These are difficult times for advocates of universal health coverage. According to the latest data from the Census Bureau, the number of uninsured Americans has risen to 43.6 million, up from 39.8 million just two years ago.
Meanwhile, Congress is preoccupied with drug benefits for seniors. The nation's attention is on foreign affairs. State budgets are in crisis. The federal budget has plunged into deep deficits.
However, there are reasons for hope. First, ideological differences have narrowed. Republicans and Democrats in Congress laid the groundwork for future political compromises on health coverage with the successful enactment of the Trade Adjustment Assistance (TAA) Act of 2002. The TAA bill created the Health Coverage Tax Credit (HCTC), which is a model for bipartisan progress on health coverage: public funding for private coverage obtained through employers or with the supervision and assistance of states.
Second, President Bush and most of the Democratic presidential hopefuls are in favor of refundable tax credits for health coverage like the HCTC. President Bush's proposal has a serious flaw -- it would threaten employer-based coverage. Therefore, it is not taken seriously in Congress. However, with a simple correction to the design, the president's proposal would be compatible with many Democratic proposals.
Third, Congress allocated $50 billion over 10 years for health coverage in this year's Budget Resolution. That is not nearly enough to achieve universal coverage. But it is enough to shrink the number of uninsured by several million, and build momentum for further progress.
Clearly, stressed federal and state budgets do not have room for large, broad-based programs designed to achieve universal coverage in one "big bang." However, we can make significant progress toward a coherent vision for universal coverage by gradually expanding the current programs for transitional coverage in a series of logical, coherent steps.
To start, we should ensure the TAA health tax credit is successfully implemented and is extended to all workers receiving unemployment benefits. Then, we should allow the tax credit to "follow" workers to their new jobs, especially if their new employers didn't offer health benefits, so that workers could take new jobs without jeopardizing their health coverage. The next step would be to allow at least some part of the tax credits for health insurance to follow low-wage workers indefinitely, and regardless of whether or not their new jobs offered health coverage. Finally, we should to expand eligibility for the tax credits to all low-wage workers, not just those who were previously unemployed.
The Progressive Policy Institute (PPI) believes this step-by-step approach would lead to a more general system of tax credits for low- and moderate-income workers, in cooperation with their employers. It would spark improvements in state purchasing groups and pools, so that affordable health coverage is available to all.
Federal tax credits made available via the workplace and through state-based purchasing systems are key to an ambitious, progressive push toward universal health coverage that can be enacted with bipartisan support, as the budget permits.
The Importance of a Consensus Vision. In the early 1990s, competing visions for universal coverage -- state single-payer systems, Medicare for all, private market systems -- led to a large-scale clash of ideologies, which led, in turn, to legislative failure.
Health reformers of the early 1990s failed to do two things: (1) create a consensus on how the health coverage should be expanded and (2) develop a practical, step-by-step plan for progress toward the consensus plan.
In any realistic plan, the responsibilities of the federal government, states, employers, and individuals must be clear and workable.
PPI's universal coverage vision was released in December 2000, in a paper called "A Progressive Path Toward Universal Health Coverage." It includes substantial, means-tested federal tax credits for health coverage that could be used either for employer-based coverage or state-based insurance pools or systems. The federal government would also create new performance-based grants to the states. States would be responsible for ensuring that all residents had reasonable choices of health coverage, and maintaining the safety net programs.
To the extent possible, the tax credits would be administered via employers. Even employers that didn't offer coverage or contribute to the premium would provide employees with state-prepared health options, administer enrollment, and advance the federal tax credits directly to employees on their paychecks to help them purchase coverage.
Once the tax credits and state purchasing systems were in place, the PPI proposal would require all people to obtain health insurance in order to qualify for the personal tax exemption or other tax breaks.
Fortunately, politicians on both sides of the aisle are coalescing around many of these ideas. Democrats and Republicans in Congress now support the idea that tax credits should be usable either for employer-based coverage or individual coverage. The TAA bill laid out a plan for state-based insurance pools or purchasing systems that garnered bipartisan support.
