Health care services credit union

Why incremental reform can't solve our health-care crisis

IN EARLY 1998, WHITNEY ADDINGTON, the president of the main lobbying group for doctors of internal medicine, went to Capitol Hill for a meeting with Ted Kennedy's health care staffers. Before he could say anything, David Nexon, Kennedy's top health adviser, gave him a cold dose of reality: "If you're here to talk about universal coverage, don't waste your time."

That's what happens when your party tries to do health care reform and it blows up in your face. But these days, just five years after the death of the Clinton health care reform plan, universal coverage is back on the table. It's not hard to see why. In 1994, the year the Clinton plan crashed and burned, there were 40 million Americans with no health insurance. By 1998, there were 44.3 million. The problem actually got worse as the economy boomed.

So it's back to the drawing board: The American Medical Association and a coalition of other groups claim they're putting together a plan for getting to universal coverage. House Majority Leader Dick Armey, one of Congress' most conservative Republicans, and Rep. Pete Stark, one of its most liberal Democrats, have floated an expansive tax credit program for reaching the uninsured. And in December, the Health Insurance Association of America, which brought us the "Harry and Louise" ads that helped kill the Clinton plan, and the consumer group Families USA will take their hands off each other's throats for a day and co-host a conference on how to help the uninsured.

That all sounds great, but there's a catch: Most politicians and interest groups still talk about getting to universal coverage in baby steps. After being burned in 1994, President Clinton and Congressional Democrats have pushed politically safe, bite-sized reforms--like the State Children's Health Insurance Program and the new law to help people with disabilities keep their health coverage when they go to work. Hillary Rodham Clinton, the architect of the administration's 1994 plan, is now saying she belongs to the "school of smaller steps." And Al Gore's Campaign 2000 proposal casts him firmly in the incremental mold (although his advisers concede that universal coverage is not their objective).

There's just one problem. Experts pretty much agree that step-by-step health care reform won't do the job. At least, not the way we're doing it. Sure, it picks up a few million uninsured people here and a few million there. There are some ideas that haven't been tried yet that could pick up a few million more. But they don't lead anywhere. None of the step-by-steppers has the "road map" that shows how we're going to get from here to covering all of the 44 million uninsured Americans, or even most of them.

There is a way to fix this, but it's tough medicine: mandates. According to the experts, if we really want to make sure that every single American has affordable health coverage, the country will have to accept some kind of requirements for employers to cover their workers, for individuals to get health coverage for themselves, or both. Other countries have gotten everybody covered in steps rather than all at once, but none of them has done it on a totally voluntary basis.

The Third Rail of Health-care Reform

It's hard for politicians to talk about mandates: Ask Bill Clinton, who tried to require employers to pay for health insurance in 1994, and got creamed. As Gore policy adviser Elaine Kamarck explains, they seem "a little Big Brother-ish." People don't like being told to buy things they don't think they can afford. Sen. John Chafee's proposed alternative to the Clinton healthcare proposal would have required individuals to buy their own insurance (with subsidies for people who couldn't afford it). It didn't fly.

Now, a few brave souls have come back to the idea of individual mandates--but with some new twists. Bill Bradley's campaign proposal would require all parents to get health coverage for their kids and subsidize the ones who can't afford it. Bradley's mandate proposal is part of a broader campaign focus on children. Adults can take care of themselves, but children should be signed up in the hospitals at birth "to make absolutely sure that there is nobody left behind," according to a Bradley adviser.

On the other end of the political spectrum, Rep. Bill Thomas, a California Republican, has been talking about a health care plan that would give everyone a tax credit--and require them to buy at least basic health coverage for themselves a kind of personal mandate. His idea is to make people more cost-conscious by putting them in charge of their own coverage, and stop treating different groups of people differently. "Just call them Americans and set up an insurance pool for Americans," he said in an October speech.

Both ideas have a couple of kinks to be worked out. Both have to explain what they would do to people who don't buy coverage. (Bradley's advisers are putting out the word that he has no immediate plans to throw bad parents in jail.) And Thomas has to figure out how to fix the individual health insurance market so people aren't just fending for themselves. The market charges premiums that vary wildly depending on how old people are, where they live, and whether they have any health risk factors.

But what's interesting is that Bradley and Thomas have both concluded that voluntary steps alone can't achieve their objective. You have to think bigger. And health care experts of all ideological stripes tend to agree.

"All you have to do is look at history," said Henry E. Simmons, who served in the Department of Health, Education and Welfare under Presidents Nixon and Ford and now runs the National Coalition on Health Care. If you want a voluntary system to take care of the growing number of uninsured people, he said, "we're heading the wrong way very fast."

Uwe Reinhardt, the Princeton University health economist, says it is "technically impossible to proceed incrementally."

Mark A. Goldberg, a distinguished faculty fellow at the Yale School of Management, says it is "pretty clear that you can't get all the way to universal coverage through purely incremental, voluntary reforms."

And even Gail Shearer, the health policy director at Consumers Union, who recently put out a paper that stressed incremental health care reforms, admits it was written that way out of "political reality" and that "it's certainly not what we want."

Why Steps Don't Work

Still, most reformers are still talking about incremental reforms and that's where the whole effort is in danger of sputtering out. Why? Because incremental health care reform is like squeezing down on a balloon; squeeze down here, and something else pops out over there. All of the voluntary steps we've been trying for the last five years run into three problems: "crowd-out," where you pick up people who already had insurance but think they'll get a better deal with your program; "risk selection," where you split all of the healthy people and stick people into separate groups and the sick people's premiums go through the roof; and large numbers of people you simply don't reach, for a variety of reasons. Every incremental idea presented since 1994 runs into at least one of these walls.

Take the Democratic approach. They want to bring in targeted groups of uninsured people, one at a time. The State Children's Health Insurance Program (CHID was the first step. It was never intended to cover all 11 million uninsured children--just the five million in the poorest families. But so far, it hasn't even stopped the bleeding. As of June, it had picked up 1.3 million children. And yet, we still have 11 million uninsured kids. According to the Census Bureau's figures, there were actually 330,000 more in 1998 than there were in 1997, the year CHIP was created.

No one is calling CHIP a failure. Most think it needs more time, and the Department of Health and Human Services says the program could have 2.7 million kids enrolled by September 2000. But no one is calling it a blazing success story either. Too many kids are slipping through the cracks. Between Medicaid and CHIP, two-thirds of all uninsured children are already eligible for health insurance, according to the Kaiser Commission on Medicaid and the Uninsured. But they're not enrolled, thanks to poor outreach and states that make it nearly impossible to apply for Medicaid. CHIP should have another 2.6 million children under its wing. Medicaid's track record is even worse--4.7 million uninsured kids are eligible for the program but aren't in it.