Issue Summary: Universal Health Coverage
updated 8/14/2003
Detailed Issue Summaries contain a quick reference to Centrists.Org policy ideas. They will be revised and updated periodically for clarity and usefulness, and as events and policy ideas change. Questions or comments? Please contact us at information@centrists.org .
Health (Basics) Issue Summary
Basic Coverage Issues and Ideology -- Tax Credits vs. Public Programs
Conservative Ideology
Centrist or Moderate Ideology
Liberal Ideology
Refundable, Advanceable Tax Credits
Large-Scale Coverage Proposals
Medicare for All, Single-Payer Proposals
Individual Mandates
Small Employer Mandates to Provide and Finance Coverage
Public-Private Purchasing Pools
Employers As Administrators, "Pass Through" Agents
Transitional Coverage for the Unemployed
Link to From Transitional to Universal Health Coverage (9/24/2003)
Medicaid or SCHIP Expansions
Family Care (Parents of SCHIP Enrolled Children)
Proposals to Raise Poverty Thresholds
Medicaid "Fill In" Proposals For All Under Poverty
Medicare "Buy In" Proposals for People Under Age 65
Basic Coverage Issues and Ideology -- Tax Credits vs. Public Programs: There are three primary approaches to health coverage that span the ideological spectrum: individual savings accounts and catastrophic coverage, tax credit or voucher programs combined with group purchasing arrangements, and expansions of public-sector health insurance. These approaches are advocated by health care conservatives, moderates and liberals, respectively.
In short, hard-right conservatives don't like health insurance of any kind, public or private. They say if we must have third-party payment for health care, it should be individually purchased catastrophic coverage. Liberals want only public, government-run health insurance. Centrists favor a public-private partnership in health insurance, with private health plans provide the main choices of coverage, and governments mostly limited to overseeing group purchasing pools, collecting information consumers need, and to making sure markets work for the benefit of all.
Conservative ideology on health coverage: savings accounts, tax credits for individual coverage. Health care conservatives argue that the private sector should be able to take care of people's health care needs without much government involvement. Many are suspicious of employer-provided health coverage, arguing it would be better if people were able to purchase health insurance individually, and keep it even as they change jobs or move from place to place. Conservatives generally favor catastrophic fee-for-service health insurance. They dislike the generous (though sometimes restricted) coverage offered by most modern HMO or PPO health plans, because low co-payments or cost-sharing included in those can give patients the illusion that health services are relatively inexpensive. Conservatives worry that Americans over-consume health services for that reason.
Health conservatives generally favor tax-subsidized savings accounts that would allow people to accumulate funds over time to use the pay for health services when the need arose. These accounts would usually be paired with catastrophic coverage with a high deductible amount, usually about $3,000 a year for people under age 65. (The catastrophic coverage would therefore kick in when a patient's health spending hit, say $3,000 a year. Some catastrophic insurance proposals have higher or lower deductibles, but the general range seems to be annual spending of $2,500 - $5,000.)
Conservatives often favor individual coverage over group coverage in their proposals. This stems from a belief that people should not be dependent on institutions (either governments or employers) for coverage. However, some conservatives favor Association Health Plans (AHPs), which are a legislative attempt to remove regulations governing a certain type of group coverage provided to members or particular business or trade groups. (Centrists.Org's analysis of the AHP legislation finds that while group purchasing is a worthy idea, the legislation proposed sometimes seems more concerned with benefiting certain trade associations than expanding health coverage in itself. Extreme versions of the legislation could hurt the small business and individual coverage systems in some states, and in general, regulatory relief or changes should be applied broadly, not just to one type of health coverage.)
Most conservatives now approve of refundable, advanceable tax credits for low-income people. However, conservative tax credit proposals usually restrict their use to individual coverage. That would cause a potential erosion of employer-based coverage for low-income workers, as those workers instead switched to individual coverage to take advantage of the credits.
