STATES TAKE ON NATIONAL HEALTH INSURANCE CRISIS

The list of what's wrong with American health care is sickeningly long and increasingly familiar to millions.

•One in seven Americans, lacking insurance, foregoes needed care or receives treatment that's inadequate and expensive at overcrowded emergency rooms. Most of the cost is passed on to others.

•Those lucky enough to have insurance have seen their premiums double in a decade, while they get less for their money. Co-pays are up, reimbursement rates are down, and some top doctors won't take insurance, making their services available only to wealthy patients.

•Nearly everyone squanders money and time fighting through payment hassles with their insurance companies, and anyone can abruptly be left without insurance at any time, at enormous medical and financial peril.

But now, for the first time since Bill Clinton's health plan collapsed under the weight of its own complexity a dozen years ago, a powerful new move to address those problems appears to be building.

Two Republican governors in Democratic states — California and Massachusetts — have proposed strikingly similar reforms to cover nearly every resident. Roughly, they look like this: Everybody is required to have insurance, much the way car owners in most states are required to have auto insurance now. But they can pick a plan and an insurance carrier that suits them. Prices vary, as does what's provided, but everyone gets at least coverage for some preventive care plus major hospital bills.

Massachusetts' plan, championed by former governor Mitt Romney, who has presidential ambitions, is already in place. In California, where nearly 20% of the population is uninsured, the battle is just beginning. Last week, Gov. Arnold Schwarzenegger proposed covering all 6.5 million of them, including 1 million illegal immigrants. Those who have insurance also would benefit, because they now pay a hidden tax estimated at $1,186 per family to cover unpaid medical bills of the uninsured, according to the New America Foundation, a health policy think tank.

As in Massachusetts, the plan would require most employers to provide coverage or pay additional taxes, which would be used to subsidize their employees and others needing insurance. It also makes tough demands on doctors, hospitals, insurers, taxpayers and employers. Schwarzenegger argues, logically, that cost savings can be achieved only when everyone has coverage so that the healthy join insurance pools along with the chronically ill. Nearly 3 million Californians whose jobs provide coverage turn it down because they think they don't need it.

There's "something for everyone to hate" about both states' plans, as many commentators have noted. Those on the left argue that they don't guarantee affordable premiums and could cause employers to drop coverage; business groups say the plans amount to a new tax on employers that could kill off jobs. But there's no such thing as a health plan that has no downside, which is why reforms are so easily demonized and killed by interests that benefit from the inefficiencies of the current system.

There's a lot to like in the two states' plans:

•Unlike European-style plans, they preserve private insurance, and therefore choice and innovation, with government oversight.

•They spread the cost burden fairly and more efficiently. Everyone is covered; everyone must contribute. Government subsidizes the poor, which is more cost-effective than the way their care is handled now.

How well the plans will work — and whether California's will even be passed — remains to be seen. But the good news is that after a decade of dormancy, attempts are finally being made to fix a system that tens of millions of people recognize is broken.

A national solution would be preferable, but having states serve as laboratories for experiments will let us see which ideas work and which ones should be abandoned.

Perhaps Washington will take notice and at long last act.

(c) USA TODAY, 2007

GROUPS ARE DEVISING PLANS

America's Health Insurance Plans laid out an ambitious initiative it said would provide affordable health insurance to every American within the next decade. It featured provisions to expand and improve Medicaid, create tax credits for low-income families and establish health accounts to pay for care with pretax dollars. The cost to the federal government: About $300 billion over the next decade.

In the wake of Gov. Arnold Schwarzenegger's bold proposal to spend about $12 billion a year to provide basic coverage to some 6.5 million uninsured Californians, a handful of big national healthcare groups with financial clout and political influence are jumping on the all-access bandwagon with plans in various stages of development and detail. They include the American Hospital Association, American Medical Association, American College of Physicians, Healthcare Association of New York State and a broad-based national coalition of groups.

