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Health Care for America


By Jacob S. Hacker
Economic Policy Institute
January 11, 2007


A proposal for guaranteed, affordable health care for all Americans
building on Medicare and employment-based insurance

America's $2.2-trillion-a-year medical complex is enormously wasteful,
ill-targeted, inefficient, and unfair. The best medical care is extremely
good, but the Rube Goldberg system through which that care is financed is
extremely bad—and falling apart. One out of three non-elderly Americans
spend some time without health insurance every two years, and the majority
of those remain uninsured for more than nine months.1 Meanwhile, runaway
health costs have become an increasingly grave threat, not just to the
security of family finances, but also to corporate America's bottom line.

The United States spends much more as a share of its economy on health
care than any other nation, and yet all this spending has failed to buy
Americans the one thing that health insurance is supposed to provide:
health security.

Health insecurity is not confined to one part of the population. It is
experienced by all Americans: those without insurance as well as those who
risk losing coverage; those who are impoverished as well as those with
higher incomes who experience catastrophic costs; those who are sick or
injured as well as those who are just one sickness or injury away from
financial calamity. As health care costs have skyrocketed and the
proportion of Americans with stable benefits has eroded, health insecurity
has become a shared American experience, felt by those who thought they
had it made as well as those just struggling to get by.

This growing problem is pushing health care reform back onto the agenda of
American politics after more than a decade of neglect. And yet, nothing
guarantees that this debate will end differently than previous battles.
Again and again in the 20th century—most recently, in the early
1990s—efforts to make health insurance an integral piece of the American
social fabric were stymied. The stakes are too high to allow reform to be
blocked again. America's economy, the finances of its middle class, the
quality of its medical care, and the health of its citizens all hang in
the balance.

To avoid the dismal fate of previous reform campaigns, a successful agenda
must take seriously the political constraints and organizational realities
that have hamstrung reform efforts in the past. Limits on public budgets,
resistance to measures that might be seen as taking away what Americans
already have, and the embedded realities of the present system all stand
squarely in the path of grand policy redesigns—from single-payer national
health insurance, to individual mandates requiring that everyone purchase
private coverage, to a universe of individualized Health Savings Accounts.
Instead, the most promising route forward is to build on the most popular
elements of the present structure—Medicare and employment-based health
insurance for well-compensated workers—through a series of large-scale
changes that are straightforward, politically doable, self-reinforcing,
and guaranteed to produce expanded health security.

A true guarantee of affordable health care

Health Care for America embodies this strategy.2 It would extend insurance
to all non-elderly Americans through a new Medicare-like program and
workplace health insurance, while creating an effective framework for
controlling medical costs and improving health outcomes to guarantee
affordable, quality care to all. It is at once comprehensive, realistic,
consistent with American values and beliefs, and grounded in the best
elements of the present system. It combines employer and personal
responsibility with a strong public commitment to ensuring that American
workers and their families and American employers can afford coverage. It
promises better care, lower costs, more choice, healthier citizens, and
immensely stronger guarantees for workers and their families. And it
promises real savings for employers and state governments—without
un-raveling existing sources of health security, without forcing workers
to obtain coverage on their own, and without pressuring patients into
Health Savings Accounts or tightly managed health maintenance
organizations (HMOs).

What Health Care for America would do is simple: every legal resident of
the United States who lacks access to Medicare or good workplace coverage
would be able to buy into the "Health Care for America Plan," a new public
insurance pool modeled after Medicare. This new program would team up with
Medicare to bargain for lower prices and upgrade the quality of care so
that every enrollee would have access to either an affordable
Medicare-like plan with free choice of providers or to a selection of
comprehensive private plans.

At the same time, employers would be asked to either provide coverage as
good as this new plan or, failing that, make a relatively modest
payroll-based contribution to the Health Care for America Plan to help
finance coverage for their workers. At a stroke, then, no one with a
direct or family tie to the workforce would remain uninsured. The
self-employed could buy into the plan by paying the same payroll-based
contribution; those without workplace ties would be able to buy into
Health Care for America by paying an income-related premium. The states
would be given powerful incentives to enroll any remaining uninsured.

Equally important is what Health Care for America would not do. It would
not eliminate private employment-based insurance. It would not allow
employers to retreat from the financing of a reasonable share of the cost
of health insurance. It would not leave Americans coping with ever-higher
private insurance premiums with an inadequate voucher, or pressure them to
enroll in HMOs that do not cover care from the doctors they know and
trust. It would not break up the large insurance groups in the public and
private sectors that are best capable of pooling risks today. And it
certainly would not encourage individualized Health Savings Accounts that
threaten to further fragment the insurance market and leave Americans even
less protected against medical costs. Instead, Health Care for America
would preserve what works in American health financing and replace what
does not—through a simple yet comprehensive strategy that holds out the
best promise of controlling costs, improving quality, and guaranteeing
health security.

