan offered by employers costs about $6,000 per year. The Affordable Care Act (ACA) requires larger employers to provide health insurance to their workers or pay a $2,000 penalty per full-time employee. Some have argued that larger employers, currently providing coverage, will drop health insurance and simply pay the $2,000 penalty, saving approximately $4,000 per worker per year. Evaluate the economic soundness of this analysis.

2015-3

Answer all questions in the space provided. Point values are in parentheses.

1. (8) What are the key provisions of the Affordable Care Act that apply to the small group market? What sort of changes do you expect to see in that insurance market as a result of the legislation? Why? These changes may relate to employers offering coverage, premiums, sources of coverage, the effects of the subsidies, etc.

2. (8) Last fall the trustees of the Medicare Trust Fund presented their annual report and indicated that the Trust Fund will be exhausted by 2030.

A. What does it mean to say that the “Trust Fund will be exhausted”?

B. Over the years, people on each side of the political aisle have proposed a “premium subsidy” plan to try to control Medicare’s spending. What are the key features of a premium subsidy plan? How is it supposed to reduce Medicare spending?

3. (6) There is good empirical evidence of “crowd-out” as it affects Medicaid and CHIP [Children’s Health Insurance Programs]. Define crowd-out and discuss how it applies in states that have expanded their Medicaid programs as a result of the ACA. Do you think the ACA motivated effects for adults will be larger or smaller in magnitude than those seen for the earlier Medicaid and CHIP expansions for children? Why?

4. (8) A key function of the health insurance exchanges is to provide risk mitigation across the plans in the exchange. Even though the premiums are not allowed to reflect health status, the payments that the plans get will take risk into consideration. Please describe each of the mechanisms that the ACA requires to be used: transitional reinsurance, the risk-corridor program, and the formal risk adjustment process.