<DOC>
[107th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:77994.wais]
THE UNINSURED AND AFFORDABLE HEALTH CARE COVERAGE
=======================================================================
HEARING
before the
SUBCOMMITTEE ON HEALTH
of the
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
SECOND SESSION
__________
FEBRUARY 28, 2002
__________
Serial No. 107-98
__________
Printed for the use of the Committee on Energy and Commerce
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
__________
U. S. GOVERNMENT PRINTING OFFICE
77-994 WASHINGTON : 2002
___________________________________________________________________________
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COMMITTEE ON ENERGY AND COMMERCE
W.J. ``BILLY'' TAUZIN, Louisiana, Chairman
MICHAEL BILIRAKIS, Florida JOHN D. DINGELL, Michigan
JOE BARTON, Texas HENRY A. WAXMAN, California
FRED UPTON, Michigan EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida RALPH M. HALL, Texas
PAUL E. GILLMOR, Ohio RICK BOUCHER, Virginia
JAMES C. GREENWOOD, Pennsylvania EDOLPHUS TOWNS, New York
CHRISTOPHER COX, California FRANK PALLONE, Jr., New Jersey
NATHAN DEAL, Georgia SHERROD BROWN, Ohio
STEVE LARGENT, Oklahoma BART GORDON, Tennessee
RICHARD BURR, North Carolina PETER DEUTSCH, Florida
ED WHITFIELD, Kentucky BOBBY L. RUSH, Illinois
GREG GANSKE, Iowa ANNA G. ESHOO, California
CHARLIE NORWOOD, Georgia BART STUPAK, Michigan
BARBARA CUBIN, Wyoming ELIOT L. ENGEL, New York
JOHN SHIMKUS, Illinois TOM SAWYER, Ohio
HEATHER WILSON, New Mexico ALBERT R. WYNN, Maryland
JOHN B. SHADEGG, Arizona GENE GREEN, Texas
CHARLES ``CHIP'' PICKERING, KAREN McCARTHY, Missouri
Mississippi TED STRICKLAND, Ohio
VITO FOSSELLA, New York DIANA DeGETTE, Colorado
ROY BLUNT, Missouri THOMAS M. BARRETT, Wisconsin
TOM DAVIS, Virginia BILL LUTHER, Minnesota
ED BRYANT, Tennessee LOIS CAPPS, California
ROBERT L. EHRLICH, Jr., Maryland MICHAEL F. DOYLE, Pennsylvania
STEVE BUYER, Indiana CHRISTOPHER JOHN, Louisiana
GEORGE RADANOVICH, California JANE HARMAN, California
CHARLES F. BASS, New Hampshire
JOSEPH R. PITTS, Pennsylvania
MARY BONO, California
GREG WALDEN, Oregon
LEE TERRY, Nebraska
David V. Marventano, Staff Director
James D. Barnette, General Counsel
Reid P.F. Stuntz, Minority Staff Director and Chief Counsel
______
Subcommittee on Health
MICHAEL BILIRAKIS, Florida, Chairman
JOE BARTON, Texas SHERROD BROWN, Ohio
FRED UPTON, Michigan HENRY A. WAXMAN, California
JAMES C. GREENWOOD, Pennsylvania TED STRICKLAND, Ohio
NATHAN DEAL, Georgia THOMAS M. BARRETT, Wisconsin
RICHARD BURR, North Carolina LOIS CAPPS, California
ED WHITFIELD, Kentucky RALPH M. HALL, Texas
GREG GANSKE, Iowa EDOLPHUS TOWNS, New York
CHARLIE NORWOOD, Georgia FRANK PALLONE, Jr., New Jersey
Vice Chairman PETER DEUTSCH, Florida
BARBARA CUBIN, Wyoming ANNA G. ESHOO, California
HEATHER WILSON, New Mexico BART STUPAK, Michigan
JOHN B. SHADEGG, Arizona ELIOT L. ENGEL, New York
CHARLES ``CHIP'' PICKERING, ALBERT R. WYNN, Maryland
Mississippi GENE GREEN, Texas
ED BRYANT, Tennessee JOHN D. DINGELL, Michigan,
ROBERT L. EHRLICH, Jr., Maryland (Ex Officio)
STEVE BUYER, Indiana
JOSEPH R. PITTS, Pennsylvania
W.J. ``BILLY'' TAUZIN, Louisiana
(Ex Officio)
C O N T E N T S
__________
Page
Testimony of:
Donnelly, Hon. Thomas R., Jr., Board Member, Coalition for
Affordable Health Care Coverage............................ 85
Feder, Judith, Dean of Public Policy, Georgetown University.. 90
