Template for Health Care Coverage

Health insurance premiums are rising at double-digit rates. Drug prices are skyrocketing. Employers are curtailing health insurance benefits and boosting the share of costs employees must shoulder. Stunned by rising premiums, employees are forgoing coverage for themselves, their spouses and their children. As a result, the ranks of the uninsured rose to more than 41 million, a jump of 1.4 million in 2001 alone, and appear likely to continue expanding as rising costs hammer employers whose profits are depressed by a weak economy. No one should be surprised if 50 million people are uninsured by 2005.

Meanwhile, going without health insurance is becoming increasingly risky. In the past, the uninsured could count on free or discounted care from hospitals and doctors. But hard bargaining by cost-conscious businesses and tough rules under Medicare and Medicaid are narrowing the financial capacity of hospitals and physicians to offer free or discounted care to the uninsured. These market-driven developments threaten to give a new and terrifying meaning to being without health insurance. A genuine mess is in the making, and no one is doing anything about it.

The reason is no mystery. Washington officials in both parties vividly remember the political debacle when President Clinton proposed a national health plan. The plan was ridiculed. Clinton’s popularity plummeted. Democrats then lost control of Congress.

Now a more vivid example of an increasingly acute national problem confronting a virtual absence of political will would be hard to find. Nor are prospects for action improving. Congress has proved incapable of acting on such comparatively minor health care issues as a patients’ bill of rights or a drug benefit for Medicare beneficiaries. President Bush’s plan to offer tax credits to promote purchase of individual insurance may pass now that Republicans control both houses of Congress. But the president’s plan will do little to reduce the ranks of the uninsured and may inadvertently increase them. The reason is that the tax credit is small, and the market for individual health insurance is burdened by administrative overhead. Because insurers charge the highest premiums to those who need care most, the young and the healthy have no trouble finding coverage at reasonable cost, while the old and the sick may find coverage only at exorbitant prices, if at all. Beleaguered employers may treat a new tax credit as cover for dropping sponsorship of health plans. If so, the population of the uninsured could explode.

Yet continued inaction in the face of rising costs and the loss of insurance coverage would merit use of a much-overworked word: tragic. It is also unnecessary. A template exists for constructive action that appeals to important principles espoused by both parties. That template is the State Children’s Health Insurance Program (SCHIP). Under this program, the federal government provides states with grants to be used to provide health benefits to children from families with incomes too high to qualify for Medicaid. As long as they do not curtail Medicaid coverage, states are free to pursue this goal under a variety of arrangements depending on local conditions and political preferences. SCHIP now provides health insurance to 4.3 million children. Most would otherwise be uncovered. It uses the conservative principle of permitting states latitude and independence to achieve the liberal goal of extending health insurance coverage.

This marriage of liberal objectives and conservative means could be extended to health insurance coverage generally. The federal government could offer states grants provided the states make progress in reducing the numbers of uninsured people within their borders. States would be permitted to use varying techniques to extend insurance—a statewide insurance plan similar to one Oregon recently considered; incremental expansions such as those in Maine, Arizona and Vermont; income-tested coverage for moderate-income families; tax credits.

States should be required to mandate that plans meet minimum coverage standards, that insurers cover all applicants at reasonable rates and that they not use the grants as an excuse to curtail Medicaid coverage. The grants would have to be large enough to defray most, but not necessarily all, of the cost of such coverage. Because the proportion of state populations without insurance varies widely, the formula would have to reward both absolute and proportionate reductions in the ranks of the uninsured. Special arrangements would be necessary for corporations operating in two or more states. And data collection would have to be improved so that information about health insurance coverage was available more promptly than it now is.

Not all states would be equally effective, and some might misuse their grants. Later legislation could deal with these problems. But honoring the principles of federalism requires that states be permitted to experiment, and experimentation means mistakes will sometimes be made. Only a plan that appeals to moderates of both political parties stands any chance of ending the political paralysis that currently prevents serious consideration of how to reverse a deadly trend toward denial of financial access to medical care for tens of millions of Americans.