Funding Universal Coverage in Stages. The problem with this developing consensus for universal coverage is money. To forge bipartisan compromises, health tax credit proposals have to be fair to people, whether they have employer-based or individual coverage. Fairness, or horizontal equity, is important -- otherwise a health subsidy plan could favor one market over the other, which could be very disruptive and problematic. Poorly designed tax credit proposals could actually punish people who already have health coverage, the very people who have made sacrifices to obtain that coverage.
But fairness is expensive, and right now there is no serious political momentum in Congress to fund substantial, fair tax credits for health coverage.
Although the federal government doesn't seem likely to foot the full bill for universal health coverage in the coming years, the HCTC demonstrates that Washington can agree on how to subsidize transitional health coverage.
The HCTC is a system of health subsidies and purchasing arrangements generally modeled after the PPI universal coverage proposal, except on a very small scale. It includes federal tax credits and state insurance pools, and has a measure of employer participation.
The HCTC's 65 percent refundable tax credit can be used for COBRA continuing coverage or certain other types of health coverage. However, eligibility for the tax credit is restricted to workers who lost their jobs due to a trade action, and to certain retirees whose pension plans have been taken over by the government.
With HCTC as a starting point, we should enact a series of follow-up steps that would gradually lead toward PPI's larger health proposal, as the funds become available and a political consensus solidifies.
Step 1 is to successfully implement the new law. Because some states have few unemployed workers eligible for trade assistance and the HCTC, it will be hard in some areas to get state governments interested in arranging the full scope of options the law provides. Without state-provided purchasing options, fewer eligible workers will be able to take advantage of the tax credit. Although COBRA is likely to be a very popular option, the law specifically denotes state high-risk pools and state employee insurance plans as qualified plans as well.
Step 2 in the path from transitional to universal coverage is to expand the 65 percent tax credit to all unemployed workers, not just those displaced by trade. Congress expects roughly 250,000 workers to qualify under the trade act; however, there are about 3.6 million workers receiving unemployment benefits. Extending the HCTC to all unemployed workers would cost about $34 billion over 10 years, well within this year's budget. It would also prod states to do their part.
Step 3 would be to allow the 65 percent credit to "follow" enrollees to a new job, especially if their new employer doesn't offer coverage or would otherwise impose a waiting period before the coverage started. Of course, their unemployment benefits would end, but under this step they could use the HCTC for a longer period of time. This would give formerly unemployed workers needed assistance as they get back on their feet, and it would give them an incentive to look for new jobs without fear of immediately losing their health subsidy.
Step 4 is to allow the tax credit to follow all low-wage workers indefinitely. Under this step, the tax credit would be scaled based on wage -- maybe continuing at 65 percent for workers making the minimum wage, with a sliding scale reduction for higher wages. The credit could be used to help workers pay for their share of health insurance premiums if their employer offered coverage.
Of course, steps 3 and 4 raise logical questions: As long as the government is providing tax credits to low-wage workers who were formerly on unemployment benefits, wouldn't it be fair to just extend the credits to all low-wage workers? And as long as employers and states have worked out a system for the formerly unemployed with low wages, wouldn't it be fairly easy to provide the same service to all low-wage employees?
Therefore, if these steps were followed, they would logically lead to a fifth step:
Step 5 is to expand the HCTC system to all workers with low-incomes. This step essentially establishes the PPI health plan. Choices would be provided by states and employers, with states and employers collaborating to deliver the federal tax credits on a timely basis and in an easy-to-use manner.
The system for transitional coverage would remain, organized primarily through the unemployment compensation offices. But the follow-up coverage and tax credits would gradually become a general system that included federal, state, employer, and, ultimately, individual responsibilities.
Ultimately, Congress may wish to add a sixth step, which would involve performance-based grants to states designed to fill in any remaining cracks in the coverage system. For example, some poor workers with incomes too high to qualify for public programs like Medicaid may nevertheless be unable to afford to coverage, even after the 65 percent credit. State programs could target those people for added help.