Grealy, Mary R., President, Healthcare Leadership Council.... 33
Kellermann, Arthur L., Co-Chair of the Committee on the Study
of the Consequences of Uninsurance, Institute of Medicine.. 27
Posada, Robert de, President, The Latino Coalition........... 80
Rowland, Diane, Executive Vice President, Henry J. Kaiser
Family Foundation.......................................... 39
Turner, Grace-Marie, President, Galen Institute, Inc......... 72
Weil, Alan, Center Director, Assessing the New Federalism,
The Urban Institute........................................ 98
Material submitted for the record by:
Donnelly, Hon. Thomas R., Jr., Board Member, Coalition for
Affordable Health Care Coverage, responses for the record.. 107
Feder, Judith, Dean of Public Policy, Georgetown University,
responses for the record................................... 112
Grealy, Mary R., President, Healthcare Leadership Council,
responses for the record................................... 114
Kellermann, Arthur L., Co-Chair of the Committee on the Study
of the Consequences of Uninsurance, Institute of Medicine,
responses for the record................................... 117
Posada, Robert de, President, The Latino Coalition, responses
for the record............................................. 121
Rowland, Diane, Executive Vice President, Henry J. Kaiser
Family Foundation, responses for the record................ 118
Turner, Grace-Marie, President, Galen Institute, Inc.,
responses for the record................................... 123
(iii)
THE UNINSURED AND AFFORDABLE HEALTH CARE COVERAGE
----------
THURSDAY, FEBRUARY 28, 2002
House of Representatives,
Committee on Energy and Commerce,
Subcommittee on Health,
Washington, DC.
The subcommittee met, pursuant to notice, at 10 a.m., in
room 334, Cannon House Office Building, Hon. Michael Bilirakis
(chairman) presiding.
Members present: Representatives Bilirakis, Burr,
Whitfield. Ganske, Wilson, Bryant, Waxman, Strickland, Capps,
Towns, Wynn, Green, and Dingell (ex officio).
Staff present: Nandan Kenkeremath, majority counsel; Yong
Choe, legislative clerk; and Amy Hall, minority professional
staff member.
Mr. Bilirakis. I call this hearing to order. I would like
to welcome our witnesses and our audience to this important
hearing on the uninsured. And first I would like to thank the
Veterans Affairs Committee for allowing us to use this hearing
room while our main hearing room, the Energy and Commerce
Hearing Room, as you know is being renovated.
And I am proud to be a member of the leadership of both
committees. Before we begin today, I would like to take a
moment to offer my thoughts and prayers to Dr. John Eisenberg
and his family.
As many of you know, Dr. Eisenberg is the Director of the
Agency for Health Care Research Equality. I know that Ranking
Member Brown and I, as well as all members of this committee,
have worked with Dr. Eisenberg over the hears in his role of
AHRQ, as a founding commissioner of the Physician Payment
Review Commission, one of the precursors as you know of MEDPAC.
And as principal Deputy Assistant Heath Secretary for
Health. John's contribution to government and to health
services research has been of immeasurable value, and did not
go unnoticed when President Bush decided to retain his
expertise during his administration.
For some time now Dr. Eisenberg has been bravely battling a
brain tumor, while continuing to lead AHRQ with the same
dedication and passion for which he has always been known.
