Digging Deeper: The Numbers Behind Expanding MinnesotaCare's Voucher Program
Here is some background and a numerical breakdown on a bill proposing to expand the voucher program within the MinnesotaCare healthcare assistance program.
The Context:
A bill from Rep. Gottwalt, discussed in a House committee hearing yesterday, would expand the Defined Contribution Program within the MinnesotaCare healthcare assistance program to include people at lower incomes levels than the program now covers.
Currently, adults without children who make at least 200% of the Federal Poverty Guideline ($22,340 per year) become ineligible for MinnesotaCare's premium-based program in which the MinnesotaCare acts like a stand-alone insurance program. These adults instead qualify for what is called a Defined Contribution (or "Voucher") Program, and receive a month base contribution to partially subsidize the purchase of private health insurance.
The proposed bill would change eligibility so that adults without children making at least 150% of the Federal Poverty Guideline ($16,755 per year) would also fall under the Defined Contribution Program. Monthly base contribution amounts follow an age-based sliding scale that ranges from $125 to $360 per month.
The Numbers:
What would that mean for a 35 year old adult with no children making $17,000 per year ($1,416 per month)? Here are the numbers.
According information from the the Henry J. Kaiser Family Foundation, the average premium for a health plan on the individual market in Minnesota is $250 per month, or $3,000 per year. Our 35 year old would receive $140 per month from MinnesotaCare, putting his/her contribution to health insurance premiums at $110 per month, or $1,320 per year. This comes out to 7.76% of the individual's $17,000 annual income, and would leave $1,306 per month in income not dedicated to health insurance premiums.
***It is very important to note that these numbers reflect only the cost of premiums, and the Foundation does not provide data on the deductibles, co-pays, or maximum out of pocket costs for the plans that go into their numbers.
Because these generalized numbers provide an incomplete picture of the implications, good or bad, of the switch to MinnesotaCare's Defined Contribution Program, an example will be helpful. For this purpose, we will enroll our 35 year old adult with no children making $17,000 per year in the Simply Blue plan from Blue Cross and Blue Shield of Minnesota.
First, here is the reasoning for choosing Simply Blue as a representative plan beneficiaries may choose. It offers three deductible options, prescription drug copays from $5 to $90, and 100% coverage of physician services, urgent care visits, emergency care, and inpatient/outpatient hospital services after reaching the deductible. Preventative Care is covered (no deductible). Maternity care is not covered at all, but pregnant women are considered a two person household in MinnesotaCare and would become eligible for traditional coverage.
The monthly premium for our 35 year old is either $131 or $145 per month depending on where he/she lives. Most of Minnesota's population falls within the $131 per month locations, so we will use that number. The deductible for that plan (the lowest deductible offered) is $3,000 annually.
This means that the monthly base contribution covers the entire premium for the plan. That leaves the deductible and prescription drug copays.
If our hypothetical 35 year old reaches the deductible for the plan and has two prescriptions for the year (one generic and one formulary brand), the total out of pocket cost for the year would be $3,660. That comes out to 21.52% of the individual's $17,000 annual income, and would leave $1,111 per month in income not dedicated to healthcare.
Now let's compare this to the traditional MinnesotaCare coverage. That same individual would pay $612 per year in premiums (under the 3.6% of income bracket), copays up to the $1,000 deductible, and $72 in prescription drugs. That comes out to $1684 per year, or 9.91% of the individual's $17,000 annual income, and would leave $1,276 per month in income not dedicated to healthcare.
*** It is very important to note here that traditional coverage with MinnesotaCare has a $10,000 annual limit for inpatient hospital services, so the costs for this beneficiary could be greatly increased if the injury or illness that caused him/her to reach the deductibles led to costs over $10,000.
Other Factors:
The demographic affected by this change tends to be less informed about how to make decisions regarding selecting and effectively using health insurance policies. For this reason, the funds spent through the Direct Contribution Program are more vulnerable to unintentional waste and intentional fraud by the program's beneficiaries and the private companies and brokers who serve them.
Efforts should be made to ensure that only plans that effectively provide for the needs of the beneficiaries are eligible for payment through the program.
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