Copyright 2000 The Washington Post
The Washington
Post
February 8, 2000, Tuesday, Final Edition
SECTION: OP-ED; Pg. A23
LENGTH: 922 words
HEADLINE:
Health Care: Show Us the Money
BYLINE:
Uwe E. Reinhardt
BODY:
At some point, any
debate over improving our system of health care is going to
come down to the question of how much it will cost. Unfortunately this is also
the point at which the debate is likely to be distorted by disinformation and
confusion.
Take the current battle between Al Gore and Bill Bradley.
Allies of Gore acknowledge that Bradley's health plan would
cover many more millions of the people who are now uninsured
than would their own plan. They claim, however, that it would incur much higher
costs for each newly insured person than would the vice president's plan. But in
fact, when they use the word "cost," they are referring only to "federal budget
outlays," which are not to be confused with cost to the nation as a whole. The
latter cost, reported annually as "total national health spending," includes
spending from all private and public sources.
If, as Bradley proposes,
low-income families that already have insurance were granted a federal subsidy
toward their coverage, that policy would indeed increase federal budget outlays,
but it would not increase total national health spending. This is so because the
increased federal spending would be offset by lower private spending. It is a
crucial point that seems to have eluded many.
It may be asked why
Bradley wishes to shift responsibility for health care costs from some
already-insured Americans to the federal budget. The reason is that his
overarching objective is "horizontal equity"--that is, to have government treat
similarly situated individuals and business firms in similar ways with its tax
and subsidy programs.
Bradley assumes, as do most economists, that the
full cost of "employer-provided" health insurance is actually paid for by
employees themselves, through lower take-home pay. Therefore, the senator
considers it inequitable to extend federal subsidies only to those Americans who
do not now have insurance while refusing it to similarly situated Americans who
have insurance, which they pay for directly or indirectly through their
employment contract. To avoid that inequity, Bradley would have all families
with the same low income receive the same federal subsidy--whether or not they
already have private health insurance.
Bradley's plan also would develop
a better functioning market where people could buy health insurance--an
alternative to employment-based insurance. Annual premiums for employment-based
health insurance are growing once again at nearly double-digit rates. Fearful of
this relentless cost growth, many small businesses with low-wage employees
simply decline to offer their employees any health insurance.
Health
experts predict that many firms that now do offer such coverage might drop it in
the future, especially in a recession. Looking ahead to that contingency,
Bradley's plan seeks to develop for individually purchased health insurance a
model akin to the Federal Employee Health Benefit program.
Under the
federal employees' program, members of Congress and federal workers choose from
a large menu of competing private health plans, albeit under strict federal
supervision. Traditionally, that program has been relatively more successful in
controlling the growth of premiums than have private employers. The federal
employees' program also provides consumers far better information on the
competing plans than is typically available from private employers. In fact,
very few employers now offer their employees a choice of more than two health
plans, and close to half offer only one plan. Bradley's plan would offer many
American families far more choice among health plans than they are now granted
by their employers.
Vice President Gore would proceed toward universal
coverage in smaller steps. His plan would require fewer federal dollars per
year, because he would extend coverage to fewer uninsured people in the near
term. To keep federal outlays on his plan as low as possible, the vice president
would concentrate new federal outlays strictly on the uninsured, which would
force him to treat similarly situated Americans differently, depending upon
their current health-insurance status.
While the Gore plan would be
"cheaper" than Bradley's plan in terms of new federal outlays per newly insured
person, it would be unlikely to be cheaper in terms of incremental national
health spending per newly insured per person.
The reason? It's well
known that uninsured Americans do receive some health care--either financed by
insured patients who indirectly subsidize charity care or paid by the uninsured
from their own resources. Either way, it is already included in the national
health spending total.
It's estimated that health spending per currently
uninsured American now averages about 60 percent of health spending on similarly
situated well-insured Americans. In effect, then, proposals to extend insurance
coverage to the uninsured would merely top off the remaining 40 percent or so.
The incremental cost for each newly insured person should be roughly the same
under the Bradley and Gore plans.
In fact, both Democratic candidates
have put before the voters reasonably well-defined reform plans that embody
distinct visions for our future health system. Voters deserve to have these
plans described and debated in their full dimensions. It will not do to compress
them into ill-defined "cost" figures that distort more than they reveal.
The writer is a professor of economics and public affairs at
Princeton University.
LOAD-DATE: February 08, 2000