Health Care for America is not single payer—a vision that, for both
political and budgetary reasons, is unlikely to be achieved in the near
future. Nonetheless, Health Care for America does embody many of the key
virtues of a universal Medicare-like program. At heart, it rests on the
time-tested idea of social insurance, the notion that major financial
risks should be pooled as widely as possible across rich and poor, healthy
and sick, young and old. Health Care for America would create a large
publicly overseen insurance pool that would bargain for lower prices,
capitalize on the vast administrative efficiencies of a single insurer,
and use its reach and purchasing power to spearhead improvements in the
quality and cost-effectiveness of medical care.

Health Care for America also rests on the conviction that the Medicare
model has a proven track record—and a huge amount of untapped
potential—when it comes to controlling costs and improving care.
Sustaining Medicare's vital promise to the aged and disabled does not
require abandoning the Medicare model, as critics of the program
frequently claim. It requires extending the model to those without secure
workplace coverage, filling some of the glaring gaps that remain in
Medicare, and allowing the two programs to work jointly to hold down costs
and improve the quality of care.

Health Care for America would be good not just for American families, but
also for American corporations. It would make it easier for firms to
provide coverage on their own by reducing the burden of uncompensated care
and the cost to employers of covering workers' employed dependents
(because all employers would be required to con-tribute to the cost of
covering their own workers). It would also offer substantial savings to
employers that decided to buy into the Health Care for America Plan—an
option that many small and low-wage employers would likely seize.
Employers that chose to enroll their workers would be free to supplement
Health Care for America benefits, allowing them to provide better coverage
at a lower cost. Yet, unlike many other approaches promising business
savings, this approach would guarantee that every employer either provided
good private coverage or enrolled its workers in a broad insurance pool
and contributed to its cost.

If one word captures the essence of Health Care for America, it is
"guaranteed." Health Care for America would guarantee coverage; it would
guarantee a generous package of benefits; it would guarantee greater
choice; and it would guarantee real savings and improved quality. The lack
of such guarantees is at the heart of health insecurity in the United
States today. To fulfill these guarantees, Health Care for America would
create a new public–private partnership with powerful built-in incentives
to control costs while improving quality. The stakeholders in our
crumbling system would forge a new and stronger social contract for the
21st century.

How Health Care for America would provide affordable coverage to all
Health Care for America has just three central elements:

the new Health Care for America Plan, which would be open to any legal
U.S. resident without good workplace coverage;3

a requirement that employers (and the self-employed) either purchase
coverage comparable to Health Care for America for all their workers or
pay a relatively modest payroll contribution (6% of payroll) to fund
Health Care for America coverage for all their employees;

a requirement that Americans who remain without insurance take
responsibility for their and their families' health by purchasing
private coverage or buying into the Health Care for America Plan.4

The benefits of the Health Care for America Plan would be comprehensive.
Besides Medicare benefits, the plan would cover mental health and maternal
and child health and include strict limits on total out-of-pocket
spending. (Medicare currently lacks such limits, and Health Care for
America would authorize a study of how best to incorporate cost-sharing
limits into Medicare in the future.) Health Care for America would also
provide drug coverage directly, rather than solely through private plans.
And it would allow Medicare to provide drug coverage directly on behalf of
the elderly and disabled as well. In addition, a new independent Benefits
Advisory Commission would be created to determine what both the Health
Care for America Plan and Medicare should cover going forward, allowing
the harmonization of the two programs' benefits over time. To encourage
better health, preventive and well-child care and covered screenings would
be provided to all beneficiaries at no out-of-pocket charge.

The Health Care for America Plan would provide extensive assistance to
enrollees to help them afford coverage. For those enrolled in the plan at
their place of work, anyone whose income was below 200% of the poverty
level would pay no additional premiums. (The poverty line in 2006 was
roughly $10,000 for an individual and $20,000 for a family of four.) The
maximum monthly premium—phased in between 200% and 300% of the poverty
level—would be $70 for an individual, $140 for a couple, $130 for a
single-parent family, and $200 for all other families.

