Make Families Cough Up For Medical Coverage

Tightness in federal and state budgets was the driving force behind the 1980s' trend toward government mandates of many business actions, including child care facilities at work and employment of particular groups. Putting obligations on companies, however, does not create resources. It merely shifts the burden to employers and employees and saddles companies with activities they may not be good at.

A bill sponsored by Senator Edward M. Kennedy (D-Mass.) would force companies to provide health insurance for their employees. Comprehensive health insurance is desirable, but I believe families, not businesses, should be required to buy it.

If the objective is to protect as many citizens as possible against major medical expenses, requiring companies to provide health insurance just won't do the trick. The unemployed, the retired, and others without jobs would have to find coverage elsewhere. It would raise the cost of labor, especially that of low-wage workers, for companies that would not voluntarily offer insurance.

Although group health insurance helps spread the risk of major illness, many companies are not big enough to provide much protection. A big claim by even one employee of a small company often leads to a large increase in insurance premiums or, in some cases, to cancellation of the insurance. This is why employers are reluctant to hire people who are likely to have large medical expenses.

FREE RIDERS. Corporate employers are the most important provider of health insurance in the U.S., but that's only because the Internal Revenue Service doesn't treat the expense as part of employees' taxable income. This is a subsidy. Taxing company health benefits would increase federal and state revenues by perhaps $60 billion annually and remove a tax incentive for companies to overinsure. If their company health benefits were taxed, many more employed persons would get their insurance from unions, churches, professional associations, and clubs that would be able to compete effectively against smaller companies and offer cheaper coverage.

People in rich countries who suffer illnesses that require long hospital stays and a lot of doctor's care are usually not allowed to go untreated, even when they do not have insurance or the resources to cover the costs. To eliminate the resulting temptation to take a free ride on the insurance and taxes of others, a federal mandate should require all families that can afford it to buy a basic package that covers major medical expenses and perhaps some preventive care also. Any family could, of course, opt to buy more extensive coverage.

Families that could not afford to buy protection would have their insurance premiums covered by the federal government. Eligibility would be determined by family income and the cost of obtaining private coverage. People with a history of serious illness who are not in a reasonably priced group health plan would be disproportionately included in the public program, because they would have to pay a lot to get private insurance.

MORE REVENUE. Some 34 million Americans are presently not covered by any type of health insurance. They would either be required to buy their own or would qualify for public assistance. But the uncovered population is not as serious a problem as the aggregate numbers might suggest. According to the National Center for Health Statistics (NCHS), most are employed people between the ages of 15 and 40 with a low incidence of serious medical problems. They could be included in the proposed system with a modest increase in public and private spending on health insurance.

The uninsured tend to work at small businesses that have been priced out of the health care market and by state-government mandates to include unnecessary medical sevices such as chiropractors and acupuncturists in all insurance plans. It is often said that the insurance companies' practice of denying coverage to the most vulnerable is to blame for the large uninsured population. The nchs statistics suggest that charge is exaggerated.

The well-off elderly should also be required to buy private coverage against major illness. Over three-fourths of those over 65 already have some private insurance as well as medicare. Although many of the elderly would need public support-since private catastrophic health coverage would be very expensive for them-the growth of group plans unrelated to employment should reduce the cost.

If the federal government covered 60% of older people, the families presently under medicaid, and half of those currently without private insurance, it would be subsidizing the health insurance of about 20% of the population. This is the same fraction now covered under medicaid and medicare, so federal spending on health care would not increase. And federal revenues would expand if employee health insurance were taxed.

The health insurance approach I am advocating does not increase the federal government's role. The problem with the present system is not too little government intervention but the wrong type of intervention. The federal role should be to ensure that all families are protected against major illness.

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