December 2005

Grant Results

SUMMARY

From September 2000 to December 2004 researchers at Columbia University's Mailman School of Public Health coordinated a series of meetings, briefings, and studies designed to improve techniques and increase consistency in the way economists and other experts model the effects of alternative proposals for expanding health insurance coverage.

Key Findings
Among the chief findings:

  • Firms place more weight on the preferences of highly compensated workers than on the preferences of other workers in making health insurance choices, according to the project director, who explains that higher wage workers gain more from the tax subsidy to employer-sponsored insurance than do low wage workers and therefore are willing to forego more wages to obtain coverage through work.

    These findings suggest that modelers should place more weight on the preferences of highly compensated workers than on the preferences of the average worker within a firm.

Funding
The Robert Wood Johnson Foundation (RWJF) provided two grants totaling $229,365 (one unsolicited, the other solicited) to support this work.

 See Grant Detail & Contact Information
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THE PROBLEM

Policymakers are considering a range of options for expanding coverage for the uninsured, including tax credits, expansions of public programs, subsidies for employer-sponsored insurance and mandates on employers to offer coverage.

To choose among these options, policymakers need estimates about the costs, the number of people who will be covered, and other implications of these proposals. Economists and others have used complex economic and statistical techniques to develop "micro simulation models" to project the effects of these proposals.

However, there is little consensus on either the structure of these models or the appropriate values to use for key parameters. Consequently, policymakers are faced with widely varying cost and coverage estimates, with no information about why the estimates differ.

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RWJF STRATEGY

One of RWJF's longtime goals is to assure that all Americans have access to quality health care at reasonable cost. To further that goal, RWJF has pursued various strategies to expand insurance coverage. One strategy is developing and communicating information aimed at raising awareness of the coverage problem among policymakers, to stimulate creation of policy solutions.

In 2004 The Foundation adopted a new goal: to help secure affordable and stable health care coverage for all Americans by 2010. RWJF aims to build support among opinion leaders for this goal through high-profile communications campaigns, innovative research and policy analysis, and efforts to enroll the millions of uninsured children who are eligible for Medicaid or State Children's Health Insurance Program (SCHIP).

RWJF believes that ensuring coverage for all children and low-income adults is a first step toward achieving coverage for all. To assist policy-makers in developing and implementing effective policies, RWJF is pursuing new proposals to expand coverage and assess the barriers to achieving affordable and stable coverage. Those barriers include escalating health care costs and structural features of health insurance markets.

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THE PROJECT

Researchers at Columbia University's Mailman School of Public Health coordinated a series of meetings, briefings, and studies designed to improve techniques and increase consistency in the way economists and other experts model the effects of alternative proposals for expanding health insurance coverage. The goal was to disseminate information on two key parameters of the models — health insurance prices and employer behavior.

The researchers subcontracted with Health Systems Research, Inc. a Washington, D.C. based public policy research and consulting firm. The firm convened a consensus conference of 34 researchers with expertise in micro simulation modeling on January 11, 2001 in Washington, D.C. (See Appendix 1 for a list of conference participants.)

The purpose of the conference was to achieve some consensus about the key elements of any micro simulation model used to predict the cost and coverage estimates of health insurance expansions. Staff wrote two papers for the conference, a background paper on modeling and a more technical paper that examined statistical issues in modeling. See the Bibliography for details.

To explore the similarities and differences that may emerge when different groups of modelers examine the same health insurance expansion proposal, the researchers at Columbia asked three teams at The Urban Institute, The Lewin Group, and the Massachusetts Institute of Technology to evaluate the same sample proposal, which employed a combination of tax credits and expansions of already existing public programs.

Overall, there was wide variation among the three models in their estimates of the price of individual insurance coverage under the proposal and in their conclusions regarding how employers would respond to the introduction of the health insurance expansion. (The Urban Institute, located in Washington, D.C. is a nonpartisan economic and social policy research institution. The Lewin Group, located in Falls Church, Va. is a healthcare policy research and management consulting firm.)

