WASHINGTON, D.C. – The future of American health insurance coverage remains tenuous. Medicare is nearly bankrupt. Forty million Americans are uninsured. However, some of the proposals being considered by President Clinton and Congress could make the problems worse, according to speakers at a major insurance briefing today.
MEDICARE
"We have two choices on Medicare," said Pete du Pont, policy chairman of the National Center for Policy Analysis. "Engage in radical reform or drown in debt and rationed care. The people who say we can tinker with Medicare are more dangerous than those who argue for doing nothing."
- This year Medicare will spend every penny it collects from taxes and premiums plus $60 billion from general revenues.
- It will exhaust its cash reserves in four years.
- By 2005, without major reforms, Medicare will be $400 billion in debt.
- Left untouched, Medicare's unfunded liability will grow to $6.1 trillion in 20 years.
"One thing can save Medicare: competition," said Sen. Phil Gramm (R-Tex.) "We have to give people a choice between competing health care systems. Right now, we have a system in which Washington just keeps paying for more and more services. We have to move to a system in which people build up assets during their working years to pay for medical care in their retirement. It will cost money in the short run, but it will save Medicare in the long run."
Gramm offered one way of converting to a private form of health insurance:
- The phase-out plan would take 50 years.
- The payroll deduction would remain at 2.9 percent while moving younger workers into an investment-based system.
- The surplus funds generated by the current tax rate would be used to pay for the unfunded liability of the current system.
- The liability could be paid off in inflation-adjusted annual payments of $22 billion over the next 60 years – just 1.4 percent of what the federal government spent last year.
"Any serious reform is going to be expensive, but the sooner we do it, the cheaper it will be," said Gramm. "To do nothing is unthinkable."
Dr. Jesse Hixson, American Medical Association spokesman, proposed reforming the existing Medicare program by lowering beneficiaries' cost-sharing requirements in traditional fee-for-service benefits. "We can modernize fee-for-service Medicare benefits and save both beneficiaries and the government money," Dr. Hixson said.
INSURING THE UNINSURED
About 90 percent of people with private insurance get it through an employer. Employer-paid premiums are excluded from an employee's taxable income. This tax break goes mainly to middle- and upper-income families. Most people who buy their own insurance don't get this subsidy, and the self-employed receive only a reduced subsidy.
"The current system encourages people without government-subsidized health care to remain uninsured," said Dr. John Goodman, NCPA president. "To remedy that problem, we propose to give a $500 tax credit to every person who buys his own health insurance."
One source of funding for this plan could be the Earned Income Tax Credit (EITC), cash payments of as much as $3,556 per family per year that the federal government currently sends to low-income families. Another could be the proposed $500 per child tax credit.
People would get full benefits under both programs if they have health insurance. If not, the government would withhold $500 for each uninsured family member and send the money to the state or local community where the family lives to be used as part of a safety net for indigent health care.
MANDATES
States have imposed nearly a thousand health insurance mandates which typically require insurers to cover specified providers or services. The door is now open for more federal mandates.
- Mandates force insurance companies and employers to offer a laundry list of features, from mental health services to hairpieces.
- Mandates have increased the cost of health coverage by 15 to 30 percent.
- As many as one-fourth of the 40 million uninsured Americans go uncovered because mandates have driven insurance out of their reach.
"Mandates are a classic, and in this case tragic, example of government telling people what they should want," said Merrill Matthews, vice president of domestic policy for the National Center for Policy Analysis. "Any special interest can convince a legislature that self-serving health care benefits should be mandated into required coverage. Before you know it, single people are paying the cost of marriage counseling and the able-bodied are paying for disability coverage. So they opt out. Government is literally forcing people to go uninsured."
The briefing was sponsored by the National Center for Policy Analysis and the National Association of Business Economists.