Conservatives are willing to tolerate insurance rating rules that allow insurers to vary their premiums widely based on the age, sex, or health status of potential purchasers. This gives people an incentive to purchase health insurance when they are well, and not wait until illness strikes before attempting to acquire coverage, a phenomenon called "adverse selection." However, it can make health coverage prohibitively expensive for people with long-term or chronic illnesses. For people with chronic illnesses, conservatives generally favor state-based "high-risk" pools.
Problems with the conservative approach: Conservative ideology on health care doesn't take into account how difficult it can be for patients and their families to be careful shoppers for health services when they have a sudden need or health crisis. Patients are simply not able to bargain for good rates at the emergency room. Moreover, conservative proposals would often violate the iron law of health care politics: Thou shalt not mess up what people already have. Conservative policies would sometimes imply wrenching changes in people's insurance. Even if the insurance that people have is not optimal in some economic or social sense, if it is threatened, let the politician beware!
The simple progressive critique of most conservative coverage proposals is that when people shop with their own money for health services, people with more money will purchase more services, and lower-income people will be able to afford much less. This is especially problematic from a public health or chronic disease perspective. As a society, we want low- and moderate-income people to have remote monitoring systems and disease management services. Those might seem like frills, but they are not. Low-income people particularly need education on self-care. From a public health perspective, we want poor people to seek treatment for communicable diseases. Finally, many liberals and moderates simply do not trust that conservative proposals would leave current health insurance arrangements unscathed, or would sufficiently help poor people get a reasonable standard of care and prevention.
Many conservatives do favor refundable, advanceable tax credits to help low-income people purchase individual health coverage. In this respect, their ideas are compatible with those of health care moderates, although most moderates do not favor health savings accounts and prefer that tax credits be usable both for individual coverage and group coverage purchased through employers or government-sponsored group purchasing pools.
Centrist or moderate ideology on health coverage: tax credits or vouchers, group purchasing pools, individual mandates. Many conservatives join with moderates in taking a more accommodating view of the government's role in health coverage. Middle-ground conservatives argue that the government should not only subsidize coverage for low-income people, but should also create group purchasing options so that people will be able to purchase mainstream health coverage at reasonable rates.
Centrists generally approve of group health insurance with rating rules that charge all people the same amount (or vary premiums only for "exogenous" factors, such as age). Moderates are not opposed to individual coverage or high-risk pools, but generally prefer group coverage via employers and government-sponsored purchasing pools. They argue that with sufficient subsidies and requirements to purchase coverage, people will not wait until they are sick before purchasing coverage, eliminating worries about adverse selection.
Moderates believe that in order to control health costs, the most important thing is to give all Americans a good choice of various health plans, reflecting more or less coverage, and greater or fewer restrictions. It is not so important for patients -- especially those needing immediate care -- to pay at the point of service, such as at the hospital or doctors' office. Instead, it is more important that patients realize health insurance comes in many forms and premium levels, and that they have strong financial incentives to choose their health plans carefully.
Moderates generally believe people should purchase health insurance from a menu of plan options patterned after the Federal Employees Health Benefits (FEHB) program. Patients should be given clear information about the insurance choices available, including information about the performance of individual hospitals and physician groups affiliated with particular insurance plans. To the extent possible, comparative information, sign-up forms, and payroll deduction of premiums should be organized through the workplace, even if the employer does not otherwise offer or subsidize health coverage.
Ambitious centrists believe individual mandates (a requirement to purchase coverage backup by tax penalties), is not only the right policy, but would also be a good spur for FEHB-like purchasing pools. Refundable and advanceable tax credits, certificates, or vouchers would help low- and moderate-income people purchase coverage. The amount of the tax credits or vouchers could be set higher or lower, based on budgetary constraints. Either way, the assistance would help people at the margin, who could not quite afford health coverage without help.
Importantly, moderates believe that all tax credits or vouchers should be available to help people purchase coverage offered by their employer. The amount of the tax credits could be lower if they were used for employer-provided coverage, reflecting the fact that such coverage is already subsidized through the tax code. However, absent the ability to use tax credit for work-based coverage, some low-income employees would be forced to drop coverage at work to qualify for tax credits for outside-the-workplace, individual coverage. That incentive to drop coverage could destabilize employer pools and reduce work-based coverage.