It seems that healthcare has returned with a vengeance as a national political topic, rising from the ashes of the ill-fated Clinton health plan that was burned at the stake some 13 years ago. Everyone, it seems, is finally feeling the heat from the high cost of healthcare. Little more than a political afterthought in the 2004 national elections, healthcare is expected to be a pivotal-and perhaps decisive-issue in the 2008 presidential campaign.

"The message we've gotten is that things have to change," said Richard Umbdenstock, president of the AHA. "The status quo is not going to make it."

The AHA plans to roll out its universal-coverage proposal in late July at its annual leadership summit in San Diego. It is being timed to help set the national agenda in the upcoming presidential elections, and could serve as a powerful force in shaping a proposal to expand coverage. What's more, the AHA is also working closely with a secretive coalition of about two dozen groups to develop a consensus on the politically fractious issue. That group, now considering three major options, will outline the coalition's plans this week.

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By Michael Romano

THE FEDERALIST PRESCRIPTION

Extending health care to the uncovered, one state at a time

With his leg injured in a recent skiing accident, Arnold Schwarzenegger, California's governor, this week announced a plan that could change the terms of America's health-care debate. The Republican in charge of the country's most populous state, where 6.5m people, almost one resident in five, lack medical insurance, said he wants to introduce universal health-care coverage.

His recipe is a combination of insurance-market reform, government subsidies and--most important--compulsion. "Everyone in California must have insurance," Mr Schwarzenegger argued. "If you can't afford it, the state will help you buy it, but you must be insured."

Although the details are still sketchy, Mr Schwarzenegger's plan is very like another pioneering health-care reform that was successfully championed by another Republican governor in a strongly Democratic state. In April 2006 Mitt Romney, then the governor of Massachusetts and now a leading Republican presidential candidate, agreed on a plan for universal health-care coverage with the state's Democratic legislature. It too made health insurance mandatory, and it also included insurance reform and subsidies.

Massachusetts, and now California, have the boldest plans. But they are not the only states concerned with reducing the ranks of the uninsured. Illinois, Tennessee and Pennsylvania have pledged to insure all children. Half a dozen other states have official commissions charged with producing comprehensive reform plans this year. Could the states jump-start American health-care reform?

America has 47m people without medical insurance, around one sixth of its population. No one doubts that this is both morally vexing and economically inefficient. The uninsured get too little preventive medicine, but hospitals are, by law, obliged to offer them (expensive) emergency care, thus raising costs for everyone else. And as health-care costs have risen, and premiums with them, the ranks of the uninsured have grown.

Unfortunately, America's national debate about health-care reform has been stalled for more than a decade by a combination of ideology and political cowardice. The left argues that the solution is more government intervention; the right espouses deregulation and consumer choice to slow cost increases and so make insurance more affordable. Both sides are cowed by the memory of Hillary Clinton's disastrous failure to rewrite the rules of American medicine in 1994.

State governors have less ideological baggage. States have often been America's policy laboratories, pioneering changes that become national models. In the late 1980s and early 1990s, for instance, Wisconsin led the revolution in welfare, the system of government handouts aimed mostly at poor single mothers.

But health care has proved trickier. Massachusetts tried and failed to force employers to provide health insurance two decades ago. One problem is that the federal government controls most of the money. Medicare, the giant health scheme for the elderly, is federally financed and run. Medicaid, the scheme for the poor, is organised at the state level but co-financed with Uncle Sam. All told, state governments pay for only about 13% of America's medical spending. If you include the huge tax subsidies for employer-provided insurance, the federal government's share is almost 40%.

Nonetheless, three things suggest that state-led innovation has greater promise now than in the past. The first is the Schwarzenegger-Romney effect. Now that America's biggest state has put universal coverage at the top of its political agenda, the feds will have to take notice. Mr Romney will also ensure that health-care reform looms large in the presidential race that is already under way.

Second, the big federally-funded State Children's Health Insurance Programme (SCHIP) is up for renewal this year. Introduced a decade ago, it gives the states $5 billion in grants a year to help children whose families are just above the poverty line (and hence ineligible for Medicaid) get access to health care. The money comes from Washington, DC, but states can spend it as they wish. Many Democrats want to expand SCHIP. And third, several congressmen are now pushing laws that would explicitly encourage state experimentation by making it easier for states to innovate using federal money and, in some cases, by offering more money.

