Like a bridge over partisan waters: Politics, philosophy divide parties
Since the Bush administration and Senate Democrats agreed to spend some $9 billion a year for the next 10 years to provide health coverage for the uninsured, the nonpartisan Washington, DC-based Economic and Social Research Institute (ESRI) says the two sides need to resolve their political and ideological differences.
"Millions of people could receive much needed assistance if policy-makers move beyond inflexible, partisan proposals and combine elements that would appeal to multiple perspectives," says ESRI president Jack Meyer about the institute’s report outlining potential common ground for significant incremental progress in covering the uninsured.
Lead author Stan Dorn, senior policy analyst at ESRI, says that different approaches "can grant each side half a loaf or assign important decisions to states or individuals rather than federal policy-makers. We can achieve significant progress without asking either major school of thought to violate fundamental principles."
Mr. Dorn tells State Health Watch, "It should be possible for people of good will in both political parties to come together and work out their differences so progress can be made on this problem."
The need to build a bipartisan consensus is seen as pressing in light of the fact that the number of uninsured Americans is going up. The ESRI report shows how agreed-upon resources could be invested to cover millions of uninsured Americans using methods that bridge diverse political philosophies.
Three approach categories
Mr. Dorn and Mr. Meyer say there are three approaches:
- individual choice strategies that would give uninsured families a range of options for using health insurance subsidies;
- hybrid strategies that couple public program expansions favored by some policy-makers with tax credits favored by others;
- state-based strategies that would give states resources to choose from a menu of policy alternatives for expanding coverage.
"This paper’s goal is not to advocate any particular policy," the researchers write. "Rather, its purpose is to illustrate, through specific examples, that differing policy preferences and political philosophies can be bridged through well-designed pragmatic proposals to help significant numbers of uninsured Americans, using resources already promised by leaders in both parties."
The authors say the political differences reflect, in part, broader divides between advocates of tax credits and supporters of public programs such as Medicaid and the State Children’s Health Insurance Program (SCHIP).
"If such philosophical differences persist in future years," they caution, "significant progress toward covering most uninsured Ameri-cans will require policies that are acceptable to policy-makers with a variety of philosophies and policy goals. . . . To be sure, incremental strategies have limitations, beyond helping only some of the uninsured. Frequently, incremental steps add new overlays that make the already fragmented health care system even more complex. That said, bipartisan agreement may be easier to secure on an incremental than a comprehensive approach."
• Individual choice strategies. While many different individual choice approaches are possible, the authors say, they focus on one that provides refundable advanceable tax credits that uninsured people could use to choose from a variety of health benefit plans, using the Federal Employee Health Benefits Program (FEHBP) as a model. Some changes would be needed in the FEHBP so it could serve low-income uninsured Ameri-cans effectively, such as limits on copayments, co-insurance, and deductibles, and incentives for plans to participate in a program with a smaller enrollment than FEHBP.
A basic design question, according to the report, is whether to provide smaller tax credits for numerous uninsured people or larger credits for comparatively few, and analysts disagree about the precise subsidy size needed for significant takeup by the low-income uninsured. "Given this uncertainty and the limited impact of even $9 billion a year," it says, "the policies describe tilt toward large credits, controlling costs through careful targeting of the beneficiary group and the incentives for selecting lower-priced coverage."
Mr. Dorn and Mr. Meyer outline an approach in which credits go to those with incomes below a specified percentage of the federal poverty level such as 100% and, if resources permit, workers who meet specified characteristics such as income below a somewhat higher threshold, employed by a small firm, perhaps with fewer than 10 employees, and lack access to employer coverage or can buy employer coverage only by spending above a specified percentage of household income, perhaps 5%.
Tax credits could cover a fixed dollar amount of health insurance premiums (for example, $1,000 per adult, $500 per child, to a maximum of $3,000 per family), plus a portion of premium costs above that fixed level. The credit could be capped at 90% of premiums.
The authors say that one important question is whether the tax credits would be large enough to make coverage affordable for low-income uninsured people. They say credits as they propose them would be sufficiently large that beneficiaries would be responsible for roughly 21% to 25% of premiums for typical FEHBP coverage (see chart, below). That represents more affordable premium costs than many other tax credit proposals, they say. Under their approach, workers with income at 200% of the federal poverty level could purchase coverage by spending 4% to 5% of household income.
Worker Premium Costs for FEHBP Plans in 2002: Impact of Tax Credits
However, the lowest income workers might have serious problems purchasing FEHBP-type coverage, even with such a comparatively generous subsidy. The report says that some research suggests that few low-income households use public subsidies if family premiums exceed even 1% to 3% of household income.
• Hybrid strategies. The goal of a hybrid strategy is to bridge policy differences by combining expansion of public programs with tax credits for purchasing private insurance. The authors say that one possible program expansion would create a new option for "need-based" Medicaid so that states could cover residents based purely on limited income without regard to other household characteristics. States would determine the percentage of federal poverty level that would qualify as long as it was under a federal upper limit. Such an approach would bring coverage to childless adults, the one category that state Medicaid programs generally may not cover, no matter how low an individual’s income level. One potentially contentious issue is the level of benefit package to be provided.
As part of their fact-based nonpartisan approach, Mr. Dorn and Mr. Meyer outline the pros and cons of following this strategy and note that there are modifications and also far different approaches that could be considered.