In sum, every American with a direct or family tie to the workforce—a
group that includes more than 80% of the currently uninsured and more than
90% of all non-elderly Americans—would be automatically covered by either
private insurance or the Health Care for America Plan.5 Employers, in
turn, would contribute a share of earnings on behalf of every individual
or family enrolled in Health Care for America. And Americans with family
incomes above 200% of the poverty level who enrolled in Health Care for
America through their place of work would pay a monthly premium based on
family income, as just detailed.

Non-elderly beneficiaries of Medicaid and S-CHIP (the State Children's
Health Insurance Program) would be en-rolled in the Health Care for
America Plan, either through their employers if working or individually if
not. Enrollment in the plan would relieve the states of a significant
share of the burden of these programs, providing states with strong
incentives to streamline enrollment. To ensure that former Medicaid and
S-CHIP beneficiaries received coverage at least as generous as that which
they had enjoyed previously, the states would be required to provide
wraparound benefits. (States could also elect to pay Health Care for
America to provide such wraparound coverage.) Moreover, all low-income
enrollees in the Health Care for America Plan would receive cost-sharing
subsidies to ensure that co-payments or deductibles did not deter them
from seeking necessary care.

For the small share of people without direct or family ties to the
workforce and ineligible for Medicaid, S-CHIP, or Medicare, the Health
Care for America Plan would be available as an attractive new coverage
option. Premiums would again be based on income, ranging from no premium
in the case of those with incomes below the poverty line to the average
actuarial cost of coverage for all enrollees in Health Care for America in
the case of those with incomes above 400% of the poverty level. In other
words, Health Care for America would allow higher-income individuals
without workplace ties to buy into the program for a premium that did not
vary with age, region, or health status (a so-called community-rated premium).

Coverage under the Health Care for America Plan would be continuous and
guaranteed. Once an individual or family was enrolled, they would remain
covered unless they gained qualified private workplace coverage.
Building on the best aspects of workplace insurance while filling the gaps

Health Care for America capitalizes on the untapped potential of workplace
insurance to ensure that virtually everyone has coverage. But while
employers would play an important role in making Health Care for America
work, they would not be asked to make an open-ended commitment. Most, in
fact, would save money under the plan, and employers as a whole would reap
substantial savings, especially over time.

While the workplace would be the main conduit of coverage, employers would
no longer need to take on the administrative burden of providing insurance
themselves. For a relatively modest cost, they could simply enroll their
workers in the Health Care for America Plan. Employers enrolling their
workers for the first time would be eligible for transitional subsidies
that would ensure that no firm faced a substantial new burden.

Even employers that did not take advantage of this cost-saving option
would gain immensely. Uncompensated care would all but disappear, bringing
down private premiums. (In 2005, annual premium costs for family health
insurance provided by private employers were $922 higher due to the cost
of care for the uninsured, while premiums for individual coverage were
$341 higher.6) Health Care for America would also spearhead quality
improvement measures that would spill over into private practice, as
Medicare's technology standards do now. And since all employers would be
required to contribute to the cost of covering their workers, firms that
now cover their workers' employed spouses or domestic partners—a common
expense for larger firms—would see their costs drop.7

For most workers with good coverage, Health Care for America would change
little—besides eliminating the very real threat of losing coverage.

Employers that provide generous insurance are largely big corporations
with high wages, precisely the employers most likely to continue to
sponsor tax-favored coverage, rather than pay the pay-roll-based
contribution to enroll their workers in the Health Care for America Plan.

Thus, enrollees in the Health Care for America Plan would mostly be
current beneficiaries of Medicaid and S-CHIP, low-wage employees, and the
working uninsured, as well as early retirees, contingent workers, and the
self-employed. All these groups have weak access to employment-based
insurance and insecure access to any insurance, and all would be vastly
better off because of Health Care for America.

To be sure, some employers would be required to upgrade their plans to
make them comparable to the Health Care for America Plan. Others might
find it cheaper to provide current levels of coverage by enrolling their
workers in the Health Care for America Plan and providing supplemental
benefits. Nonetheless, detailed estimates based on economic simulations of
the plan suggest that roughly half of non-elderly Americans would remain
in workplace health insurance, with nearly all of the other half enrolling
in the Health Care for America Plan.8 (A small share of non-elderly
Americans covered under TRICARE, the Department of Defense's health care
program for members of the uniformed services, their families, and
survivors, would be enrolled in neither.) Thus, among working-age
Americans and their families, there would be a roughly 50/50 division of
enrollment in employment-based coverage and the Health Care for America Plan.