Bay State experimenting

A lot depends on whether the states' reforms actually appear to work. All eyes are on Massachusetts, since it is the first state actually to enact (rather than merely propose) comprehensive reform, particularly the mandatory purchase of insurance. From July 2007 every resident must have health insurance, or face a $1,000 fine. People with incomes up to three times the federal poverty threshold (almost $60,000 for a family of four) will get subsidies to buy insurance. Firms with more than ten workers must offer employees a health plan or pay the state a "contribution" of up to $295 per employee.

Massachusetts has also revamped the insurance market for individuals and small businesses. A new clearing house, the "Commonwealth Connector", is designed to offer more choice and cheaper plans for those outside big firms. People in this "Connector" will be able to offset their health insurance against tax, a perk until now available only to employers.

Forcing everyone to buy insurance is probably the only way to avoid the "adverse selection" problem that plagues health-insurance markets. Younger workers in good health avoid buying coverage, leaving higher-risk people in the insurance pool, thus driving up premiums. And if the uninsured workers fall really ill, they become free-riders on the others, since hospitals are required to treat them at public expense: had they been treated earlier, they might have been cured more cheaply.

Massachusetts's success will depend on whether its mandate actually prompts people to buy insurance. To avoid political uproar when the law kicks in, the state has left itself plenty of wriggle room. The individual mandate will not apply unless "affordable" insurance is available. But the greater the wriggle room, the less effective the mandates will be.

Experiments elsewhere in New England suggest that the voluntary route to universal health-care coverage is costly and difficult. Maine and Vermont are both trying to insure all their citizens. Both have rejigged their insurance market for individuals and small businesses. Both are offering subsidies to poorer people. But neither compels anyone to buy insurance. Vermont's plan was introduced less than a year ago. But Maine's plan has been up and running since January 2005, and its results have been disappointing. According to Cristy Gallagher of the New America Foundation, a Washington, DC, think-tank, only 15,000 people have enrolled so far. The state is a long way from covering its 130,000 uninsured citizens, while the subsidies are proving costlier than expected.

Besides, although obliging everyone to have health insurance can compensate for some of the extra cost of covering the uninsured, it does not offset it entirely. Massachusetts could push for universal coverage in part because only 10% of its citizens lack health coverage. The state was also blessed with lots of money to fund its reforms: an annual $385m pot of federal Medicaid funds, as well as $600m a year that was already being used to help reimburse hospitals for treating the uninsured. Most other states have less money and greater need. Covering California's 6.5m uninsured, for instance, will cost the public purse around $12 billion a year. Mr Schwarzenegger expects $5 billion of that money to come from the federal government. He plans to raise the rest from a mish-mash of taxes on employers, doctors and hospitals.

Going for kids

The cost of expanding health coverage explains why many states have set themselves less ambitious goals than universal insurance. One popular and attainable one is to insure all children. Only about 3% of children are both uninsured and ineligible for help under either SCHIP or Medicaid. Several states are simply expanding their SCHIP schemes to cover children higher up the income scale. Illinois allows any parents to buy into SCHIP if their children have been without health insurance for more than a year. Pennsylvania offers free coverage to families who earn up to twice the official poverty rate.

Other states, however, are concentrating on the much larger problem: low-paid workers in small firms. Only 50% of small businesses now offer health insurance, down almost 10 percentage points since 2000. Several governors are trying to stem this decline by subsidising bare-bones health insurance for these people.

Arkansas, for instance, has launched a scheme in which the state subsidises the premiums of poor workers in small firms provided every worker is enrolled. To control costs, the coverage is limited to six doctor visits and seven days in hospital a year, and two prescriptions a month. New Mexico has a similar subsidised deal for small employers with a $100,000 annual limit on coverage. Tennessee has set the premium rather than the coverage, creating an insurance plan that costs $150 a month, of which it will pay $50, though just what the plan will cover is not yet clear. The hope is that people will prefer cheap, if limited, health care to none at all.