He continues to be one of the top government experts in
quality, appropriateness, and effectiveness of health care
services, and I know that I speak for myself, for Chairman
Tauzin, and all members of this committee when I say their
thoughts and prayers are with John, his family, and his AHRQ
family during this very difficult time.
While the number of uninsured individuals in America has
remained at an unacceptably high level, despite a strong
economy and record levels of employment, the Census Bureau
estimates that last year over 38 million people went the whole
year without health insurance.
Although this figure does represent an improvement from the
43.4 million Americans that lacked coverage in 1997, there is
still real concern with the fact that rising health care costs
and the recent economic downturn could and probably will
increase the number of uninsured.
In the past, we have acted to create systems that expand
health coverage. We have a system that allows employers to
offer health benefits to employees without counting these
benefits as income.
Medicare and Medicaid, and S-CHIP, represents substantial
public investments in providing health coverage to our Nation's
most needy. federally funded community health centers provide
health care to individuals without regard to their ability to
pay.
State governments have implemented innovative programs,
such as high risk pools, to help with the problem of the
uninsured. Despite these successes the plain fact is that we
must do more.
I believe that it is safe to say that no one solution will
completely solve this problem. In order to significantly reduce
the number of uninsured, we must look at innovative and
flexible solutions that will increase access to health care.
The President has proposed $89 billion over 10 years as a
refundable--and I underline that--refundable tax credit for the
purchase of health insurance. One of the most attractive
components of this benefit is that it is completely portable,
and would be in the hands of the individual to use in a manner
that best suits their family.
I believe that it is important for Congress to examine this
proposal, and certainly not to turn away from it, but to
examine the proposal, and refine it where needed. But it no
doubt demonstrates--and I feel very strongly about this, it
does demonstrate the administration's commitment to addressing
the problem of the uninsured.
The President's budget also recognizes the important role
of the health care safety net. The budget proposal would allow
States to use an estimated $3.2 billion in unspent S-CHIP funds
to expand S-CHIP, and Medicaid, by enrolling more low income
children and their parents.
The administration's proposal also proposes $1.5 billion
for community health centers, something that is very warm to my
heart, which is a $114 million increase over last year's
funding level.
And last the budget request proposes expanding the medical
savings account and flexible spending account programs. These
are real solutions that we should explore, and they can make a
real difference in reducing the number of uninsured in America.
But--and I do again emphasize--for the benefit of all of my
colleagues up here, not completely solving the problem by any
means, but as has happened in the past, hopefully a partial
fix, which will go toward at least reducing the number of
uninsured.
This year, Congress has a tremendous opportunity,
particularly with the President's interests, to improve the
quality and availability of health care for all Americans. Our
challenge is to enact legislation that will expand access to
care for a significant number of Americans in a fiscally
responsible manner.
And again I would like to thank our witnesses for being
here today, and I look forward to their testimony. And I know
would yield to Mr. Brown.
[The prepared statement of Hon. Michael Bilirakis follows:]
Prepared Statement of Hon. Michael Bilirakis, Chairman, Subcommittee on
Health
Good morning, I now call this hearing to order. I'd like to welcome
our witnesses and our audience to this important hearing on the
uninsured. First, I would like to thank the Veterans Affairs Committee
for allowing us to use their hearing room while our main Energy and
Commerce Committee hearing room is being renovated. I'm proud to be a
member of the leadership of both these important Committees.
Before we begin today, I'd like to take a moment to offer my
thoughts and prayers to Dr. John Eisenberg and his family. As many of
you know, Dr. Eisenberg is the Director of the Agency for Healthcare
Research and Quality (AHRQ). I know Ranking Member Brown and myself, as
well as the Members of this Committee, have worked with Dr. Eisenberg
over the years in his role at AHRQ, as a founding Commissioner of the
Physician Payment Review Commission (one of the precursors of MedPAC),
and as Principal Deputy Assistant Secretary for Health. John's
contribution to government and to health services research has been of
immeasurable value, and did not go unnoticed when President Bush
decided to retain John's expertise during his Administration.
