Health Care Kudos and Concerns

We need a universal plan, but rushing it will compound problems

Speaking as a longtime proponent of "universal health care," I am heartened by the remarkable consensus that's emerging on major elements of such a plan. These include:

  • A mandate that everyone not covered by an employer health plan obtain individual coverage with premium subsidies to make it affordable for those with lower incomes.
  • A prohibition against exclusion of pre-existing conditions and limitations on premium differentials that an insurer could charge based on an individual or group's health status.
  • A play or pay requirement that all but very small employers offer health insurance to their workers or be assessed for not doing so.
  • Stipulation of the benefits a health plan must offer to qualify (with some grandfathering of existing plans) including prohibition of annual or lifetime ceilings on benefits.

As both House and Senate committees seek to fast-track health care legislation this month, the biggest sticking point would appear to be whether it should provide for a "public" plan to compete with private plans. Interest groups that are otherwise supportive (insurers, doctors, and hospitals) are dead set against a Medicare-like public plan for fear it would dominate the market and dictate provider reimbursement rates. While renouncing "socialized medicine," President Obama insists a public-sector presence in the market is needed to further his goal of containing escalation of health care costs. But it's going to take compromise of some sort to get the modicum of bipartisan support that's needed in the Senate and the backing of "Blue Dog" conservative Democrats in the House.

In ordinary times, I'd be supportive of Obama's getting momentous health care legislation enacted by early fall. The goal of extending coverage to the nearly 50 million people who are uninsured is a worthy one. And I subscribe to the principle that everyone has a shared responsibility to share the cost so that everyone in turn has equal access to health care (with subsidies to those who can't afford to pay for it).

However, these are anything but ordinary times. The nation is mired in the deepest economic downturn since the Great Depression. The unemployment rate is approaching 10 percent; many businesses, especially small businesses, are struggling to survive; and the federal government is running up an unprecedented budget deficit approaching $2 trillion dollars to support things like the administration's $787 billion stimulus program and the $700 billion financial market (cum auto industry) bailout bill that preceded.

While many of the uninsured are healthy and otherwise well-off younger adults who've simply opted out of paying for insurance they don't think they need, an extraordinary number are now struggling to make ends meet and can ill-afford premiums that average upwards of $10,000 a year per household. The same goes for small employers who have been dropping their group insurance plans at a record rate as a matter of survival.

True, the unemployed and low-income workers who have lost their group coverage could qualify for premium subsidies that both House and Senate versions of the legislation would extend to households with incomes of up to 300 percent of the federal poverty line (about $42,000 for a childless couple). But these costs seem likely to push the costs of the legislation well above the $1 trillion that has been projected.

Obama and Congressional leaders insist these costs would have to be covered by some combination of tax increases and spending cuts, but they have yet to settle on plans for doing so. Meanwhile, the specter of ever-rising federal deficits is contributing to a rise in interest rates that threatens to dampen prospects for an economic recovery, especially in the depressed housing market.

Adding to the case for caution is the enormous complexity of the nation's health care system in general and those complexities surrounding implementation of the proposed changes in particular. Just a few of the myriad questions that remain to be answered include: How would the benefits of a qualified health plan be defined? How much allowance for premium differentials would be made based on an individual's health or habits such as smoking? How much of the cost of a qualified health plan would an employer have to bear? How could eligibility for a sliding scale of premium subsidies be determined on an ongoing basis and how would they be paid? How would adherence to the program's mandates (and penalties for non-adherence) be assessed?

The pending legislation would leave most of these determinations to be made administratively, which would seem to give rise to a huge new bureaucracy. It's unclear how much of the rule-making would be federal and how much might be assumed by the states through a network of new insurance "exchanges" that are envisioned.

There's enormous room for the law of unintended consequences to come into play here. For starters, if nearly 50 million uninsured people become entitled to health care, will there be a shortage of doctors, especially primary care doctors, to provide it? And if the plan induces many small employers to drop their health plans and let their workers obtain coverage on their own, it will intolerably compound discrimination in the federal income taxation of premiums. Employer plan premiums are tax-exempt regardless of who pays them whereas individuals who obtain coverage on their own are only entitled to a tax deduction to the extent their premiums and other out-of-pocket medical expenses exceed $7,500 in a year.

Fortunately, there's one state that provides a model for and experience with most of the elements of what's now before Congress. That state is Massachusetts, whose Commonwealth Care program took effect in 2006 after two years of planning. While the program has been subject to mixed reviews—a shortage of primary care doctors being a prime criticism—only 2 percent of residents now lack insurance even before a $900 fine for not obtaining it takes effect this year, and the quasi-governmental authority that approved and coordinates the variety of private health plans offered in the state takes pride in the fact that premiums actually declined this year.

Still, extending the Massachusetts plan, or anything like it, to the nation as a whole represents an enormous undertaking. Attempting to do so in haste could well create more problems than it solves. Yet the goal of universal health care is too worthy to be left in limbo.

One approach to achieving a more deliberate implementation would be for Congress to enact a set of standards but look to a designated agency to promulgate proposed rules and regulations on which all affected parties would have ample time to comment and, once adopted, ample time to prepare for their effective date. The way in which the Environmental Protection Agency sets regulations under the Clean Air and Clean Water Acts could be analogous.