Project staff wrote a paper examining how the price of health insurance varies with factors such as state insurance regulations and state health care costs. They presented the findings at a November 12, 2003 conference in Washington, D.C. sponsored by RWJF's Changes in Health Care Financing and Organization. (HCFO). HCFO supports investigator-initiated research and policy analysis, evaluation, and demonstration projects examining major changes in health care financing, and their effects on cost, access, or quality.

Staff also wrote a paper on employer behavior related to health insurance to examine how employers make decisions about offering health insurance coverage to their diverse workforce and how they allocate the costs of that coverage across a diverse workforce.

Staff presented and discussed the findings with a group of modelers at a meeting sponsored by project staff in Washington on July 14, 2004 and subcontracted with Claudia Williams, M.A., President of AZA Consulting, to synthesize the results of this paper into a policy relevant format. (See Appendix 2 for a list of conference participants).

Staff incorporated the findings from this paper into a discussion with modelers at the Congressional Budget Office, held in Washington on September 8, 2004. Staff then developed a theoretical model of employer behavior, conducted tests based on this model and wrote a paper and presented initial findings at a seminar at Georgetown University, Department of Economics on October 7, 2004. See the Bibliography for details.

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FINDINGS

In a series of papers, project staff:

  • Categorized and described the different approaches used by modelers of health insurance expansion, as reported in two articles published in The Milbank Quarterly and the Journal of Policy Analysis and Management. (See the Bibliography for full details.) The articles:
    • Explained the conceptual and theoretical relationships between the different methods.
    • Demonstrated empirically an example of the restrictive conditions under which all approaches can yield quantitatively identical predictions.
    • Empirically demonstrated conditions under which the approaches diverge and the quantitative extent of that divergence.
  • Demonstrated that very little is known about how firms that employ diverse workers make decisions about offering health insurance coverage to their employees or about how they allocate the costs of that coverage across these workers, as reported in three unpublished articles. (See the Bibliography for details.) The cost of coverage falls on workers in the aggregate, but higher cost individuals (i.e. those who file more health insurance claims) do not appear to receive lower wages in exchange for health insurance.

    The research literature suggests that low-wage workers who work with high-wage workers appear to receive greater compensation (measured as the sum of wages and employer health insurance payments) than do those who work only with other low wage workers, according to the project director.

    The project director also notes that studies find that firms place more weight on the preferences of highly compensated workers than on the preferences of other workers in making health insurance choices. This is not surprising, according to the project director, because higher wage workers gain more from the tax subsidy to employer-sponsored insurance than do low wage workers and therefore, are willing to forego more wages to obtain coverage through work.

    These findings suggest that modelers should place more weight on the preferences of highly compensated workers than on the preferences of the average worker within a firm.

Recommendations

Based on discussions held during the consensus conference and their research conducted during these grants, the researchers developed the following recommendations, which are reported in more detail in the Milbank Quarterly, the Journal of Policy Analysis and Management and three unpublished articles. See the Bibliography for details.

Micro simulation modelers should:

  • Report the assumptions they use in modeling in a way that is transparent and comparable across models.
  • Present standardized estimates of certain variables, such as the degree to which individuals will respond to a new health insurance subsidy. The guidelines ask in this case, for example, that modelers describe the percentage increase in the number of insured people with incomes within a certain range.
  • Use per capita state health costs when modeling premiums for the non-group (individual) insurance market. Project staff recommend that researchers model non-group insurance premiums based on per capita state health care costs, adjusted for the use of community rating in the state. A state with community rating requires all insurers to charge everyone the same premium; the premium is not permitted to vary according to the actuarial risk presented by the individual. In creating models, project staff found that group insurance premiums do not serve as reliable proxies (stand-ins) for non-group premiums.