For non-workers ineligible for Medicaid, S-CHIP, or Medicare—including
early retirees—states would be required to set up effective enrollment and
outreach systems that enrolled people when they sought state assistance or
obtained hospital care. States would also be encouraged to subsidize the
(community-rated) premiums paid by higher-income non-workers, especially
those that were temporarily unemployed. In the case of early retirees,
employers could contribute to the cost of the Health Care for American
Plan on a tax-free basis. Most employers would find this a much less
expensive way of providing retiree coverage, which is currently unraveling
due to rising costs.

In sum, Health Care for America would level the playing field, ensuring
that every firm made at least a modest contribution to the cost of
coverage for every worker. Meanwhile, Americans without ties to the
workforce would be enrolled in the Health Care for America Plan through an
individual buy-in, through state antipoverty and un-employment insurance
programs, or through new efforts to reach the uninsured when they sought
medical care without insurance.

Using the Medicare model to contain costs and improve quality
The other side of Health Care for America's pragmatic approach is its
commitment to build on the success and potential of Medicare, America's
most popular and familiar health program. For millions of Americans who
are now uninsured or lack secure or affordable workplace coverage, the
Health Care for America Plan would be an extremely attractive option.

Through it, roughly half of non-elderly Americans would have access to a
good public insurance plan with free choice of providers. At the same
time, the Health Care for America Plan would give enrollees access to a
range of high-quality comprehensive health plans that would offer broad,
easily comparable benefits.

A single national insurance pool covering nearly half the population would
create huge administrative efficiencies. Medicare's administrative costs
amount to roughly 2% of total program spending, compared with 14%, on
average, in the private sector.9

Because Medicare and the Health Care for America Plan would bargain
jointly for lower prices and join forces to improve quality, they would
have enormous combined leverage to hold down costs. Cross-national
evidence and the historical experience of Medicare show conclusively that
concentrated purchasing power is by far the most effective means by which
to restrain the price of medical services (see the accompanying box on the
cost-control advantages of Medicare-like plans). Other nations spend much
less for the same medical services than we do because their insurance
systems bargain for lower prices. And though Medicare covers less than a
seventh of the U.S. population, it has still controlled costs
substantially better than the private sector, especially since the
introduction of payment controls in the mid-1980s.

EVIDENCE ON THE COST CONTROL ADVANTAGES OF A SIZABLE MEDICARE-LIKE PLAN

Despite Medicare's older and less healthy population, "Medicare's
per enrollee spending has grown at a rate that is about 1 percentage
point lower than for private insurance over the 1970-2002 period,"
and these "[d]ifferences have been more pronounced since 1985."
(Medicare Payment Advisory Commission, Report to the Congress:
Medicare Payment Policy, Washington, D.C.: MedPAC , 2005.)
The United States has not contained costs (public and private) as
effectively as nations with broader public coverage. As the OECD
Observer notes (March 6, 2004): "U.S. health expenditure grew 2.3
times faster than GDP, rising from 13% in 1997 to 14.6% in 2002.
Across other OECD countries, health expenditure outpaced economic
growth by 1.7 times." According to OECD Health Data 2006 (Paris:
OECD, October 2006), between 1985 and 2004 health spending as a
share of the economy increased by more than 51% in the United
States—from 10.1% of GDP to 15.3%—compared with an average increase
of 34% in the other affluent OECD nations to 9.4% of GDP. The same
report also shows that the United States continues to have the
highest per capita health care spending among industrialized
countries. In 2004, U.S. spending per capita ($6,102, adjusted for
purchasing power parity) was more than two times the median for
affluent OECD countries ($2,961). (These calculations exclude Korea,
Mexico, Hungary, Poland, Turkey, and the Czech and Slovak republics.)
What accounts for these stark differences? According to a study
published in the May/June 2006 issue of Health Affairs (Anderson et
al., "Health Care Spending and Use of Information Technology in OECD
Countries,"as summarized at
www.cmwf.org/usr_doc/Anderson_hltcarespendinfotechOECD_itl.pdf),
"Higher prices, not higher utilization or resources, appear to be
the main driver [of higher U.S. spending]. More spending does not
translate into more services. In 2003, the U.S. had fewer
physicians, nurses, and hospital beds than the median OECD country.
And while the U.S. adopts many clinical technologies earlier than
other nations, ultimately it does not make them more widely
available, nor does it always provide the most sophisticated
procedures compared with other countries."
Indeed, in a recent report ("U.S. Health System Performance: A
National Scorecard" (Schoen et al., Health Affairs, web exclusive,
2006)), the United States comes up short on key health indicators,
including "deaths before age seventy-five from conditions that are
at least partially preventable or modifiable with timely and
effective health care. The United States ranked fifteenth out of
nineteen countries on this indicator as of 1998….The United States
ranked last on infant mortality out of twenty-three industrialized
countries as of 2002." In 2002, the Institute of Medicine estimated
that lack of health insurance causes roughly 18,000 unnecessary
deaths each year among working-age adults in the United States.
(Care Without Coverage: Too Little, Too Late, Washington, D.C.: The
National Academies Press).
However, according to OECD Health Data 2006, the United States is
slightly above the OECD average when it comes to life expectancy at
age 65—which may reflect in part the universal, guaranteed coverage
provided by Medicare to America's elderly.

