by Merrill Goozner
April 25, 2007 at 11:39 am
· Filed under 4th WHCC
Ron Wyden (D-OR) knows health care, knows health insurance, and knows the history of health care reform. He also knows politics. So the carefully considered calculations he put into his universal health insurance bill (S. 334, the Healthy Americans Act) are worth reviewing.
First, he believes the time is right to end the employer based system. He rejects the poll-driven concept that this would scare the bejeezus out of most Americans. His bill would tell employers to end their plans, give their employees a dollar-for-dollar increase in wages with the money (this makes the cost still tax deductible to employers, but taxable to employees), and have those workers go out in a revamped insurance marketplace to buy individual or family plans. Oh, and for individuals and families, buying insurance would be mandatory – like getting a driver’s license.
Consumers will like it, he claimed in the second-to-last session of the conference this afternoon, because “if they can buy insurance for less than what the employers give them, they keep the money.” Employers will like it because they are freed from all future health care cost increases.
Wyden said insurance executives have told him that they can “thrive and prosper” in this revolutionized environment. That’s interesting because his plan calls for throwing a national regulatory blanket over the entire field, something that has never been tried. When it comes to all forms of insurance, regulation remains a state-by-state affair.
He would have the federal government outlaw companies’ ability to discriminate against people in poor health or choose to insure only younger, healthier people (the adverse selection problem). He would impose a community rating system and create a minimum set of services that must be provided by every plan. “The days of cherry picking are over,” he said. “You don’t get to just choose healthy people and send the sickest people over to public programs.”
He also challenged the conventional wisdom that health insurance reform must await the next president. He believes it’s possible to get some traction this year. He has ten senators – Republicans and Democrats – signed onto his bill and he expects something similar to be introduced in the House.
Is this politically feasible? He mentioned in passing that there would be no new taxes and no new health care expenditures under his bill. The Lewin group has projected it would save $1.45 trillion over the first ten years, money that could be redirected to covering those who get either inadequate benefits or no benefits at all now. Turning the benefit into wages will also generate new taxes for the federal government to channel into subsidizing those who can’t afford to buy insurance in the private marketplace.
Sounds pretty good, but let’s get hypothetical. How will this affect the solidly middle-class voter who currently has one of those eroding employer plans? They’ll get more money in their paycheck, but probably about the same or less than what it will cost them to buy comparable insurance in the private marketplace. So there’s no benefit there.
However, they’ll also face a higher tax bill because they fell above the line getting subsidy. So for many middle class voters, this will look, smell and feel like a tax increase because it will be one. Given all the corporate executives lining up behind the Wyden plan, the chance that liberals or economic populists will point out that his plan relieves employers of their burdens while taxing the “hard-working middle class” has to be rated a better than 50-50 possibility.
And will insurance companies really line up for national regulation of their industry? Perhaps. Why not test that proposition? The current individual insurance market, which will become central under this plan, is usually described as dysfunctional. As an earlier speaker said, “If you’re in the small group or individual market in this country, you’re toast.”
Instead of testing his bill’s overall strengths in this Congressional session, Wyden should introduce as separate legislation the part of the Healthy Americans Act that would impose community rating and forbid cherry-picking on health insurance carriers selling individual and small-group plans.
The President’s signature on that legislation would be convincing evidence that the insurance industry is ready for reform.
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To take employers out of the economic loop, while seemingly attractive to many, would be a major mistake. They are, for better or worst, a necessary and positive force in this complicated economic checks-and-balances matrix of health care market and government forces. I know they want out. Hell, everybody wants out. But without their skin in the game, a major constraint on our considerable national appetite for anything health care will be lost.
I appreciate your comments on Senator Wyden’s Healthy Americans Act, but there are just a few points that I’d like to clear up.
“Turning the benefit into wages will also generate new taxes for the federal government to channel into subsidizing those who can’t afford to buy insurance in the private marketplace.”
Technically, yes, the cash-out would be taxable. The funding for the subsidies, though, would come from “Employer Shared Responsibility Payments,” which are made by all employers, as well as from savings gained through the elimination of several federal bureaucracies (e.g., Medicaid). The new revenue, however, would not come from the middle-class. Their increased income is off-set by a new health care standard deduction — and a new per child deduction — that is phased-in and phased-out by income, and is done so in such a way that benefits the middle-class.
“[Middle-class workers will] get more money in their paycheck, but probably about the same or less than what it will cost them to buy comparable insurance in the private marketplace. So there’s no benefit there. However, they’ll also face a higher tax bill because they fell above the line getting subsidy. So for many middle class voters, this will look, smell and feel like a tax increase because it will be one.”
Again, as I mentioned above, there really will be net saving for most middle-class families. More importantly though, why wouldn’t someone prefer this system, even if they did have to pay the same amount as they do today? The plan would enable someone to take their insurance with them from job to job – or keep their insurance if they lose their job. Also, someone could no longer get priced-out if they become sick. In our view, this new security would be a significant gain for millions of American families.
Merrill wrote @ April 26th, 2007 at 9:19 pm
Alec,
I have not costed out the details of the standard deduction/child credit. I have no doubt that a progressive like Sen. Wyden would structure the plan to benefit most Americans. But the operative word in your post, and in my last sentence is “most.” The fact that many upper middle class voters would probably not benefit from the bill makes it susceptible to demagogy, from either the right or left. Doesn’t make it bad. Just makes it politically vulnerable.
As far as Fred’s comment goes, I love the idea that someone still actually believes that corporate involvement as insurance providers (by either self-insuring or buying insurance) has been a constraint on overall system costs. Some individual companies, usually quite large, have been successful. But as a systemic solution, I think we have a few decades of experience now to suggest that it represents a minimal constraint on those who would run up health care costs because it is in their interest to do so.
[…] on the topic, here are a few more opinions from previous posts: - Ron Wyden (D-OR) believes the time is now to end employer-based healthcare. - Dr. Richard Fogoros, author of Fixing American Healthcare, […]
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