Evaluation. In general, most centrists believe that the chaos and diversity of the private health insurance system is valuable, in terms of the innovation in health care coverage and delivery that it allows, and because various, smaller-scale attempts at cost control (within the bounds of market competition) are strongly preferable to large-scale government price controls. Centrists prefer to let the private system sort out improvements and problems over time, with the usual pulls and tugs from various parts of the market: employers, governments, consumers, patients, health providers.
Centrists believe it would be too jarring to scrap the current health insurance system, either in favor the catastrophic-only approach advocated by conservatives, or the government-only approach favored by liberals. However, that does not mean they are satisfied with current insurance choices, especially the limited options faced by small businesses. Instead, they urge governments at the federal, state, and local levels to create purchasing pools so that all businesses and individuals have good choices.
Liberal ideology on health coverage: public sector health insurance. Many Congressional liberals simply reject the idea of private sector health insurance on its face, although most favor a continuation of private sector health care delivery: private hospitals, physician groups, clinics, and so on. Instead, liberals have focused mainly on expanding public health insurance programs to additional groups of people.
The main expansions of public health coverage suggested by liberals include expanding state-based Medicaid or SCHIP (a related program) coverage to children in families well above poverty, and then extending such coverage to their parents as well. Another expansion of public health insurance would allow people under age 65 to "buy-in" to the Medicare program, and shorten the waiting time for disabled people under age 65 to qualify for Medicare coverage.
Some moderates also favor expanding public programs, not necessarily by extending them up the income range, but instead by filling out their coverage for people under poverty. For example, some states stop Medicaid coverage for people and families well below the poverty line. Rather than trying to attract those above poverty into public programs, this approach would instead attempt to ensure that all people below poverty get public coverage.
The Problem With Liberal Ideology. Liberals essentially believe that the chaos of private health insurance is not worth it. But the idea that government could rationalize and simplify health coverage while also constraining costs over time is dubious. Government health systems tend to be locked in place for long periods of time. Benefit innovation is rare. Cost savings in government-run programs generally come from large-scale price controls, which can distort the market for health services. For example, hospitals, doctors and research companies would have incentives to seek out the least price-controlled (rather than the most productive) areas for the investments of funds, time and effort.
In the last year or two, some liberals have started to realize that tax credits or vouchers could be very helpful for low-income people, and have expressed a greater willingness to live with private health plans as the source of coverage. Large expansions of public coverage seem increasingly unlikely with conservative control of Congress and the Executive Branch, and with states in deep financial trouble. Therefore, accommodating private sector coverage seems like a more plausible way to expand coverage.
Others still complain that small tax credits would amount to throwing a short rope to people in a deep hole. That argument is illogical, however. Many people have climbed most of the way up toward health coverage on their own, and all they need is a little extra assistance.
Refundable, Advanceable Tax Credits. To be effective, tax credits for the purchase of health insurance must be refundable, so that low-income workers who pay little income tax would still qualify. Moreover, they must be available "in advance," so that low- or moderate-income people could use the funds up front to purchase coverage, and not be required to wait until they file their tax returns to receive the subsidy.
Refundable, advanceable tax credits are essentially the same thing as vouchers (or coverage "certificates" included in recent Congressional proposals). They would do the same thing -- the only difference would be which section of the government administered them: the Treasury Department, the Departments of Labor, Health and Human Services etc.
Fixed dollar tax credits would probably be the easiest to administer and would be most likely to restrain premium costs. However, Congress enacted in 2002 a percentage tax credit -- a 65 percent credit for a small group of unemployed workers -- and the percentage method is proving workable. Percentage tax credits may not be as effective as fixed dollar credits at reducing health costs, but they would be fairer when applied to the purchase of individual coverage, where some people may be required to pay more simply because they are in poor health.