To ensure that bargaining for lower prices does not come at the expense of
high-quality care, Medicare and Health Care for America would also team up
to monitor and improve the quality of care by applying the positive models
already developed or under development within Medicare and in the
increasingly successful Military Health System. Using the extensive
database of patient experiences it could amass, Medicare and Health Care
for America would come up with guidelines for best practices, create new
funding streams for the coordinated treatment of chronic medical
conditions, provide comparative quality information about individual
providers and medical institutions, encourage prevention and screening,
and carefully assess the effectiveness of new medical technology. These
innovations would be made available to private payers, and, as they do
today, many would likely follow the lead of the public insurance pool in
its coverage and payment decisions.

The Health Care for America proposal promises to restrain costs not just
because it creates a large public insurance pool. The structure of the
proposal also ensures that the sector best able to control costs is
rewarded with additional patients over time. Because employers covering
approximately half of workers would continue to provide private insurance,
employers and insurers would be free to experiment with their own
cost-control strategies, so long as these strategies did not involve
cutting benefits or shifting more costs onto workers. And if employers and
insurers effectively held down costs, then private insurance would become
increasingly attractive in comparison with the Health Care for America
Plan. If, by contrast, private premiums were not kept in line, an
increasing share of employers would enroll their workers in the Health
Care for America Plan.

Thus, rather than a constant tug of war, Health Care for America would
create a constructive public–private dynamic that would reward the sector
best able to control costs—and without holding the health security of
ordinary Americans in the balance.

Health Care for America's realistic financing

Health Care for America would require new federal spending. But because
the majority of workers who now have employment-based coverage would
retain private workplace insurance when the new Health Care for America
Plan was in place, federal spending would be much lower than it would be
under a universal Medicare plan. Furthermore, most of the necessary
financing would come from those benefiting directly from the new Health
Care for America Plan—namely, from employers that make the payroll-based
contribution for guaranteed health insurance for their workers and from
higher-income individuals who pay income-related premiums when enrolling
in the Health Care for America Plan.

A good deal of the additional financing would come from the reduction of
federal spending for S-CHIP and Medicaid, and from the redirection of
current state spending on these programs. (Despite requiring that the
states continue to contribute to the cost of public health insurance, this
proposal would still provide substantial savings to the states.) In
addition, the movement of workers from tax-favored private coverage into
Health Care for America would reduce federal tax subsidies for
employment-based insurance. And payroll and income tax receipts would rise
due to the substitution of wages for health benefits among firms that pay
less for insurance than they would have without reform.

The remaining federal costs could be financed by various combinations of
liquor and tobacco taxes and other dedicated levies and general revenues.
Past estimates suggest that this approach has a relatively modest net
federal cost compared with other comprehensive proposals, many of which
would cover fewer Americans.10 Moreover, Health Care for America requires
much less new tax financing (even including the payroll-based
contribution) than a single-payer proposal.

The main reason why Health Care for America is comparatively inexpensive
is that higher-wage and larger employers would continue to offer qualified
coverage privately. For large employers with higher payrolls, private
employment-based coverage would remain a good deal—especially since this
proposal would not eliminate the tax-favored status of private coverage.
For employers not enjoying the administrative economies of large-group
purchase or with lower payrolls, the Health Care for America Plan would be
the better option. Thus, most of the new federal spending would be
targeted on those firms and workers least capable of providing or
obtaining insurance today.

Because an employer's size and payroll would be the main determinants of
whether firms would benefit from enrolling their workers in the Health
Care for America Plan, there is limited reason to worry about "adverse
selection"—that is, the disproportionate enrollment of high-risk
workforces in the Health Care for America Plan. Lower-wage workers and the
currently uninsured—the two main groups enrolled in the Health Care for
America Plan—differ little from the rest of the population in their basic
health characteristics overall.11 While some degree of adverse selection
is unavoidable, the Health Care for America Plan would be such a large
pool enrolling such a substantial share of the population that it should
have little problem spreading this small amount of extra risk.