Combining program expansion with tax credits would mean, according to the report, that states facing budget problems could have an incentive to save money by shifting beneficiaries from Medicaid or SCHIP, which states partially fund, into tax credits funded at no state cost. Defenders of public programs often fear harm to beneficiaries who need the special protections those programs offer. On the other hand, some argue that in some states, public programs such as Medicaid have serious problems.
One approach to resolving this issue, the report says, would be to deny tax credits to individuals with income under a certain cutoff point who qualify for Medicaid or SCHIP under current law. Individuals with incomes above the cutoff point who qualify for both tax credits and public programs could choose to enroll in any health plan available through either of the programs. If people eligible for public programs choose plans serving tax credit beneficiaries, public programs would offer wraparound payment for services and costs not in the coverage purchased by credits. Each state could be required to pay its share of the federal tax credit costs for state residents who qualify for Medicaid or SCHIP. Implemented effectively, the researchers say, that could eliminate state financial incentives to "dump" public program enrollees into tax credits.
• State-based strategies. Choices policy-makers could consider offering states include: 1) public program expansions in groups Medicaid and SCHIP did not previously cover in the state; 2) refundable, advanceable tax credits to individuals; 3) financial support to employers for expanded health coverage; 4) restructuring health care markets using strategies such as purchasing cooperatives, high-risk pools, and market reforms; 5) buy-in options permitting individuals and groups to enroll in plans offered through Medicaid, SCHIP, or public employee programs; 6) multistate strategies permitting states to join together and address common problems that cross state lines or pool purchasing power; 7) local or regional strategies; and 8) other approaches proposed by a locality, a state, or a combination of states.
The report says that despite pressing fiscal limitations, some states still have gone beyond planning to implement innovative approaches to coverage expansion, which could be used to further develop a menu of state options for a new health insurance grant program. Cited are efforts in Massachusetts with several programs to help employers and workers pay their respective premium shares for employer-based coverage and work in Arkansas to combine a substantial Medicaid expansion financed by tobacco settlement funds with multifaceted support for small employers, including a Medicaid buy-in option, local purchasing pools, and risk pools to stabilize coverage.
ESRI suggests that national standards could be used to evaluate state proposals, such as fiscal integrity, covered benefits, costs to low-income beneficiaries, quality of care, choice of health plan options, safeguards to preserve employer-sponsored insurance, safeguards to preserve prior public coverage, limits on administrative and other non-coverage costs, and eligibility rules.
"Federal policy-makers pursuing this approach will need to resolve various trade-offs," the report says.
"Perhaps the most basic involves accountability vs. flexibility. National standards ensuring that federal grants achieve certain policy goals can limit state flexibility. . . . Another trade-off involves whether grant funds are limited to the uninsured [to maximize coverage] or can be used to lighten the financial burdens of insured, low-wage workers [to treat individuals more fairly]. Federal policy-makers face a similar trade-off between coverage and equity to states. More uninsured get help if federal grants provide new coverage rather than simply replace previous state spending. But if federal funds cannot cover people eligible under previous state law, the states that have done the most to cover the uninsured will be the most severely limited in their use of the new federal dollars."
Policy-makers also will need to assess how much, if any, state match to require. Especially in times of economic downturn, the authors say, nationwide rapid and thorough implementation of new approaches may require reducing or eliminating state match requirements. However, matching requirements give states incentives to control costs and promote efficiency.
Federal officials interested in pursuing state-based approaches need to decide how they will hold states accountable to meet the requirements and achieve the objectives of a new health insurance grant program. Options include requiring that states provide specified information; ensuring that state policies are publicly available; using financial incentives to encourage positive state action; requiring states to set specific objectives, goals and measurements, notice and appeal policies, federal enforcement, and individual enforcement.
The authors conclude that since the collapse of national health reform in 1994, policy-makers have adopted several incremental reforms at the national level. Each of these reforms had bipartisan backing and each was a product of compromise. "This history suggests," according to Mr. Dorn and Mr. Meyer, "that supporters of incremental but significant health coverage expansions may be more likely to succeed with proposals that both represent sound policy and offer prospects of broad-based support."
Mr. Dorn tells State Health Watch that he expects policy-makers to be thinking and talking about the issue between now and January, and also anticipates that President Bush’s budget request next year will include a major tax credit proposal, perhaps again worth $9 billion a year. "That budget proposal will give policy-makers an opportunity to come together and develop a framework to do some good for people and still satisfy all sides in the philosophical debate," he says.
A second opportunity for action may come, according to Mr. Dorn, if the economic downturn continues and members of Congress feel a need to work on an economic stimulus package, which could include an effort to expand health coverage to the uninsured.
Are such changes likely to occur? Mr. Dorn says he sees hope because of actions that were taken in approving Trade Adjustment Assistance legislation that provides refundable, advanceable health insurance tax credits to more than 100,000 displaced workers and retirees. The credits can be used to purchase insurance through state-based groups, certain employers and, in limited cases, the nongroup market. "That legislation is a sign to us that our policy-makers are able to overcome ideological and philosophic impasses," he adds.
[To access the report, go to: www.esresearch.org. Contact Mr. Dorn and Mr. Meyer at (202) 833-8877.]