For years, the debate over how to solve the health-care crisis has been frozen by an implacable standoff between Democrats and Republicans. Many Dems favored a government-run system, called single-payer because Washington would fund it. The GOP has rejected that approach as too bureaucratic and pushed for an alternative that would give individuals tax credits and other subsidies to buy their own insurance.
Now, the ice jam may be starting to crack, or at least thaw around the edges. When Representative Richard A. Gephardt (D-Mo.), rolled out an ambitious health-care plan as part of his Presidential campaign in April, he became one of a growing number of Dems who have begun to embrace a third way: universal health care built around employer-based insurance. Of course, this isn't really a new idea, since most Americans already get coverage from their employer. Still, there's a consensus emerging among Democrats that the problem of the uninsured should be fixed by requiring employers to cover all their workers while easing the costs with subsidies.
This is a major shift for a party whose last President rolled the dice, and lost, on a health-care plan that was tarred as a single-payer scheme. Even Senator Edward M. Kennedy (D-Mass.), the party's stalwart on government-funded health care, has been coming around. "Single-payer is over," says Jeff Lemieux, a senior economist at the Progressive Policy Institute, a moderate Democratic think tank.
Most Republicans still favor an individual system. But some free-marketeers, such as American Enterprise Institute health economist Joseph Antos, see a middle ground between employer-based and individual coverage. Many companies might sign on, too -- as long as the feds don't impose lots of rules about what coverage they would have to provide. Some proposals, such as one advanced last month by the Commonwealth Fund, a liberal New York think tank, "include ideas that could actually work," says Helen Darling, president of Washington Business Group on Health, which represents large employers. "That's a big step forward."
The Democrats' shift stems largely from a new acceptance of the political reality. The 1994 debacle over Hillary Rodham Clinton's regional health purchase plan convinced most Dems that it would be political suicide to push anything that even sounds like a single-payer plan. And such an idea is certainly a nonstarter as long as the GOP controls Congress and the Presidency. "There is no doubt a single-payer approach could be done less expensively," says Marilyn Moon, a senior fellow at the Urban Institute. "But we're in a world where no one trusts government very much, so we're finding ways to expand on the employer-based system."
Gephardt's proposal has reinvigorated the health-care debate partly because to pay for it he would repeal President Bush's 2001 tax cut. That would free up $200 billion a year for a new tax credit, which would allow employers to take 60% of their health-care spending off their federal tax bill. Washington and the states would still insure the poor and the elderly. But the main responsibility for covering workers and their families would fall to employers, who would expand coverage to part-timers and others without insurance.
A big advantage of the employer framework is that it builds on what already exists. Companies now insure more than 160 million workers and their families. Of the nearly 41 million Americans without insurance, two-thirds either work for companies that don't offer health benefits or aren't eligible because they are part-timers or haven't been on the job long enough. So it would be relatively simple for employers to cover most of those who lack insurance, especially if they got a tax break to help pick up the cost. "Employers are spending $370 billion on health care," says a top Kennedy aide. "You have to ensure they will maintain that expenditure or the public cost will be far beyond" what's affordable.
To be sure, not everyone is on board. At a May 3 debate for Democratic Presidential hopefuls, Senator John Edwards (D-N.C.) denounced Gephardt's plan as a tax giveaway to Big Business. The plan, he charged, was like saying "you're in good hands with Enron."
At the same time, many conservatives still prefer tax subsidies to individuals. Bush has proposed a $7 billion-a-year tax credit to boost individual coverage. Senator John B. Breaux (D-La.) would require all Americans to acquire basic insurance. To make such policies affordable, low- and moderate-income families would receive federal aid, and everyone would be guaranteed coverage at a group rate, regardless of their health.
Large corporations such as General Motors (GM ) Corp., which spends $5 billion a year to cover all of its 640,000 workers and retirees, would love some help from Uncle Sam. And many big companies would benefit from an employer mandate that forced rivals to provide full coverage, too. On the other hand, this could be difficult for companies that don't cover many of their employees, from small firms to behemoths like Wal-Mart Stores (WMT ) Inc., which now covers less than half of its workforce. Under some plans, it would have to either insure all of its workers or pay what amounts to a tax to help them buy insurance through a government-run pool.
Corporate America's real fear is that new subsidies would come with strings. In theory, an employer-based system would let companies decide what insurance to offer and how much of the cost would be passed on to employees. But the feds could eventually require private policies to cover certain illnesses or treatments or even limit the percentage of premiums workers would pay. "When government gets involved, it ends up costing employers much more money," says Darling.
In any case, universal health care is back on the political stage. The last time that happened, the Clinton Administration rolled out Hillary-care. Will the Democrats' new plan do better this time?
By Howard Gleckman in Washington