Finally, and most important, Health Care for America promises substantial
cost savings over time for employers, individuals, states, and the federal
government. By bargaining for lower prices and encouraging cost-effective
care, the Health Care for America Plan—working with Medicare—provides the
best realistic hope for finally bringing American health spending under control.

Not only would the Health Care for America Plan reap the rewards of these
efforts, so too would Medicare. The serious cost pressures on
Medicare—driven overwhelmingly by general medical inflation rather than
the aging of the population—have led to calls for restructuring the
program in ways that would leave its beneficiaries ever more at risk.
Health Care for America represents a different bargain: Medicare
beneficiaries and younger workers would be united through a new social
compact that extends Medicare-like coverage across the generational divide
to ensure health security, improve medical quality, and better control costs.

Why Health Care for America is what Americans want
Americans are ready for a bold proposal for change like Health Care for
America. Most believe the present system is broken, and most are willing
to support fundamental change even if it means new taxes or an enhanced
government role. Americans do not believe they should be on their own when
it comes to health care. They want employers to remain in the game, and
they are skeptical of measures, such as Health Savings Accounts, that
would shift more costs and risks onto them. Overwhelming majorities of
insured Americans worry that they won't be able to afford care in the
future, and a substantial majority of those who currently have insurance
fear losing coverage altogether.12

An innovative public opinion project sponsored by the Herndon Alliance has
examined Americans' core values with regard to health reform (for more,
see the box on public opinion and health reform). It finds that Americans
want a proposal that guarantees standard health benefits from a choice of
public or private coverage. Guaranteed coverage, good standard benefits,
shared responsibility and risk, and a choice between public and private
plans are all key elements of the Health Care for America Plan.

Other surveys indicate that a Medicare-like program covering all Americans
beats the current system hands down. However, Americans are even more
receptive to a mandate on employers to provide coverage—the most popular
reform option in most polls.13 In a poll done after the 2006 election,
among those wanting to expand health care coverage the two most popular
options were an employer mandate (44%) and an expansion of existing public
programs (32%)—the twin foundations of Health Care for America.14
Health Care for America respects these longstanding views. It requires
that employers insure their workers, but provides employers with the
Health Care for America Plan as a modestly priced option through which
their workers can obtain insurance, thus ensuring that this requirement is
not unduly burdensome.

Health Care for America also responds directly to two other key elements
of public opinion. First, most Americans do not recognize the full extent
to which they pay for health care through forgone cash wages and the
revenue cost of health care tax breaks. Rather than suddenly confront
Americans with these huge hidden costs (a political nonstarter proposed by
both Medicare for All plans and individual mandate initiatives), Health
Care for America would largely preserve the current division of employer
and individual responsibility, while nonetheless delivering major savings
to business.

Second, and no less important, Americans remain extremely wary of tightly
managed health plans like HMOs, which have not only lost out in the market
but have also been the target of political backlashes nationwide.15 And
yet, nearly all proposals relying on private plan competition rely for
much of their savings on the rapid further movement of Americans into
HMO-style plans, with restricted choice of providers. To get this movement
underway, these plans would impose substantial penalties on those who want
to have a free-choice, comprehensive plan.

PUBLIC OPINION AND HEALTH REFORM: THE HERNDON ALLIANCE'S FINDINGS

Over the past year, an innovative research project has examined
American public opinion about health care reform, with a particular
focus on the Health Care for America approach. The goal of the
project, coordinated by a consortium of organizations called the
Herndon Alliance, is to develop new strategic initiatives that can
attract the enthusiasm of voters who traditionally support reform as
well as the swing constituencies whose support will be most
contested in any political battle. Combining the distinctive
approaches of two established firms, American Environics and Lake
Research Partners, the effort marries sophisticated social values
research and the more traditional tools of focus groups and public
opinion polls.

The Herndon process developed and tested a strategic initiative that
includes the core elements of the Health care for america proposal.
the research found that this approach had very strong support from
all voters: 8 on a scale of 10. "Base" voters, defined as those who
strongly support the value of universal health care, gave it a 9.1,
while three key swing constituencies rated it from 7.8 to 8.0. The
study found that this approach was sturdy when voters were presented
with some of the expected attacks on it. For example, each swing
voter group favored access to a guaranteed affordable health plan
and the choice to use a private plan, despite the argument that
requiring such a choice will push people into inferior public plans.
In addition, respondents expressed only mild concern that choice and
quality of health care would decline, less than usually seen with
universal health care proposals.

