Insurance and Affordability

Health insurance benefits determine not only what services are covered, but also how much is paid—by patients, out of their own pockets, and by payers (employers or public payers, such as Medicare or Medicaid). Designing those benefits requires a delicate balance of accommodating demand for particular services and providers, provider availability, prices for services, and federal and state policies that regulate coverage. With the cost of health care services and insurance increasing year over year, policymakers and stakeholders need to align incentives for high-value care—care that improves health while containing cost.

Since fielding the seminal Health Insurance Experiment study, our health economists, statisticians, policy analysts, and other researchers have examined how health insurance benefits and affordability affect the use of health care services and health outcomes. RAND teams

• simulate the effects of health insurance reforms
• conduct primary data collection through interviews, focus groups, and surveys of stakeholders
• collect secondary data from sources like Medicare Advantage plan bids and encounter data, as well as Medicare Part D Event Data, fee-for-service (FFS) claims, quality ratings, and beneficiary risk scores.

Assessing National and State Reforms

State and federal policymakers have offered many promising policy ideas to enhance insurance coverage and reduce costs. But it can be difficult for them to know exactly how these policies will influence the decisions that people make about insurance plans or the health care services they will seek—or put off—when costs change.

Modeling a multitude of scenarios: RAND has a long history of helping decisionmakers understand the real-world implications of their insurance reform policies. That experience, combined with the ground-breaking COMPARE microsimulation model and related models, allows RAND to estimate the effects of a wide array of approaches to increasing insurance coverage and controlling costs.

• Large-scale changes: RAND has analyzed wholesale changes to the current insurance system, including single-payer approaches and a self-pay alternative financing system called the 10-Plan.
• Individual market reform: RAND has evaluated the effect of implementing a public option in the individual market, reinsurance programs (in Alaska, Minnesota, and Oregon), and state efforts to reform the individual coverage market in Minnesota and Connecticut.
• State initiatives: RAND has estimated the effects of policies being deployed in states, such as rate setting and spending growth targets. Our researchers have also worked with state legislatures to estimate which types of policies are most worth pursuing to control costs.

Improving Medicare and Medicaid

With the health of millions of people and billions of dollars at stake, the Center for Medicare and Medicaid Innovations tests new models of care that deliver quality care while saving taxpayer dollars. The model tests take place over multiple years, and accurately and fairly measuring the effectiveness of these approaches is critically important.

Cutting-edge data science for Medicare Advantage model tests: RAND’s evaluations help the CMS Innovation Center and other stakeholders understand the models’ effects on Medicare and Medicaid beneficiaries, insurers, CMS, providers, and related third parties. RAND’s recent evaluations include

• the Medicare Advantage Value-Based Insurance Design Model. RAND’s results prompted CMS to conclude it would save more than $2 billion by canceling the model test.
• the Million Hearts Cardiovascular Disease Risk Reduction Model. CMS cited RAND’s findings that the model reduced cardiovascular disease deaths without increasing spending in its proposed changes to the Medicare Physician Fee Schedule.
• the Part D Senior Savings Model, which piloted a $35 cap on monthly copays for insulins. RAND’s evaluation showed CMS that the payment cap did not shift costs to taxpayers and had the intended effect of shielding beneficiaries from spikes in drug costs.

State-led Medicaid reforms: RAND evaluated the California Global Payment Program, which provided funding to improve access to primary care and preventive services for uninsured populations. For New York, RAND conducted multiple evaluations of the state’s Medicaid redesign efforts through 1115 Waivers and their cost implications. These included the Managed Long-Term Care program, a program to support self-directed care, and Health and Recovery Plans (for people with significant behavioral health needs, including addiction), among others.

Estimating the Effect of Regulation on Insurance and Spending

Policymakers develop laws and regulations with particular goals in mind, yet predicting the effects of even small regulatory changes across an insurance market with many stakeholders can be difficult.

Deep understanding of market dynamics: RAND researchers’ expertise in analyzing multifaceted health care markets helps policymakers understand—and sometimes anticipate—whether a particular rule or law will achieve its intended objectives.

Medicare Physician Fee Schedule: RAND found that most of the post-operative visits included in Medicare surgical payments are not provided to patients—meaning that Medicare has been overpaying surgeons (by an estimated $2.6 billion in 2019).

• Medicare drew from RAND reports in nearly all of its annual Physician Fee Schedule rules over the past decade and published possible changes in its 2025 Proposed Rules.
• Because changes to Medicare payments must be budget-neutral, reducing surgical payments to reflect the services that surgeons actually provide would increase revenue for other (likely primary care) practitioners.
• More accurate surgical payments would also lower financial barriers to care for some Medicare enrollees.

Surprise billing: Patients sometimes get hit with bills they did not expect, to cover the difference between what their insurer paid and the total bill for an out-of-network provider. RAND helped the Office of the Assistant Secretary for Planning and Evaluation gather information on the effects of the No Surprises Act (NSA), in preparation for congressionally mandated reports.

• Using its expertise in examining consolidation in health care markets, RAND conducted an environmental scan to understand the existing trends and potential impacts of the NSA.
• Subsequently, RAND spoke with dozens of stakeholders to get their perspectives on how the NSA would affect contracts, negotiations, and finances.

Drug price regulation: The federal government acts as both a “buyer” of prescription drugs, for its Medicare and Medicaid programs, and also as a regulator of the prescription drug market. This dual role lends policymakers a unique role in potentially shaping drug price negotiations and business decisions such as when a drug becomes available.

RAND worked with policymakers to anticipate how drug-related provisions of the Inflation Reduction Act of 2022 would affect multiple domains in the coming years, including drug utilization and access, spending, pharmaceutical markets, and innovation.

Understanding Employers’ and Employees’ Decisions

Employer-sponsored insurance is the primary path to health insurance for most working adults and their families. Yet employers have to make yearly decisions about what benefits to offer and how much of the cost to share with employees. Employees also have to make decisions with incomplete information on how their yearly medical bills will play out.

Uncovering clues: RAND researchers work with a wide variety of data, such as Census records and public and private insurance enrollment files, to find instances of possible turning points in employers’ and employees’ insurance decisions.

• Changes in minimum wage: For working families near the cut-off for Medicaid coverage, a $1 increase in the minimum wage reduced the likelihood that the family would receive employer-sponsored health insurance coverage. This finding was contrary to previous assumptions, though further analysis is needed to understand whether families would likely remain covered, for example, through ACA marketplace plans.
• Dual enrollment among veterans: All veterans who meet certain requirements may enroll in VHA coverage, and in 2023 about 84 percent of the 8.2 million VHA-enrolled veterans also had a second form of health insurance, including employer-sponsored insurance, Medicare, and Medicaid. A RAND analysis offers recommendations for VHA to reduce any duplicative payments for services and premiums that the government and veterans may be making.
• Consumer choice: An ongoing project with the Minnesota State Employee Group Insurance Program (SEGIP) has been examining how benefit design can be adjusted to help primary care clinics change health behaviors and outcomes. An initial qualitative study found that patient preferences for higher-cost providers was one of six main factors that can stymie efforts to lower costs.