It is tempting to pour cold water on all this state activity. The most radical innovation--forcing people to buy health insurance--may prove unenforceable. Will Massachusetts's new Democratic governor, Deval Patrick, really risk levying heavy fines on low-paid workers without health insurance? And even if the idea works at first, the model will surely collapse unless the ever-growing cost of treatment can be brought under control. As the plan's architects admit, that was not the main priority.

For now, however, such cynicism is misplaced. America's governors are focusing on an important issue that Washington has ducked for too long, and, in several cases, are tackling it with bold new ideas. Now it is up to President Bush and the new Democratic Congress to respond.

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Copyright of The Economist © 2007

MINIMUM-WAGE HIKE CLEARS HOUSE

The House on January 10 voted 315-116 to approve a bill to increase the nation's minimum wage from $5.15 to $7.25 an hour over two years. All Democrats were joined by 82 Republicans in voting for the measure, which would provide the first increase in a decade; at least 28 states have a minimum wage higher than the federal requirement. Republicans offered an alternative measure to exempt small businesses from paying the wage increase if they provide their employees access to health insurance. Rep. Buck McKeon, R-Calif., noted that Democrats objected when Republicans passed a minimum-wage hike last year as part of a bill that also included elimination of the estate tax. But House Education and Labor Committee Chairman George Miller, D-Calif., replied, "What is it you don't understand about being poor? What is it you don't understand? You are stuck at $5.15 in today's world. You can't buy the gasoline to go to work, the bread to put on the table, the milk out of the refrigerator." In the Senate, where a minimum-wage debate is expected once ethics legislation is wrapped up, Republicans are seeking to add several tax breaks, especially for small businesses. Although the underlying bill is widely expected to pass, the GOP's leverage in the 51-49 Senate may win concessions.

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By Richard E. Cohen

KENNEDY SUGGESTS MEDICARE COVERAGE BE EXTENDED TO ALL HEALTH

Senate Health, Education, Labor and Pensions Chairman Kennedy today called on Congress to extend Medicare to all Americans to respond to skyrocketing healthcare costs and provide insurance for 47 million uninsured citizens. "Health costs are threatening the livelihoods of millions of families because insurance premiums are rising four-and-half times faster than wages," he said in the committee's first hearing of the new Congress. "Many of us have views on how best to address the crisis. I believe the right way is to extend the guarantee of Medicare to all Americans," he said. Kennedy's plan would allow enrollees to choose among any of the health plans offered to members of Congress and the president. According to Kennedy, the plan would save $380 billion annually through reduced administrative costs, a universal electronic medical record system and reduced insurance overhead costs. Cost savings also would be garnered from covering uninsured Americans because they would receive preventive care and earlier treatment of disease, according to Kennedy's office. Meanwhile, Sen. Ron Wyden, D-Ore., also is poised to introduce his own healthcare measure, which would ensure universal healthcare coverage by ending the employer-based healthcare system, terminating Medicaid, and requiring every American to buy private insurance through state-run entities.

At the hearing, HELP ranking member Michael Enzi, R-Wyo., focused his comments on his own pet project, a small business health bill that would allow small firms to band together across state lines to bargain for insurance premiums. "I firmly believe that small business pooling power is an important component of any health reform effort," he said. Enzi can expect a fight on his small business healthcare bill, which most Democrats oppose, but he indicated he will cooperate with Kennedy on other issues. For example, Enzi said he wants to move forward with one component of Kennedy's agenda, a health information technology bill. Several witnesses at the hearing also called on Congress to reauthorize the State Children's Health Insurance Program, which both Republicans and Democrats have called a high priority. "I'm struck by how much agreement we've heard from a diverse set of participants," Kennedy said. Witnesses represented all facets of the advocacy community, including business, labor, health providers, and policy analysts.

In a procedural hiccup, Kennedy was unable officially to assume the gavel of the committee in the hearing because the Senate has not yet approved a funding resolution for committee budgets. Enzi gaveled in the hearing and then turned the meeting over to Kennedy.