The Herndon Alliance expects to launch a more in-depth look at
public opinion about various policy options congruent with the
Health Care for America proposal in the coming year.

Health Care for America does not need to rely on pushing Americans into
HMOs. Its savings instead come principally from the ability of Medicare
and Health Care for America to bargain jointly for lower prices while
upgrading the quality of care. Though the Health Care for America
insurance pool would allow Americans to purchase good private plans, all
Americans enrolled in the program would be guaranteed a reasonably priced
fee-for-service health plan with free choice of providers at no extra cost
to them.

To pass the test of public opinion, a reform proposal should be simple,
rest on familiar foundations, and not be threatening to those Americans
relatively happy with their coverage today. Health Care for America is
such a proposal. It contains no complex purchasing pools or complicated
new tax credits, no tough new incentives for HMO enrollment, and no
unpopular changes in the tax treatment of health benefits. Instead, it
builds on the most popular elements of the present system, changing little
for most Americans with secure insurance today, except to promise them
true health security at last.

A time for vision

Over the last generation, Americans have grown more economically insecure
even as the nation's economy has expanded handsomely. In nearly every
facet of our economic lives—our jobs, our family finances, our pension
plans, and above all our health insurance—risk and responsibility have
shifted from the broad shoulders of employers and government onto the
fragile backs of American workers and their families. This great risk
shift must end, and the place to push back first is health care, the
epicenter of economic insecurity in the United States today.16
Health Care for America would provide the health security that is sorely
lacking, guaranteeing affordable, quality health care to all. Without
upending our system, it would create a new framework ensuring that
everyone is covered, that risk is spread broadly, and that costs are
controlled and quality improved.

Health Care for America is consistent with American values, politically
realistic, and based on real-world successes. It draws on the best
elements of existing ideas for reform—combining a requirement on employers
to insure their work-ers, a new Medicare-like plan covering tens of
millions of Americans, and an individual coverage requirement on those
without workplace ties—to create a flexible framework for affordable,
quality universal health care that can evolve over time in the right
direction for Americans.

Jacob S. Hacker is professor of political science and resident fellow of
the Institution for Social and Policy Studies, Yale University, and a
fellow at the New America Foundation. His latest book is The Great Risk
Shift: The Assault on American Jobs, Families, Health Care, and
Retirement—And How You Can Fight Back (Oxford University Press, 2006).

