Insuring the Uninsured: Will the 2004 Election Provide an Answer?

A June 2004 report revealed startling new statistics on uninsured Americans (1). A total of 82 million Americans1 of 3 people younger than 65 years of agewere uninsured at some point during 20022003 (1). Conducted by the well-regarded Lewin Group, the study found that two thirds of the 82 million were uninsured for 6 months or more, with half lacking coverage for at least 9 months. These figures, based on U.S. Census Bureau Current Population Survey data, are far higher than the commonly cited number of 43.6 million uninsured for the entire calendar year 2002 (2). Despite these findings, proposals to expand health insurance rarely grace headlines about the 2004 presidential election, crowded out by concerns over jobs and Iraq. Even in the health care penumbra, other issues command more attention. Controversy swirls around the 2003 Medicare Modernization Act. Drug reimportation from Canada is high on the wish list of seniors and of governorsRepublican and Democratconcerned with Medicaid pharmacy costs. Embryonic stem-cell research and abortion rights are on constituents' minds. Physicians want legislative action to control malpractice premiums. Recent polls indicate that most Americans desire a government guarantee that people receive coverage for basic health care services, but far fewer people are willing to pay more taxes to insure the uninsured. The polling data suggest that the climate for expanding health insurance is less favorable than it was 10 years ago (3). According to analyst Jonathan Oberlander, The most relevant political fact about U.S. health politics is not that 15 percent of the population is uninsured but that 85 percent is insured (4). Responding to voters' lack of enthusiasm to pay for expanded health care coverage, politicians from both parties have changed their view on how to insure the uninsured. In the past, many health coverage proposals called for increasing taxes. Under the new thinking, health coverage is stimulated by reducing a person's taxes by providing a tax credit to purchase private health insurance. The tax credit approach is a central feature of the health proposals of both presidential candidates in 2004. After discussing a historical categorization of universal health insurance strategies, this paper summarizes the Bush and Kerry health insurance plans, critiques these proposals, and explores the broader concept of using tax credits to facilitate the purchase of individual insurance policies. The paper concludes by describing physician organizations' approaches to insuring the uninsured. The Three Varieties of Universal Health Insurance Proposals For 90 years, reformers in the United States have argued for the passage of universal health insurance, a government guarantee that every person is covered for basic health care services. This political movement has seen 5 periods of intense legislative activity, alternating with stretches of political inattention. In 19121919, 19461949, 19631965, 19701974, and 19911994, expanding health insurance was the topic of major national debate. In 1916, 1949, 1974, and 1994, proposals were defeated and reconsigned to the back burner. In 1965, the passage of Medicare and Medicaid brought a major advance. While the details of universal health insurance proposals may be inscrutable, the basic features of all proposals are simple. Only 3 varieties exist: 1) government-funded public programs such as Medicare, Medicaid, or the Canadian single-payer system; 2) employer-based systems in which people receive insurance through their jobs; and 3) individual-based insurance through which people purchase their own health coverage. Every health insurance expansion proposal is based on 1, 2, or all 3 of these models (5). From 1912 to 1972, almost all universal health insurance proposals were government-funded single-payer plans, by which the government would levy taxes and pay physicians, hospitals, and other providers when people needed care. The most prominent of these was the WagnerMurrayDingell bill, supported by Harry Truman in the 1948 election. A major effort from the American Medical Association, assisted by the growth of employment-based private insurance, killed that proposal. The passage of the government-financed Medicare and Medicaid programs in 1965 was followed in a few years by Senator Edward Kennedy's single-payer plan. To counter Kennedy's efforts, President Nixon introduced the first-ever universal health insurance program based on private health insurance companies. The central feature of Nixon's plan was an employer mandate, which legally required employers to insure their employees. The Clinton plan of the early 1990s, also an employer mandate, had many similarities to Nixon's proposal (5). Rather than offering everyone insurance through the government, or requiring employers to insure their employees, the current Washington poster child features individually purchased insurance. This