Large-Scale Coverage Proposals: Historically, large-scale proposals for universal health coverage have always deadlocked on ideology. Most liberals sincerely believe that the only fair way to rationalize the chaotic U.S. health system is to create a standardized, national insurance program, so that all Americans can participate equally. Some modify that general approach by proposing that the standardization occur instead at the state level, mimicking the Canadian, provincial system.
Conservatives have vigorously opposed those sorts of proposals, because they would represent such a large increase in taxation and government spending, and because they imply direct government control over a large sector of the economy. Some conservatives propose to reduce the scope of third party health insurance altogether, fearing that over-insurance causes excessive health spending. They oppose employer mandates for several reasons, including fears that government would increasingly determine the terms of employer-provided coverage, in effect directing the health insurance system indirectly, and without responsibility for the results.
The ideological meta-struggle for the core of the U.S. health system is serious and heart-felt. Many liberals have scaled back their proposals, hoping instead to achieve national or regional health insurance in stages, via incremental expansions in Medicare and Medicaid. Others have moved to a second best solution: the employer mandate.
Conservatives favor incremental proposals to strengthen individually purchased health insurance, and to create incentives for the purchase of catastrophic-only coverage. Liberals fight back in support of group coverage through government or employers, and insist on comprehensive benefit packages.
There are two ways to break the gridlock: (1) “strange bedfellows” proposals that combine incremental proposals from both the hard right and hard left, and (2) centrist packages that essentially reject the government-run approach of the left and the right’s limited insurance model.
The two strongest possibilities for strange bedfellows proposals are Medicaid “fill-in” proposals from the left, to ensure that all Americans under poverty have government health coverage, and individual tax credit proposals from the right, which would give low-income people a tax benefit for health insurance equivalent that already received by higher-income people. The make that sort of compromise work, conservatives would insist that the Medicare proposal be limited to the poor, and liberals would insist that tax credit proposals not tilt the tax incentives toward individual health insurance (and away from group coverage).
The alternatives to strange bedfellows approach have been tagged “radical centrist” or “third way” proposals, and they usually include a combination of mandates to purchase private insurance, individual choice of insurance plans and portability, significant tax credits to help large numbers of low-and-moderate income people purchase coverage, group purchasing through public/private purchasing pools, and transitional coverage for the unemployed. These larger-scale alternatives often require employers to handle enrollment and payroll deduction of premiums for employees. However, they generally do not mandate that employers actually pay for or subsidize coverage.
The Heritage Foundation has written about the need for tax credits, employment-based enrollment systems, and has supported bipartisan compromises on public/private purchasing groups or systems. The Progressive Policy Institute (PPI) has written complete “third way” packages. The Commonwealth Fund, which is usually associated with liberal health policies, has also recommended a centrist-style package, although its proposal includes larger expansions of government-run coverage.
Medicare for All, Single-Payer Proposals. There are two traditional liberal prescriptions for universal coverage: state-based universal coverage programs patterned after the Canadian provincial system, and federal-based universal Medicare coverage. The main arguments for these approaches are that government-run coverage would operate with lower administrative costs than private health insurance, and that it would be available equally, without regard to people’s income.
However, these approaches have lost political momentum over the last several years for several reasons. Expansions of current state-run Medicaid programs to all residents have lost favor because of state budget woes and the belief that state-based coverage would pay so little that the hospitals and doctors would refuse to participate or provide care at desired levels.
Medicare-for-all proposals are politically dead primarily due to the fact that Medicare’s claim to greater efficiency than private coverage has been refuted by the public realization that Medicare needs to spend hundreds of billions of dollars to modernize its benefits, especially for prescription drugs. It is difficult to argue that universal Medicare would reduce the nation’s health costs if the political system remains stymied trying to afford modern benefits for its current enrollees.
The need to add funds to modernize Medicare benefits has also driven home the fact that government-run health programs tend to stagnate, and that keeping them current can be very expensive. Voters have noticed that while the rest of the health care system switched from hospitalization toward drug therapy, Medicare doesn't have a drug benefit. When the health sector started developing chronic care methods and disease management systems, Medicare was left out. Medicare is dependent for change on the actions of politicians. No amount of political good will and enlightened government administration can substitute for the millions of market signals present in the private health system.
