Addressing Crowd Out
Issues to ConsiderIn responding to concerns about crowd out, a few specific issues to consider include:Many lower-income families do not have any access to employer-based coverage. Some employers, usually concentrated among certain industries and smaller firm sizes, do not offer coverage, and some employers may not offer coverage for a worker’s dependents (e.g., they might cover the employee, but not a spouse or children). For instance, 53 percent of low-income children live in families where at least one employed parent is offered health insurance through an employer, compared to 91 percent of higher-income children. 1 Even if an employer does generally offer coverage, not all employees, especially part-time, seasonal, or new employees, are eligible for that coverage. Many of the employment characteristics that affect access to private coverage for low-income families also do so for moderate-income families. 2 Families may have legitimate reasons for foregoing private coverage. Some families may have valid reasons, or a “good cause”, for not taking advantage of private coverage, and states may decided that they, therefore, should not be subject to anti-crowd out policies. For instance, some families may find their private coverage to be unaffordable (i.e., when private coverage costs more than five or ten percent of a family’s income). Several states acknowledge this and exempt such children from their uninsured waiting periods. |
 Framing the Issue
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| Not all crowd out needs to be considered inherently problematic.
More broadly, the reality that private coverage is not always
affordable and of high quality (e.g, some private plans impose high
deductibles or fail to cover services critical for children, such as
vision, hearing, mental health, and dental care) illustrates that not
all substitution needs to be considered inherently problematic. For
example, allowing an uninsured child into SCHIP whose low-income
parents otherwise would need to spend 20 percent of their income on
health care costs may offer much needed help to the family, perhaps
allowing them to improve and stabilize their living situation. It also
should be noted that researchers, in general, have opted not to treat
the dropping of individual coverage in response to government subsidies
as substitution because the individual coverage market can be highly
unstable and/or expensive. In some other contexts, substitution has
been widely acknowledged and accepted. For example, Congress adopted
the Medicare Part D drug benefit fully aware that most seniors already
had private drug coverage through retiree health plans or other
sources. One early study estimated that up to a quarter of seniors with
private drug coverage would drop coverage to enroll in Part D. 3 Instead of imposing a waiting period or higher premiums to discourage crowd out, the federal government opted to maximize participation in Part D while offering employers financial incentives to continue providing drug coverage through their retiree plans.
The price of anti-crowd out strategies can be high. Strategies to reduce crowd out, such as waiting periods, can cause children to remain uninsured or delay their enrollment in coverage. Research has shown that uninsured children generally have less access to medical care, especially primary care, and as a result may receive more costly care in emergency rooms or may altogether delay or forgo care necessary for their healthy development. 4 Delayed or forgone care of uninsured children can have adverse effects on their health and can make treatments more costly when a child is able to obtain coverage or secure medical services. Any policy that leaves children uninsured in an effort to minimize crowd out should be considered in the context of the health consequences and financial costs associated with limited access to health care. Go To Next Section: State ExperiencesFootnotes
1. See. L. Clemens-Cope, et al., “Access to Employer-Sponsored Health Insurance Coverage Among Low-Income Families,” Urban Institute (September 2007). Back |