Providing Universal and Affordable Health Care (1989)

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Health Care for the Uninsured: The Federal Role Senator George J. Mitchell More Americans are working and our nation's income is increasing. But, at the same time, more of our children have no health insurance. More pregnant women have deficient prenatal care. Perinatal mortal- ity is worsening for large groups of people. More people, the majority of whom are workers and their families, have no health insurance and suffer from unattended medical conditions. The fact that the Institute of Medicine has convened this series of lectures on access to health care demonstrates your concern. I commend you for this attention to an im- portant problem. You are not alone in your attention to this issue. Many states, individuals, interest groups, professional organizations, and members of Congress are concerned about the uninsured. Some are interested in the working population. Others are emphasizing maternal and child care. Still others are attending to the medically high-risk people unable to buy insurance. This is a complex and interrelated problem. Many of the high-risk uninsurable people are employed. Many of the employed are mothers working part time with incomes below the poverty level. Some of the uninsured people are extremely poor, but do not qualify for Medicaid because they are not categorically eligible. Some are only identified when they present themselves to the emergency room.

Any response must be sensitive to this complexity. Any solution will require a clear view of the ultimate goal, a well-thought-out path to that goal, and the cooperation of many different groups in our country. Our goal and highest priority should be ready access to good, affordable health care for all of our people. We must direct our resources and activities toward that end. Historically, we have had a combined public and private system. In the near future I see no move away from this dual system. On the public side we have a major cooperative venture between the federal government and the states in the form of the Medicaid program. The federal government also provides funding through various block grant programs. States and local authorities, with the help of the federal government, support other important public health programs and tar- geted health services delivery programs. On the private side we have the significant contribution of employment-based insurance. In recent years the coverage of both the Medicaid program and employment- based insurance has been declining relative to their target populations. Any improvements in the near future will be largely built on the structure currently in place. Medicaid and employment-based insur- ance will be the foundations of our approach. However, these two programs will not be sufficient to address all of the gaps in current coverage. Approximately 41 percent of the poor were covered by Medicaid in 1986. This is down from 65 percent covered by the program in 1976. This decline is in the face of congressional expansion of eligibility for Medicaid over the past few years. The major factor in this contraction of coverage has been the declining level of the Aid to Families with Dependent Children (AFDC) income threshold, relative to the federal poverty level. Medicaid is the bedrock program for poor Americans. Expanding Medicaid coverage will be the necessary cornerstone of any approach to increase the insurance coverage of poor Americans. I recently cospon- sored a bill with Senator Bill Bradley (D-New Jersey) to require states to cover all maternity care for all women whose incomes are below the poverty level. We will need to work closely with states to improve the Medicaid coverage of "these and other people categorically eligible but above state AFDC income thresholds.

Other needy groups can benefit from Medicaid expansion. Poor children are not now well covered. Despite our legislatively directed increases in the coverage of children in the past few years, only about half of this country's poor children under age 18 are covered by Medicaid. The bill I cosponsored with Senator Bradley includes coverage for poor children up to age 3. We need to increase the number of children covered by increasing the eligibility age for Medicaid for poor children. Poor people with chronic medical conditions are not now well served. Unless disabled, they are not eligible for Medicaid. Private insurance is beyond their reach unless it is available through their employer. We need to explore the possibility of including this group in Medicaid. There is, of course, a severe financial limitation on the Medicaid program. There is a large gap between what we want to accomplish through Medicaid and what we are able to do. We need to rationally set our sights and plan our approach so that our step will be sure when funding does become available. The erosion of insurance coverage of employed people is the second major stress on our system. The majority of our nation's unin- sured are working or are dependents of an employed family member. The service and retail sectors, the fastest growing parts of our economy, account for the largest numbers of uninsured employees. If employees, particularly low-income employees in these sectors, are to depend on private insurance, we will have to take some measures to stimulate employment-based insurance. If the trend continues, and fewer employ- ees are covered, a situation will develop where major public programs will become necessary to cover working people, or more people will go without coverage. Most employers have done a good job of providing benefits for their employees. However, many employees and dependents are with- out insurance coverage. Most frequently these are employees of small firms—but many work in large firms. Often insurance is not offered to the employees. If it is offered, many employees cannot afford the premiums or they are ineligible due to insufficient hours or length of employment. The problems, then, are the employment situations where insurance is not offered, affordability, and eligibility requirements.

The goal for employment-based coverage is clear: we need to maximize coverage with a minimum negative impact on employment rates and small businesses. The role of the federal government will have to be focused on providing incentives, and, where necessary, disincen- tives, to encourage employers to offer affordable health care. Any incentive will need to be balanced against the legitimate concerns of employers. There are situations—as with start-up or marginally profit- able firms, part-time employees, and medically high-risk employees— where a blunt mandate may be harmful. Obviously, those who propose to mandate health benefits for all employees have the right goal. But we must examine closely the impact of this approach on economic viability and employment. Achieving a balance between the health care coverage needs of employees and the business concerns of employers requires thoughtful and considered attention. It is clear, however, that the current trend needs to be reversed. If mandated benefits are not the answer, the next step would be to use the tax code to encourage employers to provide the health insurance they would not otherwise provide. Ideally, the preferable and least controversial approach would be to create a series of tax incen- tives—that is subsidies—for business to increase their health insurance coverage. While this might have been a typical approach in the past, it is not realistic in today's budget climate. A proposal that simply suggests a way to spend tax revenues without offsetting receipts to make the overall plan revenue neutral will not be seriously considered in Congress. For that reason, I am looking at legislation that provides tax incentives as well as disincentives. Although the former would cost revenue and the latter would raise revenue, both are intended to encourage employers to expand the number of employees covered by health insurance. The incentives could be structured as a tax credit for small employers who today are least likely to provide coverage. The credit would be provided on top of the current deduction. In addition, in- creased incentives can be provided to unincorporated small businesses by permitting the principal owner to deduct his or her full health insurance costs.

Together these proposals would be costly and would have to be financed by disincentives that penalize employers who do not provide health insurance for all their employees. Regardless of the revenue and policy consequences of such a penalty, it can be justified on the grounds that employers who do not provide insurance to their employees are unfairly shifting such costs to other employers who do provide health insurance coverage for their workers. This arises, of course, because when the uninsured do receive medical care, someone picks up the tab for that care—usually in the form of cost shifting to private insurance or charity provided by publicly owned hospitals. The legislation I am considering would impose a penalty on employers to the extent that their employees and their dependents are not provided with a minimum health benefit, as defined in the legisla- tion. While we may give incentives to employers to provide health coverage, we must ensure that such coverage is affordable. The two major problems small firms have are the medically high-risk employee or dependent, and the high cost of administering health insurance to a small number of employees. I am considering proposals that will address these two obstacles to health insurance. One proposal would require community rating of insurance sold to small employers with a reinsurance mechanism for costly individuals. This would treat the small-employer market as a large group similar to large employers. Another proposal that I am considering would promote statewide health insurance pools for all individuals, employed or unemployed, with a separate pool for high-risk individuals. We must as a society deal with the problems of people without health insurance. We will need to keep our goals clearly before us as we improve the current structure of Medicaid and employment-based insurance. We will need to develop new partnerships with state and local governments as we develop new programs for the group that falls between these two. I look forward to working with you and your organizations as we develop a proper response to this serious national problem.