Washington is paying more attention to the problem of the uninsured than it has in a decade, and with good reason. Despite a modest two-year decline during the boom years of the late 1990s, the number of Americans without health insurance has been steadily increasing. Today nearly 40 million Americans-roughly 14% of the population-have no health insurance coverage.
Some efforts by lawmakers to address the problem have been small-scale, such as providing help to workers who have lost their health insurance because of international trade. Other proposals are grander in scope, from President Bush's decision to set aside $95 billion to provide health tax credits to the uninsured to Sen. Edward Kennedy's bill requiring all businesses with more than 100 workers to offer health insurance to their workers. What all proposals share in common is an understanding that the biggest barrier to expanded coverage is cost.
Most of the uninsured lack coverage because they simply can't afford it. Any serious plan to help them must do two things: reduce the cost of health insurance and provide financial support to those who still find it too expensive.
Many factors contribute to rising health insurance premiums. They include double-digit increases in the cost of prescription drugs, higher payments to providers and an erosion of managed care. But one factor doesn't get nearly the attention it should: mandates. Every time lawmakers require that a certain condition or procedure be covered, even if the consumer buying the policy doesn't want it, it drives up the cost of health insurance. In Maryland, 22% of claims costs stem directly from mandates, according to a study by the General Accounting Office.
While there are encouraging signs on mandates at the state level-seven states have passed bills creating commissions to study the cost impact of mandates and nine more are considering such bills-the outlook in Washington remains dim. A patients' bill of rights pending before Congress contains hundreds of mandates that would drive up the cost of care, and one particularly costly mandate, mental health parity, may become law before the end of the year.
If nothing else, lawmakers serious about making health insurance more affordable should impose a moratorium on new mandates. Better still, they should roll back existing mandates and allow employers and consumers to purchase the coverage they want, free of government edicts.
Of course, even if all mandates were repealed, the cost of health insurance would still exceed the reach of many Americans, which is why the other side of the affordability equation is financial assistance. The Health Insurance Association of America has recommended a detailed blueprint for expanding health insurance coverage that mixes some government help with reliance on the private market. It starts with very low-income Americans, those below the federal poverty level. For this population, the HIAA recommends building on existing programs to expand coverage. Where possible, we encourage funds to be used to subsidize private, employer-sponsored plans. But because only 18% of non-elderly Americans in this income range have employment-based coverage, government programs must play a role as well.
For those with incomes from 100% to 200% of the federal poverty level-45% of whom have employment-based coverage-it is neither necessary nor wise to replace private coverage with a government program. Instead, the HIAA proposes refundable tax credits or vouchers worth up to 75% of an average premium. If employer-sponsored coverage were offered, the money would be used to offset the worker's share of the premium. If no employer coverage were offered, the money would be used to help purchase health insurance in the private market.
Beyond the assistance given directly to individuals, small employers also need help providing health insurance to their workers. Small-employer tax credits, reserved for firms with average wages below the median, would go a long way toward helping those who work hard but still lack health insurance.
Finally, for those without employer-sponsored coverage who don't qualify for coverage in the individual health insurance market, we recommend federal matching funds for state high-risk pools. Individuals who can afford to pay a premium, or have a voucher or credit to help them pay a premium, need a mechanism that guarantees access to coverage when their health status makes it impossible to get coverage elsewhere.
How many of the uninsured would be covered under this proposal? That's tough to predict. Our program would ensure that all Americans have access to coverage they can afford, but the decision to purchase insurance would be left to the individual. Some will criticize such an approach for not guaranteeing universal coverage, but too many combatants in the uninsured debate think in "all-or-nothing" terms. The proper goal in expanding coverage should be to provide financial protection against the cost of illness, not create a mechanism for prepaying all possible healthcare. Indeed, the need to make people more sensitive to the cost of healthcare has never been greater, which is why we're seeing new consumer-driven insurance models that provide incentives to use services wisely.
The problem of the uninsured will not go away. On the contrary, with healthcare costs projected to rise sharply for years to come, it will get worse. There are important steps lawmakers can take to help, but only if they stop making the perfect the enemy of the good.