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LESSONS LEARNED

The project generated the following lessons:

  1. The particular problems in health insurance expansion models are often context specific. If Congress contemplates other types of expansions such as prescription drugs for Medicare, universal health insurance or small-firm subsidies, the key model parameters will change. Absent outside intervention, micro simulation models will once again become hard to understand and not comparable. It would be useful to repeat this type of analysis regularly. (Project Director)
  2. The exercise of identifying and describing sources of variation in modeling practice yields useful information both about modeling and about other areas for further economic research. Modeling research, economic research and funding for these activities should be more closely connected. (Project Director)

Project staff published two papers, the first in the Milbank Quarterly in 2002 and the second in the Journal of Policy Analysis and Management in 2004, and wrote three unpublished papers. Project staff made presentations to organizations such as the Georgetown University Department of Economics and the American Economics Association. Staff organized a panel titled, "Diverse Approaches to Modeling Health Insurance Expansions: Making Models Useful for Policy Decision Making" at the Washington, conference of the Association of Public Policy Analysis and Management, November 3, 2004. See the Bibliography for details.

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AFTER THE GRANT

Project staff have continued occasional meetings with staff from the Congressional Budget Office (CBO) to help inform CBO's understanding of private micro simulation models. Several findings from the project have been incorporated into CBO's micro simulation model, according to the project director.

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GRANT DETAILS & CONTACT INFORMATION

Project

Researching Models to Expand Health Insurance

Grantee

Columbia University (New York,  NY)

  • Amount: $ 158,127
    Dates: September 2000 to August 2002
    ID#:  039999

  • Amount: $ 71,238
    Dates: January 2003 to December 2004
    ID#:  044109

Contact

Sherry A.  Glied, Ph.D.
(212) 305-0299
sag1@columbia.edu

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APPENDICES


Appendix 1

(Current as of the time of the grant; provided by the grantee organization; not verified by RWJF.)

January 11, 2001 Consensus Conference Participants

Jessica S. Banthin, Ph.D.
Senior Economist
U.S. Department of Health and Human Services
Rockville, Md.

James R. Baumgardner, Ph.D.
Acting Deputy Assistant Director
Congressional Budget Office
Washington, D.C.

Linda Bilheimer, Ph.D.
Senior Program Officer
The Robert Wood Johnson Foundation
Princeton, N.J.

M. Kate Bundorf, Ph.D.
Assistant Professor
Stanford University
Stanford, Calif.

Michael E. Chernew, Ph.D.
Associate Professor
University of Michigan
Ann Arbor, Mich.

David Colby, Ph.D.
Senior Program Officer
The Robert Wood Johnson Foundation
Princeton, N.J.

Sonia Conly, Ph.D.
Financial Economist
U.S. Department of the Treasury
Washington, D.C.

William S. Custer, Ph.D.
Associate Professor
Georgia State University
Atlanta, Ga.

John Czajka, Ph.D.
Senior Researcher
Mathematica Policy Research, Inc.
Washington, D.C.

Karen Davenport
Program Officer
The Robert Wood Johnson Foundation
Princeton, N.J.

John Drabek, Ph.D.
Economist
U.S. Department of Health and Human Services
Washington, D.C.

Judith Feder, Ph.D.
Dean of Policy Studies
Georgetown University
Washington, D.C.

Roger Feldman, Ph.D.
Professor of Economics
University of Minnesota
Minneapolis, Minn.

Danielle Ferry
Research Assistant
Columbia University
New York, N.Y.

Bowen Garrett, Ph.D.
Research Associate
The Urban Institute
Washington, D.C.

Isadora Gil
Research Assistant
Columbia University
New York, N.Y.

Doug Gould
Research Assistant
Columbia University
New York, N.Y.

Sherry A. Glied, Ph.D.
Professor and Chair
Columbia University
New York, N.Y.

Jonathan Gruber, Ph.D.
Professor
Massachusetts Institute of Technology
Cambridge, Mass.

Stuart Hagan, Ph.D.
Principal Analyst
Congressional Budget Office
Washington, D.C.

