The Pragmatic Road Toward National Health Insurance

America's health insurance system has few defenders, many critics, and no shortage of proposals for reform. Business and labor, the nation's governors, religious leaders, advocates for children and the elderly, and the public at large share a sense that major changes are necessary and inevitable. Political leaders such as Senate Majority Leader George Mitchell and House Majority Leader Richard Gephardt rank health care reform high among domestic priorities. Even the House Minority Leader, Newt Gingrich, has begun to focus on the shortcomings of our health insurance system. The challenge now is to develop a plan for comprehensive reform that has broad enough support to prevail over well-financed, deeply entrenched groups with an interest in the present system.

Advocates of system-wide reform have focused on two basic approaches. Under a "single-payer" system of national health insurance, such as Canada's national program, the government finances health care, while private physicians and hospitals provide it. The chief alternative is a system of universal coverage with cost controls that builds upon our existing employer-based health insurance by requiring businesses either to provide coverage or to pay the government to insure their employees. Known as "pay-or-play" models, these approaches envisage an expanded public program for current Medicare and Medicaid beneficiaries, the unemployed, and employees of companies that decide to "pay" into the public system instead of "playing" by providing insurance on their own.

Both roads to national health insurance would achieve the goal of universal coverage. Both could achieve the goals of controlling health care costs, reducing financial insecurity, improving the quality of health services, and ultimately better protecting the public's health. We believe, however, that while the Canadian model is preferable as policy, the only politically feasible alternative is the pay-or-play approach that builds on our current employer-provided coverage. This is the model used by Democratic congressional leaders who are pursuing major national health reform. If advocates for reform wish to play a role, they need to address the key issues raised by such an approach.

The Emerging Reform Consensus
Skyrocketing health care costs are creating a crisis of affordability for virtually all sectors of our society. From 1980 to 1990, per-capita health spending in the United States more than doubled, from $1,016 to $2,425, and is expected to more than double again by the decade's end, reaching $5,515.

How this increase affects business is well captured by one pair of statistics. In 1965 health expenses were only 14 percent of net profits; now corporations are spending as much on health benefits as they make in profits. Between 1977 and 1987, employers' average real premiums for health insurance rose 49 percent. Frustrated by the failure of cost controls, business leaders are increasingly willing to abandon their ideological predispositions and accept the need for government involvement in system-wide solutions. According to a recent Gallup poll, 91 percent of chief executive officers of the nation's biggest companies now believe the health care system needs fundamental change or complete rebuilding. Three-quarters are convinced the problems cannot be solved by companies on their own.

If big business is frustrated by its inability to control the costs of insurance, many small businesses are frustrated by their inability to get insurance coverage at all. A small business in one of many red-lined industries, or a firm whose employees are perceived by insurers to be high risks, can find it impossible to obtain insurance at any price. If insurance is available, the premiums for a small group are likely to be high, and to rise rapidly, because of the administrative costs of small-group policies and the rating practices of the insurance industry. Insurers are no longer willing to spread the cost of serving small groups across the wider community they serve.

State and local governments, too, find themselves overwhelmed by the problems of health care finance. As employers, state governments experience the same growth rates for health benefits as all employers face. The states also now must share the costs of federally mandated policy initiatives that have expanded access to health care without systemic reform.

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Labor, like business and the states, must now devote increasing energy to worrying about health care. Unions now are struggling just to maintain the health benefits they won previously. Many workers have had to sacrifice wage increases to fund health premium increases; some have been forced to strike to defend their insurance plans. Not surprisingly, health care reform is a top legislative priority for the AFL-CIO, which has launched an unprecedented campaign to educate its rank and file on the issue.

By cutting into their real wages and raising their taxes, the costs of health care are indirectly eroding the standard of living for many Americans. Those with insurance, whether buying it on their own or getting coverage through their job, are paying ever increasing premiums, deductibles, and copayments.

And, of course, millions of Americans remain uninsured. Between 1980 and 1989, according to one estimate, the number of Americans without any health insurance increased from 25 million to 34 million. During the 28-month period ending May 1987, more than one out of every four Americans, or an estimated 63 million people, lacked health insurance for a month or more. Another 20 million non-elderly Americans are underinsured

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