Why Universal Health Coverage Is Smart Medicine

In early February, United Airlines Inc. decided to stop providing medical insurance for new hires. By mid-March, the carrier had added 450 reservations agents and other nonunion employees who agreed to forgo coverage. United isn't alone. In recent years, thousands of employers have cut out coverage for new workers or yanked it from current ones. Many startups, meanwhile, simply don't offer a plan at all. As a result, millions of families are now uninsured--unless their breadwinners are blind, disabled, or on welfare, and thus qualify for Medicaid, the government program that provides health care for the indigent.

The retreat of employers from health insurance spotlights a central issue in the health-care debate: Should every citizen have medical insurance, as President Clinton insists? Or is this admirable goal simply too expensive? The answer: Universal coverage is essential--and not just because it's the right thing to do. It also is virtually impossible to achieve the other primary goal of reform--cost control--without bringing everyone into the system.

CORPORATE CASTOFFS. "We don't let people bleed on the street. So we're paying for the uninsured anyway," says William S. Custer, the research director at the Employee Benefit Research Institute (EBRI), a nonprofit Washington group that doesn't endorse a particular health-care bill. "Also, as employers reduce the number of people in the risk pool, the pool gets riskier, and premiums go up for everyone still paying for insurance."

The problem is evident in the figures on employer coverage. Companies and other employers provided primary health insurance for 55.6% of Americans in 1992, the latest year available, down from 59.7% in 1988, according to EBRI's tabulations of Census Bureau statistics (chart). That represents more than 10 million workers and dependents who either lost coverage or didn't get it when they started a new job. The actual figure is even higher, because EBRI includes some 3.6 million workers who get coverage through their employers but must pay the entire cost themselves.

Taxpayers and those who remain insured pick up the tab for these corporate castoffs. Some of the uninsured have sought refuge in Medicaid, where the number of recipients soared 40% between 1988 and 1992, to 20.5 million people, according to EBRI. Part of the increase occurred because Congress eased Medicaid's eligibility rules. But some of those left stranded by companies--such as part-timers making low wages--joined up as well, experts say. Add in continuing medical inflation, and taxpayers' bill for Medicaid has jumped 159% since 1988, to $140 billion last year.

Most of the other people abandoned by employers have no coverage at all. The ranks of uninsured have risen by 15% since 1988, to 38.8 million, according to EBRI. But as Custer says, taxpayers foot the bill for them, too. Experts aren't sure how much health care the uninsured get from public health clinics, city ambulances, and hospital emergency rooms. But the estimates range from about half to two-thirds of what the insured get. The funds for such services either come from public coffers or are rolled into health-care providers' prices for everyone else.

Given the highly inefficient nature of emergency care, unchecked growth in the numbers of uninsured could negate the various cost-control ideas being considered in Washington. Preventive care, which usually is cheaper than waiting for an emergency, is virtually nonexistent for these people. Also, most of the managed-care cost-control measures employers are applying to the insured don't work in hospital emergency rooms. And since the poor aren't paying for their care, the market competition envisioned by reformers, such as Representative Jim Cooper (D-Tenn.), wouldn't have much impact on its cost either. "There's a strong reason to move to universal coverage: to get rid of the cross-subsidies and other inefficiencies," says C. Eugene Steuerle, a health expert at the Urban Institute, a Washington think tank that hasn't endorsed any health-care bill.

So far, Congress isn't rushing to embrace coverage for everyone. Only two of the reform initiatives swirling around the Capitol insist on universal coverage: Clinton's and one from Representative Jim McDermott (D-Wash.) that calls for a Canadian-style system.

HEFTY HIKE. Most other reformers object to the projected expense for insuring 39 million extra people: It ranges from $25 billion to $60 billion a year, depending on assumptions about how many health-care dollars the uninsured already use. That translates into about $260 to $625 a year per household. Clinton expects most of this to be offset by the slowdown in medical cost hikes his plan envisions. But most polls show that taxpayers may be willing to pony up even if that doesn't happen. For instance, a 1993 EBRI poll found that 76% of Americans want Washington to provide health insurance to everyone, even if it means a tax hike. On average, respondents said they would pay $169 a year more in taxes.

It makes no sense, in short, to leave the uninsured out of the equation. If that happens, any reform plan will face a never-ending battle to rein in the runaway costs created as employers abandon health insurance.