Friday, May 29, 2009


Things have been quieter on the health care reform front this past week, as the two biggest current fights—over the public plan proposal and over taxation of health care benefits—moved behind closed doors on Capitol Hill.

Both of these fights are still generating visible heat—literally visible, in fact—with television commercials from conservatives attacking the public plan (“the government is going to control your medical care”) and unions attacking the proposal to tax health benefits (“the government is going to slash our paychecks”). Neither issue will be settled soon, and either could derail reform permanently.

There are more battles coming, too, as lobbyists for insurers, drug manufacturers, providers, businesses and unions try to fight off any proposal that might curtail their incomes.

The next one is likely to be over coverage mandates, imposed on individuals or employers or both.

There were some hints of the upcoming clash in recent comments by Senate Finance Chair Max Baucus. In a breakfast meeting sponsored by the Kaiser Family Foundation, he estimated that only 94 to 96 percent of Americans would be covered by the reform model he expected, then was forced later to amend his remarks to “as close [to 100 percent] as we can.” The gap between Baucus’ two estimates could be critical, since AHIP has publicly agreed to eliminate medical underwriting only if universal coverage is achieved—and a mandate is the obvious way to do so.

Whether imposed on employers or individuals, or both, coverage mandates will be a political hot potato. Small businesses will fight a play-or-pay mandate (and one that they are willing to accept may leave a big hole in reform financing), while conservatives will undoubtedly battle any attempt to require individuals to carry a prescribed level of insurance. An individual mandate may have been—for the moment, at least—successful in Massachusetts, where the percentage of uninsured was low, but it will present severe problems in states like California and Texas, with very large numbers of uninsured who would be expected to contribute towards coverage.

Mandates also face other problems. Tying them to income tax filings—as Massachusetts has done—will not make them more attractive, and will open up questions of how to determine compliance, what penalties to impose for non-compliance, and how to relate a retroactive process (tax filing) to a current requirement (insurance coverage).

Given these difficulties, an alternative that may get more attention is some form of voucher, as suggested by Fuchs and Emanuel. While the VAT levy that they proposed is almost certainly not politically viable as a funding mechanism, building some part of the coverage cost into the tax system, as in the Wyden-Bennett Healthy Americans Act, might gain support. From an administrative viewpoint, guaranteeing coverage to everyone who files a tax return is simpler than a mandate-penalty model, and could be more politically acceptable.

What’s clear is that insurance system stability depends on getting very, very close to universal coverage, and that either an individual mandate (most likely combined with an employer mandate) or a quasi-voucher system is the only way to get there.

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