Moreover, Medicare has increasingly faced issues of underpayment as well. This is not the program’s fault -- it stems instead from the ebb and flow of Medicare payments relative to private insurance payments. In years when private plans paid less -- such as in the mid-1990s -- health providers did not complain about Medicare benefits. Now, when private plans are paying more, some health providers are beginning to refuse Medicare patients.
Individual Mandates. Requiring people to have health insurance would be a simple, powerful start in the drive toward universal health coverage. People should be required to purchase health coverage for themselves and their families; however, the government should make sure coverage is affordable, fairly priced, and easy to acquire.
Penalties for remaining uninsured could be “soft” tax penalties. For example, the Progressive Policy Institute has suggested that proof of health coverage be a requirement for the personal tax exemption, which is currently $ per person. Low-income families would face little or no penalty, because their income tax liability is often very small or even zero after they claim the Earned Income Tax Credit (EITC) or the Child Tax Credit. An additional tax penalty that would create a powerful incentive even for low-income to acquire coverage would be to deny the Child Tax Credit for uninsured children.
Small-Employer Mandates To Provide and Finance Coverage. This is essentially a small employer vs. large employer dispute. Large employers almost always provide health benefits. They have sufficiently large numbers of employees to bargain for reasonably priced insurance from health plans. They can usually “self-insure,” which means the firm (not the health insurance plan) holds the final risk of the cost of health claims.
So to drive down the number of people uninsured, an employer mandate would have to target small firms.
Practical Problems With A Small-Employer Mandate. However, small employers cannot bargain for favorable rates or self-insure. The premiums they are quoted can be very volatile -- for example, if one employee gets seriously sick, a small firm’s premium can skyrocket.
Moreover, the hassle factor for small business is important. Large, established firms have human resources departments that can handle employee benefits. A small firm may only consist of an owner-operator and a few hired hands.
Any small employer mandate would have to go to great lengths to help small employers find, afford, and maintain coverage. Large-scale purchasing groups, which small employers could join, are probably the best way to do this. Nevertheless, a small employer mandate would be extremely problematic until a much improved infrastructure for purchasing health insurance was in place.
Theoretical Problems With A Small-Employer Mandate. Politicians often view employer mandates as a correction to a "free rider" problem: employers that do not offer coverage are seen as passing on the cost of health insurance to other employers that do. But this is not the full story.
Employees actually pay for health insurance provided by employers. This may seem counterintuitive, but it makes perfect economic sense. In competitive labor markets, employers decide to hire based on the productivity and the total compensation costs of an employee. Total compensation includes both wages and benefits. Therefore, when employers provide health insurance they are providing it at their employees’ expense.
For example, consider two workers with equivalent coffee pouring skills, worth $12 an hour in compensation. One chooses to work at Starbucks, which offers health insurance, making $10 an hour in wages and $2 an hour in health benefits. The other works at a coffee shop that does not offer health benefits, and therefore makes $12 an hour in wages.
Of course real life doesn’t work out that neatly. Workers at a given firm cannot usually persuade their employers to give them raises if they drop health benefits. Companies often have firm-wide wage or compensation guidelines.
Moreover, it hardly seems fair that high-productivity employees often earn high wages and receive generous benefits.
However, lower-skill workers may instead face an impossible choice between sufficient wages and health benefits.
Small employer mandates to provide health insurance would force the choice: they would raise the benefits, but lower the wages of many low-skill workers. Trying to get around this problem by requiring employers to maintain wage levels would cause some low-skill workers to lose their jobs.
Refundable Tax Credits Preferable To Small Employer Mandates. The better solution to lack of health benefits among low-income workers would be refundable tax credits. Just as the Earned Income Tax Credit (EITC) helps low-income workers with children boost their after-tax income, refundable tax credits for health insurance would help low-income workers afford health benefits, either at work (if offered) or individually. In fact, health tax credits could spur more small employers to offer coverage, knowing that the low-income workers could afford it, and that they would have a sufficiently sized, insurance pool of enrollees.
