Conditional Cash Transfers: An Interim Model for Health Care Reform?

This past September, New York City’s Mayor Bloomberg welcomed 5,000 families into the pilot program of Opportunity NYC– the nation’s first conditional cash transfer (CCT) program. Based on a Mexican program called Oportunidades, CCT programs like Opportunity NYC (ONYC) provide financial incentives for poor households to “meet specific targets” in three areas: education, employment/training, and health.

I recently spoke with Héctor Salazar-Salame, Advisor to the Center for Economic Opportunity, which operates ONYC, about the health components of the program. I wanted to get an idea of the aims and strategy behind ONYC—and also to learn more about CCT as a potential model for thinking strategically about health care reform. 

According to the city’s press release, ONYC’s health incentives will be offered “to maintain adequate health coverage for all children and adults in participant households as well as age-appropriate medical and dental visits for each family member.” In terms of coverage, families can earn “$20 or $50 per adult per month for maintaining health insurance and $20 or $50 for maintaining health insurance for all the children in the family.”

The point is to encourage low-income families to enroll in health insurance plans. “Many families work for employers that offer insurance,” Salazar-Salame explains, but “many times the necessary employee contribution is quite high for low-income families. We’re providing an incentive for families to opt into their work-based, private health plan—and hoping that the incentives will help them offset the cost of the employee contribution.”

If parents are unemployed—or work for employers that don’t offer coverage—the family can still be eligible for health incentive rewards that keep them enrolled in Medicaid. “We know that to recertify for Medicaid can be a challenging yearly process that takes a lot of time,” says Salazar-Salame. (It’s worth keeping in mind that roughly 30 percent of parents who don’t manage to enroll or re-enroll their children in Medicaid have less than a high school education).  “We’re hoping the incentive will help them maintain the insurance that they’re eligible for,” Salazar-Salame explains.

Maintaining insurance is harder than it sounds. In October, Maggie wrote about  just how difficult it can be to stay enrolled in Medicaid and SCHIP, pointing to a Health Affairs article titled "Why Millions of Children Eligible for Medicaid and S-Chip Are Uninsured."

"If families do not complete the eligibility renewal process, which
occurs once or twice annually depending on the state, then their
children ‘disenroll’–a loss of coverage that is often completely
unintentional," the study explained.  Moreover, in many cases, "states
took steps that intentionally or unintentionally exacerbated dropout.”
At the time, Maggie suggested that if expansion of SCHIP is impossible
now, “legislators should not give up on the issue. Helping those who
are already eligible from being stripped of coverage would be a good
place to start.” CCTs are one way of doing this.

In addition to offering incentives that encourage parents to keep their
children insured, ONYC also offers from $100 to $200 per family member
for preventive health screenings. I asked Salazar-Salame if this
particular reward plan was all about the health of participating
families or if there was also a back-door cost-cutting strategy at work
here (i.e. more preventive care means less costly catastrophic care).

“While MDRC [a research firm] will evaluate the impact of the program
on care costs, we are primarily concerned about improved family
health,” he says. “What we’re trying to do is incentivize people to
build human capital through these activities. Many times low-income
families have competing priorities, and hopefully this program will
help them” make preventive screenings a priority. 

ONYC views preventive screening as a way to help low-income workers
keep themselves healthy so that they can be productive—and  stay on a
track them will lead them out of poverty. Salazar-Salame noted that
“[the experience in] Mexico shows that [with CCT] the need to use sick
days has decreased.” 

But even if cost-cutting isn’t the point of ONYC’s health incentives,
Salazar-Salame admits it could be by-product.  “Families that go in for
preventive screenings can avoid emergency situations that could have
been dealt with through a preventive screening that caught it sooner,”
he notes. “By giving families a medical home [i.e. a regular source of
care], you’re hoping to reduce the number of times they need to use the
emergency room.”

