Last year, Massachusetts enacted a fill-in-the-gaps approach to expanded health coverage. There was great self-congratulation by the Democratic legislature and the then-Republican governor, Mitt Romney. The press was mostly favorable. The hope was that by using existing subsidy dollars more efficiently and levying a token penalty on employers ($295 per employee) who failed to provide coverage, Massachusetts could get most people insured.
Last year, Massachusetts enacted a fill-in-the-gaps approach to expanded health coverage. There was great self-congratulation by the Democratic legislature and the then-Republican governor, Mitt Romney. The press was mostly favorable. The hope was that by using existing subsidy dollars more efficiently and levying a token penalty on employers ($295 per employee) who failed to provide coverage, Massachusetts could get most people insured.
On January 8, California Governor Arnold Schwarzenegger launched a more robust version of the Massachusetts plan. Pennsylvania Governor Ed Rendell is promoting something similar. And last Thursday a coalition of business, medical, insurance, and some consumer groups proposed a national version of a similar formula.
If this general strategy of incremental reform building on private insurance seems too good to be true, that's because it is. The cheering is premature, and the buyer should beware.
The Massachusetts plan brings coverage under MassCare to everyone with incomes below the poverty line. People with incomes up to about $50,000 for a family of three can buy subsidized private insurance on a sliding scale. The insurance industry is devising new plans for people above that line that will supposedly be more affordable than current plans.
Healthcare for All, the reform coalition whose director, former State Representative John McDonough, somewhat reluctantly endorsed the deal, felt it did not go far enough, but that the plan got a foot in the door to universal coverage. McDonough's coalition is pressing for more resources. But is it the right door?
It's commendable that more people will be covered, though the current funding is woefully inadequate to meet the promises. But the Massachusetts approach builds on, and reinforces, an inefficient and fragmented system -- one where private insurers divert too much money from actual medical care and have too large a political role. In that respect, the strategy takes us further away from efficient, universal health insurance.
Some 80,000 uninsured people have already gotten coverage either through MassHealth (the state's Medicaid program), or through "Commonwealth Care," the new, subsidized program for people moderately above the poverty line. The unsubsidized, supposedly affordable plans will be unveiled by the insurance industry by July.
Eventually, McDonough expects something like two-thirds of those who lack insurance in Massachusetts will eventually be covered thanks to these programs, leaving the Bay State with about three percent of its people still uninsured. "It's not universal coverage, but it's not a bad day's work," he says.
True enough. However, surveys by the Greater Boston Interfaith Organization indicate that the proposed premiums may not be affordable for many moderate income people. And insurers simply cannot deliver unsubsidized plans that are both affordable and adequate for working people of slightly higher incomes.
Decent family insurance costs at least $8,000 a year. To deliver an affordable plan for total premiums of, say, $3,000 or $4,000 a year means either wholly inadequate insurance, or huge out-of-pocket payments that will force many "insured" people to forego needed care.
Last Friday, the state body responsible for certifying new and supposedly affordable insurance private plans targeted at moderate income families authorized plans that cost people as much as $7,500 a year. Who can afford that even on a $67,000 income, the state's median?
These plans may have modest premiums but will include huge deductibles and co-payments, as well as stringent limits on participating doctors. Without additional tax dollars, more people may be nominally insured -- but more insurance will be inadequate and more people will go without needed care.
Indeed, while over 47 million Americans have no insurance, and about 85 million are uninsured at some point during a two year period, America's hidden health problem is under-insurance. A large share of bankruptcies caused by medical bills are declared by people who had health insurance that proved inadequate.
As employers keep shifting costs to workers, and insurance companies more intensely "manage" care -- i.e., deny it -- the under-insurance epidemic will only worsen. By partnering with the insurance industry, state policies like that of Massachusetts could end up improving the statistics on people insured -- and worsening the broader problem of under-insurance.
Schwarzenegger's plan, at least, would levy a more serious charge on employers who fail to provide insurance -- four percent of payroll. But that doesn't buy good insurance either, and the whole approach remains a big subsidy to the insurance industry, just like President Bush's privatized Medicare drug program. The Wall Street Journal recently reported that insurers are lining up to support Schwarzenneger, because they see big profit opportunities.
A far better alternative was recently proposed by Yale Professor Jacob Hacker and the Economic Policy Institute. Employers would either have to provide good insurance, or pay a tax of six percent of payroll. People without insurance could buy into a public program much like Medicare, on a sliding scale. That same program would enroll people whose employers elected to pay the tax instead of providing insurance.
Hacker estimates about half of all Americans would soon be in the universal pool. Over time, the superior efficiencies of the public program would attract more people. The private health insurance industry, as a superfluous and inefficient middleman, would gradually dwindle. We'd eventually get universal and public coverage without the fragmentation.
Of course, the people who brought us HMOs will fiercely oppose it, but that's not necessarily bad. Harry and Louise, the stars of the insurance industry commercials that helped kill the Clinton plan, have a lot less credibility these days. Reformers seeking universal coverage should recognize that the private insurance industry is less a credible partner than the prime obstacle.
Robert Kuttner is co-editor of The American Prospect. A version of this column originally appeared in The Boston Globe.
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