Health Care in America
The debate over the nation's health care situation recently has intensified in earnest here in Washington. The Senate's Democratic leadership has unveiled a plan which it believes will help to solve the health care crisis. As this article is penned, the Republicans are framing their response. The media have labeled health care 'the issue of the '90s.' A great deal is at stake for all Americans, but especially for small businesses and their advisors.
The scope of the health care crisis is staggering. The twin problems of access and cost have taken a heavy toll on the nation's economy. Some 37 million Americans have no health insurance coverage at all; three-fourths of these individuals are working men and women. The price of insurance premiums has grown by double digits each year for the past several years. In a development surprising some business leaders, more and more Americans of every political persuasion are throwing up their hands in desperation and looking to Washington for a solution. The Democrats think they've found the answer in HealthAmerica, their new initiative.
The legislation seeks to assure every American basic health insurance coverage, either through a plan provided by an employer or through a federal-state public insurance program called AmeriCare. Except for long-term care services, AmeriCare would replace Medicaid. The Democrats maintain their plan couples universal health insurance coverage with a comprehensive cost-control program and with provisions to reflect the special needs of small business.
The crux of the plan is what has been dubbed 'play-or-pay.' Employers would be offered a choice of providing coverage meeting specified minimum standards for employees and their families or making a contribution to the public plan. Proponents of HealthAmerica estimate that the contribution would work out to about 8% of payroll. However, the Small Business Administration estimates that current actual health care costs for small business average approximately 12% of payroll. One must ask how the government proposes to provide coverage for one-third less than the private sector does.
For employers choosing to 'play,' employees may be required to pay up to 20% of premium costs. The plan would be required to cover all employees who work more than 17 hours per week and their families. One of the problems still to be ironed out is family coverage for dual-career families.
For those not covered by employment-based insurance, including those whose employers choose to 'pay,' AmeriCare coverage would provide access to the same health care benefits. AmeriCare would be administered by the states, subject to national standards for eligibility, reimbursement and coverage.
Individuals below the poverty line will pay no premium. Those between 100% and 200% of poverty would pay on a sliding scale. Those above 200% of poverty would be charged based on ability to pay.
Of course, the reason the government is feeling pressed to get into the health care business is that the private sector can't afford it anymore. It's tough to imagine the public sector would fare any better without some change, so cost containment measures are included in the bill. The cost containment strategy is organized around steps to reduce unnecessary and ineffective care, to reduce the excessive costs of the pluralistic payment system and to limit unrestrained price and volume increases by providers. The first goal is a little nebulous. The second would be achieved through standardized claim forms. The last item, however, really gets to the heart of the health care crisis - cost.
In order to rein in costs, an independent agency along the lines of the Federal Reserve Board would be established to set national health expenditure goals, in total and by sector of the health care industry. Advisory goals would also be established by state and region. The board would then convene providers (e.g., hospitals, doctors, et. al.) and purchasers (i.e., insurance companies) to conduct negotiations on rates and other methods of achieving expenditure goals. Negotiated rates would be binding.
The states would also be required to establish insurance consortia. It is hoped that, through these consortia, enough economic pressure would be brought to bear on providers to encourage them to negotiate in earnest. However, the bill stops short of actually mandating prices for health care services.
In order to make this medicine a little easier for small business to swallow, several incentives have been included in the legislation. First, the applicability of the law to small business would be phased in over a five-year period. Next, Section 162(1) of the Internal Revenue Code (deduction of health insurance costs for self-employed persons) would be made permanent and expanded to 100%. Finally, very small businesses with low profit margins would receive a tax credit to cover up to 25% of the program's costs.
The Democrats' proposal has received generally favorable reviews, from being labeled an 'important first step' to qualified support. Again, it must be pointed out that this support cuts across traditional ideological boundaries. Moreover, it appears that the Republican response will not include universal coverage. Although it would be premature to comment on a plan that has not even been formally announced, this fact, if true, would seriously damage any proposal's credibility.
Nevertheless, certain important questions about HealthAmerica remain to be answered. Particularly: 1. How can small business be certain
that the 8% figure won't
quickly turn into 12% or even
15% as costs rise and the level of
required health care services is
sought to be expanded? 2. Why are the plan's proponents
mandating coverage, but not
mandating prices? If the consensus
has emerged that the
marketplace must be usurped,
why do so only on one side of the
equation? 3. As with all 'revenue-negative'
legislation in Washington these
days, where will the money come
from to finance the government's
end of this deal?
The argument that health care is a basic right to which all Americans should be entitled is a compelling one. However, before this can come to pass, these important questions need to be answered.