Robert B. Helms, Ph.D.
Resident Scholar
America n Enterprise Institute
Washington, D.C.

Bradley J. Herring, Ph.D.
RWJF Health Policy Scholar/Post Doctorate Fellow
Yale University
New Haven, Conn.

Richard Hinz, M.P.A, C.F.A.
Director
U.S. Department of Labor
Washington, D.C.

John Holahan, Ph.D.
Director
The Urban Institute
Washington, D.C.

Gillian C.B. Hunter, Ph.D.
Financial Economist
U.S. Department of the Treasury
Washington, D.C.

Ronald A. Jeremias, Ph.D.
Economist
U.S. Congress
Washington, D.C.

Larry Levitt, M.P.P.
Vice President
Henry J. Kaiser Family Foundation
Menlo Park, Calif.

James W. Mays, M.C.S.
Vice President
Actuarial Research Corporation
Annandale, Va.

Jack A. Meyer, Ph.D.
President
Economics and Social Research Institute
Washington, D.C.

John F. Moeller, Ph.D.
Director
U.S. Department of Health and Human Services
Rockville, Md.

Alan C. Monheit, Ph.D.
Professor
UMDNJ
Piscataway, N.J.

Adam Neufeld
Research Assistant
Columbia University
New York, N.Y.

Len Nichols, Ph.D.
Vice President
Center for Studying Health System Change
Washington, D.C.

Michael J. O'Grady, Ph.D.
Assistant Secretary
U.S. Department of Health and Human Services
Washington, D.C.

Mark V. Pauly, Ph.D.
Professor
University of Pennsylvania
Philadelphia, Pa.

Joseph Piacentini, M.S.
Acting Director
U.S. Department of Labor
Washington, D.C.

Jack Rogers, Ph.D.
Director
PricewaterhouseCoopers LLP
Washington, D.C.

James F. Rodgers, Ph.D.
Vice President
American Medical Association
Chicago, Ill.

William Scanlon, Ph.D.
Director
U.S. General Accounting Office
Washington, D.C.

Thomas Selden, Ph.D.
Economist
U.S. Department of Health and Human Services
Rockville, Md.

John F. Sheils, M.P.P.
Vice President
The Lewin Group
Falls Church, Va.

Louise Sheiner
Senior Economist
Employee Benefits Security Administration
Washington, D.C.

Rob Stewart, M.P.P.
Program Analyst
U.S. Department of Health and Human Services
Washington, D.C.

Kenneth E. Thorpe, Ph.D.
Robert W. Woodruff Professor and Chair
Emory University
Atlanta, Ga.

Gordon R. Trapnell, F.S.A.
President
Actuarial Research Corporation
Annandale, Va.


Appendix 2

(Current as of the time of the grant; provided by the grantee organization; not verified by RWJF.)

July 14, 2004 Consensus Conference Participants

James R. Baumgardner, Ph.D
Deputy Assistant Director
Division of Health and Human Resources
Congressional Budget Office
Washington, D.C.

Linda Bilheimer, Ph.D.
Senior Program Officer
Research and Evaluation
The Robert Wood Johnson Foundation
Princeton, N.J.

M. Kate Bundorf, Ph.D.
Assistant Professor, Department of Health Services Research
Stanford University
Stanford, Calif.

Michael E. Chernew, Ph.D.
Associate Professor Department of Health
Management and Policy
University of Michigan
Ann Arbor, Mich.

Bowen Garrett, Ph.D.
The Urban Institute
Washington, D.C.

Sherry Glied, Ph.D.
Professor and Chair
Mailman School of Public Health
Columbia University
New York, N.Y.

Doug Gould
Mailman School of Public Health
Department of Health Policy and Management
Columbia University
New York, N.Y.

Stuart Hagen, Ph.D.
Principal Analyst
Congressional Budget Office
Washington, D.C.