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By Fawn Johnson

A HAMSTRUNG HEALTHCARE AGENDA

Their hands are tied.

Giddy Democrats danced into control on Capitol Hill last week, with healthcare a headliner of their agenda. But seldom has there been less wiggle room for substantive action by a new majority party in Congress. A tissue-thin margin in the Senate, large budget deficits on the horizon (pay no heed to last week's White House disinformation campaign on that score), threatened vetoes and a lack of political will combine to make it a rather tepid changing of the guard.

OK, a couple of modest healthcare bills, notably reimportation of prescription drugs from Canada, might even become law. Other actions, such as expansion of embryonic stem-cell research and allowing HHS to negotiate drug prices in Medicare Part D, may attract a measure of bipartisan support, but a Bush veto will only serve to hand the Dems good campaign issues for 2008.

Even if one of these controversial ideas is slipped into larger bills that the president feels compelled to sign, they won't do much to address the central healthcare issues of the day: the rising tide of uninsured and the health cost crisis.

Dramatic responses to the coverage problem are highly unlikely. Sen. Ron Wyden (D-Ore.) recently announced an interesting plan for an individual health insurance mandate coupled with an end to employer-based coverage. Employers would give their portion of the premiums to their employees, who would buy private coverage but couldn't be turned down because of their health status or age. Subsidies would be offered to help people up to 400% of the poverty line pay their premiums.

We don't know what Wyden's bill would cost, but it would be a lot, and neither money nor will exist to see it through. We already are looking to a deficit that would be $286 billion without the $100 billion "emergency" funding for the wars in Iraq and Afghanistan, and fixes for the alternative minimum tax and the physician Medicare reimbursement program, both of which may cost in the hundreds of billions of dollars.

Turning back the president's tax cuts for the wealthy, no matter how fiscally sound such a move would be, appears to be untenable for the Democrats, who don't want to be labeled tax-and-spenders.

There is, however, one area of health coverage that presents an opportunity, even in these billion-dollar-pinching times. The State Children's Health Insurance Program must be reauthorized this spring. This program, because it includes state matching dollars, could be leveraged to cover several million adults for a relatively modest investment.

SCHIP, for those who don't follow it, gave states a total of $40 billion over 10 years to provide health coverage for children who lived in families that earned too much to qualify for Medicaid, but not enough to afford private insurance.

Even people like Mark McClellan, the former CMS chief under Bush, have come out in favor of expanding the scope of the program to target some of the most vulnerable of the uninsured. And because it involves children, a larger SCHIP is unlikely to be vetoed.

As to health costs, there simply does not appear to be much interest in the issue from the new majority. Already we have seen some disparaging remarks about pay-for-performance, quality measures and evidence-based medicine from some influential Democrats.

They should reconsider: It doesn't cost very much to use the federal government's financial leverage to push for preventive care, lifestyle changes such as smoking cessation and nutrition counseling, evidence-based clinical decisionmaking and disease management programs that have at least the promise of slowing health spending increases.

These are a handful of changes that could help the Democrats at least begin to fulfill their campaign promises, not just go begging for more ammunition for 2008.

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By Todd Sloane

CHANGE WILL BE INCREMENTAL

Democrats will push a healthcare agenda, but Bush still stands in the way

In the 110th Congress, new leadership will bring new priorities. However, we have to be realistic: President Bush will continue to occupy the White House for two more years.

Instead of working toward quality healthcare for everyone, President Bush wants to dismantle the parts of our healthcare system that work--Medicare, Medicaid and the coverage that most of us receive through our jobs. We can't expect too much from a president who ignores the overwhelming majority of Americans who support life-saving stem-cell therapy.

That doesn't mean Congress will be at a standstill on healthcare. On the contrary, we will be working to make much-needed improvements in our health system, helping to control rising costs and slow the loss of insurance coverage. But for the next two years, our efforts will be more incremental than some of us, me included, would prefer. (See related story, p. 28.)