To be sure, governments should still create purchasing pools for both small employers and individuals, to help them find reasonably priced coverage with a minimum of hassle.
Public-Private Purchasing Pools. The Federal Employees Health Benefits (FEHB) program is a good model of a public-private purchasing pool. Federal workers get a wide choice of health plans at fair prices. The government negotiates good deals with those plans. Workers must pay a significant share of the premium, forcing them to choose wisely.
Large employers can naturally create similar pools. However, small employers and individuals do not have the advantage of a large group. Large purchasing pools have two advantages: ability to negotiate better deals with health plans, and ability to spread the cost of a few very sick (and expensive) people over the premiums of many others.
There are several alternatives. Allowing small employers or individuals to purchase directly into the FEHB program is one. Creating a facsimile of FEHB for non-federal workers is another.
Perhaps the best option would be for states to create improved purchasing groups for small business and individuals. The state-based purchasing pools could be patterned after the options created in 2002 in the Trade Adjustment Act, for unemployed workers displaced by foreign trade.
Association Health Plans (AHPs) are a particular type of purchasing pool proposed in current legislation. However, the AHP legislation would create such advantages for AHP enrollees that small businesses and individuals not in AHPs could lose coverage. The AHP legislation takes a good idea too far, and Congress should equalize or at least leaven the advantages it would create for AHPs with those available to other forms of coverage.
Employers As Administrators, "Pass Through" Agents. Just because it is inappropriate to mandate that small businesses provide health benefits, employers, even the smallest firms, have a very important role to play in a centrist push toward universal coverage: enrollment and payroll deduction.
Even employers that do not offer health benefits can offer payroll deduction and enrollment services to employees wishing to purchase outside coverage. In cooperation with states, firms could hand out menu options of coverage available via local or state-wide purchasing pools.
Research suggests that for many people, it is very important that the opportunity to enroll in health coverage at work. We suggest that health insurance forms be provided universally to new employees, just like W-4 forms. The employer’s job would be to collect and forward the enrollment forms, handle payroll deduction if the employee wished, and forward or “pass through” to the employee’s paycheck any tax credits that were available. (There would be contemporaneous bookkeeping adjustments to payroll and/or income tax withholdings to make employers whole.)
Transitional Coverage for the Unemployed: Covering the unemployed should be policymakers’ first priority, both for humanitarian and counter-cyclical reasons, and set the stage for larger expansions of coverage on the centrist model.
The first step should be expanding the 65 percent refundable tax credit passed in 2002 for workers displaced by foreign trade to all unemployed workers. Legislation to do this is currently on the drawing board in Congress.
Second, the tax credits should be allowed to follow workers for a period of time when they start a new job. That way they wouldn’t have an incentive not to take a new job for fear their health insurance subsidy would lapse. It is better to maintain the subsidy until they are back on their feet.
Third, the tax credits should be accompanied by new state-based purchasing pools and other options for acquiring health coverage, as in the 2002 Trade Adjustment Act (which created the 65 percent credits in the first place).
Fourth, the tax credits should be extended to all low-income workers, regardless of whether or not they were previously unemployed.
This stepping-stone approach could lead to significant reductions in the number of uninsured Americans, based on a workable, bipartisan model already enacted in law.
Link:
Centrists.Org From Transitional to Universal Health Coverage (September 24, 2003)
Medicaid or SCHIP Expansions: Since 2002, political momentum for state-based Medicaid or State Children’s Health Insurance Program (SCHIP) expansions has waned somewhat, mostly because of state budgetary woes. Programs to expand Medicaid and SCHIP to ever-higher income levels are probably less appropriate than programs to ensure that public programs cover everyone, young or old, health or sick, adult or child whose income is below or at the poverty line.
Family Care (Parents of SCHIP Enrolled Children). Despite the lure of highly subsidized (or even free) health care for children, the State Children's Health Insurance Program (SCHIP) program has not yet succeeded in covering nearly all the eligible children. In some states, eligibility extends well above the poverty line. But enrollment has not been sufficient to solve the problem of uninsured children.