strategy, launched around 1990 by the conservative Heritage Foundation, was called the individual mandateeveryone would be legally required to purchase individual health insurance just as drivers are required to purchase auto insurance. To make insurance more affordable, the individual mandate proposed that lower-income people receive tax breaks to help in the purchase of health insurance (6). From the individual mandate approach came the tax credit concept that features prominently in the 2004 election health insurance proposals, although the 2004 tax credit proposals are voluntary rather than required. Tax credits can assist in the purchase of individual or group insurance. Previously an idea limited to Republicans, tax credits have recently attracted many Democrats (7). Even though 46% of the general public and 56% of Democrats supported a government-funded single-payer system in a 2003 Harvard School of Public Health/Robert Wood Johnson Foundation survey (3), most Democratic politicians have moved away from the single-payer approach. The Candidates' Proposals for Insuring the Uninsured Bush Proposal The Bush proposal is simple. A tax credit to purchase individual health insurance would be available to individuals and families who do not participate in employer-based coverage or public health insurance programs and would equal up to $1000 for individuals and up to $3000 for families with children. For people who owe taxes, the amount of the credit would be deducted from their tax payment. The tax credit is refundable, meaning that people who do not owe taxes would receive the money from the government. The full credit would be available to individuals with incomes below $15000 per year and families with incomes below $25000. The tax credit phases down as income rises above these levels and phases out entirely when income reaches $30000 for individuals and $60000 for a family of 4. The Bush proposal views health insurance as belonging to the individual rather than to the employer. The Bush plan also proposes a tax deduction for the value of the health insurance premium for people who purchase a high-deductible individual insurance policy in combination with a health savings account (Table 1) (8-11). Health savings accounts were authorized by the 2003 Medicare Modernization Act (although they have nothing to do with Medicare) (12). Table 1. Health Savings Accounts Kerry Proposal The Kerry proposal is complicated (13). It combines various tax credit schemes with the expansion of Medicaid and the State Children's Health Insurance Program (SCHIP). Kerry's proposal contains elements of all 3 varieties of health insurance: individual, employment-based, and government-funded. The Kerry plan is far more generous than the Bush plan, but heaven help the poor bureaucrat (or confused family) who has to figure out who is eligible for what. Individual People age 55 to 64 years with incomes below 300% of the federal poverty level (Table 2) about $28000receive a tax credit that pays for 25% of an insurance premium. People who are between jobs and have incomes below 300% of the federal poverty level receive a 75% tax credit. People not covered by the above provisions receive a tax credit that limits health insurance premiums to 6% of their income (for people below the federal poverty level), phasing up to 12% of income for people at 300% of federal poverty level. Table 2. Federal Poverty Guidelines Employment-Based Small employers receive a tax credit of 50% if they purchase health insurance for their low- and moderate-income employees (those with incomes <300% of the federal poverty level). Government-Funded Medicaid and SCHIP (Table 3) would be expanded. All children under 300% of the federal poverty level, all families under 200% of the federal poverty level, and all childless adults under 100% of the federal poverty level would have coverage under these public programs. To ensure that eligible people actually enroll in the program, the enrollment process would become far easier. Table 3. Medicaid and the State Children's Health Insurance Program Under Kerry's proposal, the federal government also pays 75% of the cost of medical cases that reach $50000, thereby reducing private health insurance premiums and making insurance more affordable. Evaluations of the Candidates' Proposals In a 22 January 2004 editorial, The New York Times lamented that the Bush Administration tax cuts for the wealthy have made significant extension of health insurance impossible (14). Other analysts concur that the tax cuts drained the federal budget of surpluses that could have been used to expand health insurance (7). According to Kenneth Thorpe, professor of public health at Emory University, the Bush proposal would expand health insurance to only 2.5 million previously uninsured people and over 10 years would cost $90 billionfunds required to make up for reduced tax revenues resulting from use of tax credits (12). A policy director for the Bush campaign did not dispute Thorpe's f