Initially Congress will focus on Speaker Nancy Pelosi's (D-Calif.) "Six for '06" agenda, which includes two important healthcare items: fixing the Medicare prescription-drug program so that the HHS secretary negotiates drug discounts for Medicare beneficiaries and passing legislation to promote real stem-cell research. The House of Representatives will pass these two initiatives in January, setting the stage for meaningful action on healthcare in the months to come:

* Restoring Medicare's board of directors. Once we've completed the Six for '06 agenda, my focus will turn to oversight and management of Medicare. It is my intent to return the Ways and Means health subcommittee to its traditional role as, in effect, Medicare's "board of directors." For the past six years, Republicans in Congress have conducted almost no oversight of the administration's activities. Instead, they choreographed cheerleading sessions to compliment each other on the great work they were doing to bring "choice" to Medicare, all the while dismantling the traditional program through design and neglect.

Their focus has been to maximize the choices of private health insurance plans available to Medicare beneficiaries, rather than choice of physicians and hospitals--the choices that truly matter to patients. As a result, Republicans have placed Medicare on a path toward destruction. We need to reverse the march toward privatization and once again put Medicare on solid footing.

One way Republicans have made private plans in Medicare more attractive is by paying private plans 12% more than it pays fee-for-service. Equalizing payments between plans and fee-for-service would save upward of $50 billion over 10 years and would be a good place to begin.

Republicans also subjected Medicare to a bud get gimmick--called the 45% trigger--designed to indicate the sky is falling with regard to the program's financing and hasten its demise.

Further endangering Medicare, Republicans allowed a defective physician payment formula to be in effect far too long, forcing physicians and other providers to annually beg Congress to override the cuts the formula would have forced. Making providers angry at Medicare further aids Republican efforts to privatize it.

In addition to these topics, there are many other issues on which oversight is overdue--everything from ensuring that beneficiaries are receiving the benefits they are eligible for through the Medicare prescription-drug program to reviewing quality improvement programs to ensure that taxpayer resources are being carefully stewarded. We could fill the next two years in this arena alone. These efforts are necessary to guarantee that Medicare remains a high-quality program for generations to come.

A healthy, functioning Medicare program that pays adequately is an asset to healthcare providers working in a country where more and more people are uninsured--and from whom payment is not necessarily possible. Improving Medicare should be a bipartisan commitment. Again, I will work to restore that philosophy in the new Congress.

* Expanding coverage for kids: One major healthcare imperative in the 110th Congress is to reauthorize the State Children's Health Insurance Program. SCHIP is a combined federal and state program designed to provide coverage to uninsured children above Medicaid eligibility, but in families with incomes below 200% of poverty (higher in some states). Even with this program in place, we saw the number of uninsured children in America increase 5.1% to 8.3 million in 2005 from 7.9 million in 2004.

Reauthorizing this program provides the opportunity to improve it as well. Ideally, I would expand SCHIP to all children, and parents who provided coverage for their children from elsewhere could opt out.

Otherwise, anyone who takes a child as a deduction on their tax return would be assessed an annual SCHIP premium. Subsidies would be available for lower-income families on a sliding-scale basis. I don't know how much bipartisan support we could obtain for such a proposal, but I would happily dare the president to veto children's health insurance.

Bipartisanship is an important part of my game plan. While expanding government-funded healthcare might not be a bipartisan success, there are still plenty of opportunities for bipartisan cooperation. When I chaired the health subcommittee from 1985 to 1994, Bill Gradison of Ohio served as my Republican counterpart. Together, we wrote plenty of good Medicare legislation. In 10 years, my subcommittee never sent a bill to the House floor that was not co-sponsored by both Gradison and me. I intend to pursue a similarly bipartisan course this Congress.

All of these are important improvements to our healthcare system. If we can move forward in these arenas in the 110th Congress, we will enter the 2008 presidential election cycle, in which I expect healthcare to be a major issue. Then, we can turn to the pressing need to follow the rest of the world in guaranteeing that everyone in our nation has affordable healthcare.

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By Pete Stark