Last year, health-care reform seemed so desirable. America's patchwork quilt of private and public health-care systems was badly in need of repair, and support for reform pervasive. Now, the drive for reform may be on the verge of breaking down. There are many reasons--from special-interest pressure to the sheer size and complexity of the problem. But the biggest challenge is President Clinton's insistence on universal coverage as part of any acceptable reform package.
There is reason for people to recoil at universal coverage, and it can be expressed in a word: money. Yes, the incremental cost of such coverage could be at least $30 billion a year just to cover those now uninsured. That, plus billions more to subsidize small businesses, has sobered many reform supporters, such as business leaders, who initially enlisted in the cause as a way of cutting costs.
Yet arguments for spending the extra money to insure everybody are strong. Right now, most of the 37 million Americans without insurance are getting their health care in hospital emergency rooms. But hospitals build such costs into the rates they charge other patients--an inefficient system, to say the least. Changing the system would also allow people to seek better jobs without worrying about losing coverage and would thereby improve labor-market mobility. So the critical test for universal care is to satisfy medical needs and to do it in a way that will not send costs spiraling.
In an ideal world, all companies big and small would be required to offer health benefits to their employees. The program would not need to be prohibitively expensive. The mandated coverage could be bare-bones, perhaps the equivalent of basic hospital insurance, which would relieve workers of the worry that heart surgery or cancer treatments would plunge them into bankruptcy. If employers offered their workers more generous coverage or a menu of choices above the cheapest plan--as most would--employees could pay taxes on the excess benefit as if it were income. Companies would be free to negotiate discounts directly with health carriers, as most big employers do now. Smaller companies could gain the clout of big business by banding together in health-purchasing cooperatives. Such an employer mandate would bring into the system the workers who account for 75% of the uninsured adults. For the poor who need subsidies, the money could come from the taxes on health insurance beyond minimum levels or by raising cigarette and other sin taxes. For example, hiking the federal excise tax on cigarettes from 24 cents to $2 a pack would bring in $23 billion in new revenues.
Given current political realities, an employer mandate isn't likely to happen. A second-best solution is to not give up on universal health care and to accept that the transition will have to be gradual.
For starters, Washington shouldn't do anything that interferes with the private sector's stream of innovations to hold costs in check and should do anything it can to bolster competition in the health-care market. Already, employers have embraced with zeal the idea of "managed competition" and are using health-maintenance organizations and preferred-provider organizations to lower medical bills and monitor spending. The payoff has been dramatic: So far in 1994, medical-care prices have risen at a 4.6% annual rate, down sharply from 9.6% in 1990.
A minimal plan would require ending certain common health-insurance practices. Insurance companies should no longer be able to discriminate against anyone with a preexisting condition or a propensity to get sick. Subsidies for the poor would be necessary, but the costs need not be excessive.
Washington always has difficulty enacting major institutional reforms without the spur of war or depression. And reforming the $1 trillion health-care market is devilishly complex. President Clinton should be lauded for stimulating debate that may lead to change. Now is the time to accept more modest reforms and declare victory. In a few years, policymakers could revisit health care and judge how well existing reforms have done. By then, the prospect of universal coverage may seem less intimidating.