This isn’t to say that more preventive care is a sure-fire way to
drastically reduce health care costs. According to the American College
of Emergency Physicians, emergency care makes up about five percent of
the nation’s health care bill—nothing to scoff at, but also not the
crux of the cost problem. More important are other concerns, like the
high costs of prescription drugs (Americans pay from 30 to 80 percent
more for prescription drugs than citizens in other countries), medical
technology, and administrative costs associated with a multi-payer
system. Marketing and underwriting (deciding who to insure and how much
to charge them based on their medical condition) account for two-thirds
of private insurers’ overhead.

But the potential for savings is there; and it speaks to how CCTs could
contribute to broader health care reform. Recently here on Health Beat,
Maggie has written about the political realities that health care
reformers will face given the fact that, unless progressives sweep
Congress, National Health Care Reform will not be a slam-dunk in 2009.
She quotes
Harvard professor Robert Blendon saying that “reformers need to ask
‘what are the points that are absolutely critical to various interest
groups if we want them to find reform acceptable?’” In other words,
reform has to be about negotiation and pragmatism, not just idealism.

Which gets me thinking: in the short term, could the CCT model serve as
an example of how to expand health coverage in a way that steps on as
few toes as possible?

The model certainly seems to have a political appeal that more
comprehensive and high-minded reform ideas lack. First, the emphasis on
preventive care that may cut emergency care is something that appeals
to both the Left and the Right.

Further, CCTs can expand coverage—a good thing for liberals—without
imposing any mandates—a good thing for libertarians. Since CCTs are
conditional, there’s no mandatory component to the program, meaning
health care is not “controlled” by the government.

Conservatives also would be happy to know that there’s barely any
bureaucracy attached to CCTs, because rewards are electronically
deposited into family accounts after the participants submit proof of
completed activities (such as medical receipts) on a bimonthly basis.
It’s the social policy version of a direct-deposit mail-order rebate.

Liberals can take comfort in the fact that ONYC can fill in coverage
gaps between abject poverty and the working poor. Partnered up with
programs like New York’s Family Health Plus, which provides free
coverage for low-income families that make too much to qualify for
Medicaid, CCTs can provide incentives for those in the purgatory
between too-rich for welfare and too-poor for employer coverage.

Those who empathize with the plight of the low-income and uninsured
will also be glad to know that the Opportunity NYC rewards are untaxed.
“All the rewards the family receives are considered gifts,” according
to Salazar-Salame. “Monetary rewards do not count against families to
make them ineligible for public assistance or other programs. We’re
working on waivers.”

Of course, it’s far too early to say for certain if ONYC will be
successful even in its basic goal of fighting poverty, let alone in
introducing a short-term strategy for incremental health insurance
reform.  It’s only been around for two months, and Salazar-Salame
himself readily admits that “it’s a pilot program, so we don’t know if
it will work or not.”

Moreover, in our polarized society, even a program like ONYC can face
ideological barriers. In trying to please both the Left and the Right,
CCTs may leave purists on both sides unsatisfied.

In August, The Gotham Gazette ran a piece
that suggested as much. The article quotes a representative of the
conservative Manhattan Institute as saying that ONYC “could destroy the
ordinary incentive system that usually motivates people to engage in
good" behavior, because it creates the expectation that people “should
do such proper things as take their children to school or study only if
they are bribed by the government.”

At the other end of the spectrum, a liberal respondent told the Gazette
that the plan “just reinforces the impression that if everybody would
just work hard enough and change their personal behavior we could solve
poverty in this country, and that’s not reflected in the facts.” As an
October 28th article in New York Magazine noted, for poor families, the problem isn’t a matter of behavior, but rather of insufficient income.   

But for now, this is all speculation. What we know for certain is that
the program gives families an opportunity to earn anywhere from “$3,000
to $5,000 per year depending on family size and level of targets met.”

Whether this will lift ONYC families out of poverty is one question;
but another, that should pique the interest of those who care about
health care reform, is whether CCTs provide a model for expanding
health coverage today while we continue to debate how to achieve large
scale reform tomorrow.

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