Bradley Herring, Ph.D.
Rollins School of Public Health
Health and Policy
Atlanta, Ga.

Michael J. O'Grady, Ph.D.
Assistant Secretary
Office of Assistant Secretary for Planning and Evaluation
Office of the Secretary
US Department of Health and Human Services
Washington, D.C.

Mark V. Pauly, Ph.D.
Professor
Health Care Systems Department
The Wharton School
University of Pennsylvania
Philadelphia, Pa.

Joseph Piacentini, M.S.
Acting Director
Policy and Research
Employee Benefits Security Administration
US Department of Labor
Washington, D.C.

William Scanlon, Ph.D.
Adjunct Professor
Georgetown University
Oak Hill, Va.

John Sheils, M.S.
Vice President
Health Care Finance Policy
The Lewin Group
Falls Church, Va.

Louise Sheiner
Senior Economist
Federal Reserve Board of Governors
Employee Benefits Security Administration
Washington, D.C.

Rob Stewart
Director
Division of Healthcare for Low Income Populations
Office of the Assistant Secretary for Planning and Evaluation
US Department of Health and Human Services
Washington, D.C.

Kenneth E. Thorpe, Ph.D.
Robert W. Woodruff Professor and Chair
Rollins School of Public Health
Health and Policy Management
Emory University Health Policy Management
Atlanta, Ga.

Gordon R. Trapnell, F.S.A.
President and Actuary
Actuarial Research Corporation
Annandale, Va.

Patricia Willis, Ph.D.
Office of Policy and Research
United States Department of Labor
Washington, D.C.

Joshua Gavin Zivin
Mailman School of Public Health
Department of Health Policy and Management
Columbia University
New York, N.Y.

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BIBLIOGRAPHY

(Current as of date of this report; as provided by grantee organization; not verified by RWJF; items not available from RWJF.)

Articles

Glied S, Remler D, and Zivin JG. "Inside the Sausage Factory: Improving Estimates of the Effects of Health Insurance Expansion Proposals." Milbank Quarterly, 80(4): 603–635, 2002. Abstract available online.

Remler DK, Zivin JG, Glied S. "Modeling Health Insurance Expansion: Effects of Alternate Approaches." Journal of Policy Analysis and Management, 23(2): 291–313, 2004. Abstract available online.

Glied S and Little S. "The Price of Health Insurance." Unpublished.

Glied S and Zivin JG. "Modeling Employer Decisions to Offer Health Insurance." Unpublished.

Glied S and Zivin JG. "Employer Decisions to Offer Health Insurance." Unpublished.

Sponsored Workshops

"Consensus Conference." January 11, 2001. Washington D.C. Thirty-four people attended from approximately 25 organizations.

"Consensus Conference." July 14, 2004. Washington, D.C. Twenty-one people attended from approximately 17 organizations.

Presentations and Testimony

Sherry Glied. "Modeling Health Insurance Expansions." Workshop at Congressional Budget Office organized by Judy Feder, April 3, 2001, Washington, D.C.

Sherry Glied. "Modeling Health Insurance Expansions," at the American Economics Association Conference session, "Doing Something About People Without Health Insurance," January 5, 2002, Atlanta, Ga.

Dahlia Remler. "Diverse Approaches to Modeling Health Insurance Expansions: Making Models Useful for Policy Decision Making," at the Annual Fall Conference for the Association for Public Policy Analysis and Management, November 3, 2001, Washington, D.C.

Sherry Glied. Panelist. AcademyHealth panel on Modeling. June 7, 2004. San Diego, Calif.

Sherry Glied. Discussion at Congressional Budget Office, September 28, 2004, Washington, D.C.

Sherry Glied and Joshua Graff Zivin. Georgetown University Department of Economics, October 7, 2004, Washington, D.C.

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Report prepared by: Barbara Matacera Barr
Reviewed by: Richard Camer
Reviewed by: Marian Bass
Program Officer: Linda Bilheimer

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