Flatlined: Resuscitating American Medicine

Chapter 16. Three Options for Covering the Uninsured

To achieve a high-performance health care system, the United States must do two things: (1) cover the uninsured and (2) reform the medical industry. The two are interrelated but separate policy undertakings. First, let’s consider the expansion of insurance coverage. A Federal Problem: The Uninsured The problem of the uninsured will not solve itself. Nonetheless, many in Washington circles, including members of Congress, believe that the states will take responsibility for covering their uninsured where the federal government has not. This delusion is fueled by a gridlock in federal policymaking and has been encouraged by Massachusetts’s recently enacted plan to cover nearly all its uninsured. But what is possible in a handful of northeastern and midwestern states with small percentages of low-wage workers and uninsured residents is not possible in more populous states with very different demographics (California, Texas, and Florida, for example). For instance, a plan that cost Massachusetts 132 million dollars in new expenditures was projected to cost California about 9 billion dollars.1 The reason for the difference in 179 16 Three Options for Covering the Uninsured Employer-based health care financing subsidizes the health insurance of 60 percent of the population while leaving more than half of the uninsured, who are ineligible for public programs and cannot afford insurance, to pay full price. CH016.qxd 10/7/08 10:08 AM Page 179 cost is that in 2006 only 1 1 percent of the non-elderly population of Massachusetts was uninsured, and 40 percent of these people were in families with incomes at more than twice the federal poverty level (a low cutoff point for affordability of insurance). By contrast, among the non-elderly population of California, 21 percent were uninsured, and only one-third of them lived in families with incomes at more than twice the federal poverty level. In Massachusetts 79 percent of people in families with at least one full-time worker were covered by employer-based insurance; in California the figure was 62 percent in 2006. Governor Arnold Schwarzenegger’s effort to lead California to cover the majority of its uninsured failed in large part because of a projected annual cost of 14.9 billion dollars in the face of a 14.5-billion-dollar budget deficit.2 The only workable solutions to America’s health care problems are federal. There are three options for covering the uninsured in the United States: ■ Expanding present financing methods ■ Implementing a single-payer system analogous to Medicare for all ■ Creating a reformed insurance market that protects individuals who directly purchase their health insurance. Helpless Employers U.S. health care is broken, and continuing to finance and manage it by the current model presents a number of challenges. It is, however, the most politically palatable. In 2005,158 million Americans were insured through their employers. Fourteen million purchased their own insurance (called individual insurance), and 47 million were left uninsured. Seventy-five million were covered by public programs.3 Remember that 82 million people lose coverage sometime in a two-year period, and16 million are underinsured , totaling more than one-third of the non-elderly U.S. population. Expanding the present system has the advantage of not interfering with the coverage of 70 percent of the American public who are secure in their Medicare or private coverage. Businesses finance the largest number of insured Americans, so why have they been unable to control health care cost? The answer is that no one business, however large, can face off against the medical industry REFORMING AMERICAN HEALTH CARE 180 CH016.qxd 10/7/08 10:08 AM Page 180 because no business has enough employees to exert competitive pressure. Businesses also lack the time and resources to fully understand and confront the problems of medicine. They must focus on generating revenue, not solving their problems with medicine. An Unjust Tax Code The existing structure of health care financing is propped up by a tax code that was enacted for reasons that no longer exist. During World War II employers used health insurance benefits to reward employees because they could not legally increase wages. The National War Labor Board exempted health benefits from wage and price freezes in 1942, and the Internal Revenue Service exempted employer-purchased group health insurance from taxable gross income in 1943. Employer-based health insurance grew from 12 million people in 1940 to 159 million...