There may be many reasons for incomplete enrollment: some poor kids already have coverage through their parents’ policies, some families may not want to apply for a “welfare” program, some low-income families are just hard to for state outreach workers to continuously administer and enroll, because they move from job to job or location to location.
It is certainly true that more low-income kids would probably be enrolled in SCHIP if families were allowed to enroll too. That is the purpose of Family Care proposals, to open SCHIP enrollment not only to kids in certain income categories, but also to their parents.
However, older people are more expensive to insure, and the potential cost of Family Care programs may seem high to states (and increasingly to the deficit-burdened federal government). Moreover, Family Care proposals would probably have a greater impact enrolling the already covered, not the uninsured. (Some of the children enrolled in SCHIP probably already had private coverage, so the program’s enrollment does not necessarily imply as a large a reduction of the uninsured.)
On balance, centrists should probably concentrate on tax credit and purchasing pool proposals for not-so-poor workers and their families, and focus expansions of public programs toward those actually below, at, or just above the poverty line. Some states’ eligibility thresholds for Medicaid remain well below the poverty line. That is unacceptable, because private health insurance is not a viable option for truly impoverished people. If additional federal funds are needed in certain states to raise the national standard of public coverage to the poverty line, Congress should appropriate the funds.
Proposals to Raise Poverty Thresholds. As with Family Care expansions of the State Children’s Health Insurance Program (SCHIP), Medicaid expansions to ever-higher income levels are bound to have great success switching enrollment from private coverage to public than reducing the number of uninsured.
That is because some people highly value health coverage and some people don’t. People who highly value health coverage already have it, but would be willing to switch to Medicaid to get a better deal. People who value health coverage less are also less likely to enroll in Medicaid in the first place.
It would be a better use of resources to concentrate funds for public program expansions on ensuring that all people below or just above poverty are eligible. (In many states, eligibility levels for Medicare are still set well below the poverty line.) Private health coverage is much less likely to be plausible option for truly poor people, and public coverage is highly appropriate in that case.
Medicaid "Fill In" Proposals For All Under Poverty. Given limited resources at both the federal and state level, ensuring that all states provide public coverage to those at or below the poverty line should be a top priority. People in or near poverty cannot realistically be expected to purchase private health coverage, either on their own or through the workplace (although statistics indicate that some do, God bless them.)
Expansions of Medicare to income thresholds well above poverty in some states, or expanding the State Children’s Health Insurance Program (SCHIP) to families of children well above the poverty line would do much less to solve the problem of the uninsured than simply ensuring that decent public coverage is readily available to all people who are truly poor.
Medicare "Buy In" Proposals for People Under Age 65: For several years, Presidential candidates have proposed allowing people to “buy in” to the Medicare program prior to the usual eligibility age of 65. Medicare would charge a premium designed to coverage all or most of the cost.
Health expenditures go up with age. Medicare buy-in proposals are popular because, in the absence of more widespread purchasing pools for employees of small business and early retirees, people over 55 but not yet eligible for Medicare face the highest premiums.
However, this sort of program would certainly experience what economists call “adverse selection.” Whatever rate Medicare charges, people who couldn’t get less expensive coverage elsewhere would enroll in Medicare, and people who could get cheaper coverage on the open market would just do that instead. Therefore, Medicare would enroll people whose costs to insure exceeded whatever price it charged, and would not enroll people whose health costs were lower than that price. Medicare would lose no matter what, and its costs would increase.
Some Medicare “buy-in” proposals claim to cost nothing over long periods of time, or be “budget neutral” in the long run, because they would force enrollees in the buy-in program to pay the government back for the cost of adverse selection, either determined individually or collectively among all the buy-in participants. That is pretty far fetched. Not only would it be difficult to calculate an accurate amount to pay back, the political likelihood of the government collecting more from people because they happened to be very sick is not high. Politicians would reject the pay back provisions as soon as Medicare attempted to collect.
Medicare “buy-in” proposals are not free or budget neutral, under any realistic set of expectations.
