Evaluating healthcare reform proposals
By Ed Muir

Last spring, I wrote about the government’s role in America’s healthcare system and promised a sequel. To recap: Healthcare costs are the leading cause of personal bankruptcy in the United States. Americans spend more on healthcare than people in other developed countries, and our outcomes, measured by factors such as life expectancy and infant mortality, are poorer than in other developed nations.

We have 47 million Americans without health insurance. Health insurance premiums have risen at a much faster rate than inflation. Higher-wage U.S. companies that have to provide healthcare benefits to their workers are at a competitive disadvantage compared with companies in nations where taxpayers pick up healthcare costs. And lower-wage companies sometimes try to gain a competitive advantage by having their workers use Medicaid instead of employer-provided healthcare, distorting the playing field.

Healthcare is a huge problem, yet—despite the efforts of many—the federal government is not taking the steps it needs to remedy that problem. President Bush recently opposed efforts to make more poor children eligible for publicly subsidized insurance through the State Children’s Health Insurance Program (SCHIP). Why? Call it the "No Insurance Company Left Behind" rationale: Some low-income families that manage to have insurance but struggle to pay the premiums would drop private insurance to take the public benefit. 

Some state governments are trying to step into the gap created by federal inaction. Massachusetts has created a program that will, on paper at least, insure everyone in the state. At this writing, comprehensive efforts are under way in other states, including California, Oregon, Washington and Wisconsin. Others are pursuing simpler approaches. For example, Indiana recently raised the cigarette tax, devoting the proceeds to covering the uninsured.

How do we evaluate the relative merit of state proposals? Ask these questions:

■   What’s the quality of the healthcare benefits given to the uninsured? High deductibles and health savings account options may lead to people avoiding care until it’s too late. 

■   Does the plan discourage employers currently providing good coverage from doing so, or otherwise lower the quality of coverage you might already receive? The Massachusetts plan and a number of other state proposals require companies that don’t provide insurance to pay a small payroll tax that is used to cover the cost of providing uninsured employees with a minimal health plan. Other proposals would give public employees the same benefit as everyone else in the state, and then allow them to try to bargain back to their previous level. The fine print is important if you get good benefits.

■   How does the plan control costs? Investments in preventive care, streamlining bureaucratic structures, better data reporting to patients, and using a larger system’s bargaining power to negotiate lower costs with vendors are among the strategies that need to be adopted. 

■   How is the plan funded? Some politicians, like Gov. Arnold Schwarzenegger in California, are loath to call funding mechanisms "taxes." Funding should be stable and adequate for the program needs; and the burden of payment should be distributed fairly. An important thing to remember when looking at the tax bill for one of these plans is that much (and perhaps all) of any new tax money is simply a redirection of what citizens already were paying for healthcare.

Action is needed for healthcare reform, but we must make sure the action taken is the right action.

Ed Muir is associate director of the AFT research and information services department.