Endnotes

1. Families USA, One in Three: Nonelderly Americans Without Health
Insurance, 2002-2003 (Washington, D.C.: Families USA, 2005), available
online at
www.familiesusa.org/assets/pdfs/82million_uninsured_report6fdc.pdf
2. This proposal builds on a plan developed in 2001 for the "Covering
America" project sponsored by the Robert Wood Johnson Foundation. Although
key features of the proposal have not changed, a number of provisions have
been altered or updated. Readers interested in the earlier proposal
("Medicare Plus") and the cost and coverage estimates for this earlier
proposal that were produced by the Lewin Group can find them at
www.greatriskshift.com/ideas.html.
3. For simplicity, legal U.S. residents are hereafter referred to as
"Americans."
4. All Americans would eventually be required to show proof of coverage by
attaching a standard insurance verification form to their federal income
tax return. Because all workers and their families would be enrolled
automatically in either Health Care for America or employer-sponsored
plans, the individual mandate would have true significance only for the
small share of Americans who both lack ties to the workforce and are
currently ineligible for Medicaid or S-CHIP (the State Children's Health
Insurance Program). To reach those in this population who do not file tax
returns, states would be given powerful incentives to enroll non-workers
in Health Care for America. They would also be encouraged to subsidize
Health Care for America coverage for the temporarily unemployed, and to
establish mechanisms for enrolling the uninsured in Health Care for
America when they sought care.
5. The estimate of the share of the non-elderly population with ties to
the workforce is drawn from the 2006 Current Population Survey and
represents the proportion of non-elderly individuals living in households
with positive earnings. The exact share is 94%.
6. Families USA, Paying a Premium: The Added Cost of Care for the
Uninsured (Washington, D.C.: Families USA, 2005), available online at
www.familiesusa.org/resources/publications/reports/paying-a-premium.html.
7. Firms that do not cover all their workers would be required to pay 6%
of payroll for health insurance (with transitional rate reductions
available to newly insuring firms). Usually, this payment would fund
coverage under the Health Care for America Plan. However, if a firm's
worker was insured by another firm, the share of payroll contributed on
behalf of that worker would be remitted to the firm sponsoring coverage.
The contribution rate would be the same whether workers were full time or
part time.
8. These estimates, prepared by the Lewin Group in response to an earlier
version of this proposal, are available at http://www.
esresearch.org/publications/SheilsLewinall/E-Hacker.pdf.
9. Private administrative costs are taken from National Health Expenditure
data, available at
www.cms.hhs.gov/NationalHealthEx-pendData/downloads/nhe2004.zip.
Administrative and net costs of private health insurance (including
profits) were 14.4% of private insurance payments in 2004. Medicare's
administrative costs are calculated from tables II.B1 and III.B1 of the
2006 Medicare Trustees Report, available at
www.cms.hhs.gov/ReportsTrustFunds/downloads/tr2006.pdf. The estimate
includes "administrative expenses" from table II.B1 ($6.1 billion) and
"fraud and abuse control" costs from table III.B1 ($1.1 billion)—which sum
to administrative costs of 2.1% of expenditures ($336.4 billion).
10. As part of the Agenda for Shared Prosperity project, the Economic
Policy Institute plans to commission independent estimates of the cost and
coverage impact of the Health Care for America proposal.
11. Although some of the uninsured are in poor health (in part because
they lack insurance), many are young and inexpensive to insure. Past
estimates suggest that the overall costs of uninsured Americans should be
about equal to the rest of the population once they are covered. See Alice
M. Rivlin, David M. Cutler, and Len M. Nichols, "Cost Estimates: Authors
Respond," Health Affairs Supplement (Spring 1994), p. 55; P. Anthony
Hammond, "Actuarial Memorandum: Premiums in Regional Health Alliances
under the Clinton Administration's Proposed Health Security Act," Health
Insurance Market Reform, Hearing before the Committee on Finance, United
States Senate, 103rd Congress, 2nd Session, 1 February 1994, Washington:
U.S. GPO, 1994, pp. 102-4. The same is true of lower-wage workers. They
are more likely to have a work-limiting health condition than higher-wage
workers but also younger. And the overall incidence of work-limiting
health problems even among low-wage workers is less than 10 percent. See
Peter Schochet and Anu Rangarajan, Characteristics of Low-Wage Workers and
Their Labor Market Experiences: Evidence from the Mid- to Late 1990s,
Report Prepared by Mathematica Policy Research, Inc., for the Office of
the Assistant Secretary for Planning and Evaluation, U.S. Department of
Health and Human Services (Washington, D.C., 2004), available at
http://aspe.hhs.gov/hsp/low-wage-workers04/.
12. For a good recent compendium of polls, see Ruy Teixeira, "What the
Public Really Wants on Health Care," The Century Foundation, December 4,
2006, available online at
http://tcf.org/publications/healthcare/wtprw.healthcare.pdf.
13. In a December 2003 Harvard School of Public Health/Robert Wood
Johnson/ICR poll, 76% of respondents supported employers being required to
offer a health plan, while 54% supported an individual coverage mandate.
See Teixeira (ibid.).
14. Kaiser Family Foundation/Harvard School of Public Health, "The
Public's Health Care Agenda for the New Congress and Presidential
Campaign," December 2006, available online at
www.kff.org/kaiserpolls/upload/7597.pdf. The third option, new tax credits
for private insurance, garnered support from 24% of those favoring action.
15. HMO enrollment as a share of all health plan enrollment nearly doubled
between 1988 and 1996, but has since fallen dramatically—and in 2005 was
only around a third higher than it had been in 1988. Moreover, HMO
coverage has shifted away from more tightly managed group and staff model
plans toward mixed and open models. See Kaiser Family Foundation, "Trends
and Indicators in a Changing Health Care Marketplace," available online at
www.kff.org/insurance/7031/index.cfm (visited January 2, 2007).
16. See Jacob S. Hacker, The Great Risk Shift: The Assault on American
Jobs, Families, Health Care, and Retirement—And How You Can Fight Back
(New York: Oxford University Press, 2006).
Acknowledgments
Elise Gould and Josh Bivens provided invaluable assistance in preparing
this proposal. Richard Kirsch kindly provided a detailed summary of the
research of the Herndon Alliance on public support for "guaranteeing
Americans standard health benefits from a choice of public or private
coverage." Roger Hickey deserves credit for the "Health Care for America"
label, and he and Diane Archer made possible many meetings with
stakeholders and experts that have in-formed this proposal. Patrick Watson
and Kieran Daly provided excellent editorial assistance, and they and the
rest of the EPI team—including Ross Eisenbrey, Mark Levinson, and Larry
Mishel—carefully (and patiently) shepherded this proposal into final form.

 

 

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