For some time now, Dr. Eisenberg has been bravely battling a brain
tumor while continuing to lead AHRQ with the same dedication and
passion for which he has always been known. He continues to be one of
the top government experts in quality, appropriateness, and
effectiveness of health care services. I know I speak for myself,
Chairman Tauzin, and all the Members of this Committee when I say that
our thoughts and prayers are with John, his family and his AHRQ family
during this difficult time.
The number of uninsured individuals in America has remained at an
unacceptably high level, despite a strong economy and record levels of
employment. The Census Bureau estimates that last year over 38 million
people went the whole year without health insurance. Although this
figure represents an improvement from the 43.4 million Americans that
lacked coverage in 1997, there is still real concern with the fact that
rising health care costs and the recent economic downturn could
increase the number of uninsured.
In the past we have acted to create systems that expand health
coverage. We have a system that allows employers to offer health
benefits to employees without counting these benefits as income.
Medicare, Medicaid and S-CHIP represent substantial public investments
in providing health coverage to our Nation's most needy. Federally
funded Community Health Centers provide health care to individuals
without regard to their ability to pay. State governments have
implemented innovative programs, such as high risk pools, to help with
the problem of the uninsured. Despite these successes, the plain fact
is that we must do more.
I believe it is safe to say that no one solution will completely
solve this problem. In order to significantly reduce the number of
uninsured, we must look at innovative and flexible solutions that will
increase access to health care. The President has proposed $89 Billion
over ten years as a refundable tax credit for the purchase of health
insurance. One of the most attractive components of this benefit is
that it is completely portable and would be in the hands of the
individual to use in a manner that best suits their family. I believe
it is important for Congress to examine this proposal and refine it
where needed, but it no doubt demonstrates the Administrations
commitment to addressing the problem of the uninsured.
The President's budget also recognizes the important role of the
health care safety net. The budget proposal would allow States to use
an estimated $3.2 Billion in unspent S-CHIP funds to expand S-CHIP and
Medicaid by enrolling more low-income children and their parents. The
Administration's proposal also proposes $1.5 Billion for Community
Health Centers, which is a $114 million dollar increase over last years
funding level. Lastly, the budget request proposes expanding the
medical savings account and flexible spending account programs. These
are real solutions that we should explore, and they can make a real
difference in reducing the number of uninsured in America.
This year, Congress has a tremendous opportunity to improve the
quality and availability of health care for all Americans. Our
challenge is to enact legislation that will expand access to care for a
significant number of Americans in a fiscally responsible manner.
Again, I would like to thank our witnesses for being here today and I
look forward to their testimony.
Mr. Brown. I thank you, Mr. Chairman. I want to echo the
Chairman's remarks, first, about John Eisenberg. As a
physician, a teacher, a researcher, and a leader in the health
care policy area, John has dedicated himself to making our
health care system more responsive, and more efficient, and
more inclusive.
I was fortunate to work closely with John during the
reauthorization of HRQ a couple of years ago, and know that one
of this personal priorities has been to ensure the independence
and the scientific integrity of the Agency's products.
He has fought hard in his career to deliver objective,
timely, and scientifically valid research, in what can
sometimes be a politically supercharged environment. And that
endeavor, as in so many others, John has been wholly
successful.
I want to thank him for his contribution and my thoughts
and prayers are with him during his illness and with his
family.
I want to thank the witnesses for joining us this morning,
especially considering the hearing room in which we sit, and
what this committee in Congress that normally sits in this
room, with Mr. Bilirakis and others, has done in the area of
Veterans Administration health.
And when you look very quantifiably at results, at medical
errors, at outcomes, the VA is performing these days an untold
story, but one to celebrate. The VA is performing these days
according to quantifiable outcome results better than the
private health care system in many, many ways in this country.
And from that I think we could learn something. There was
an interesting op ed in the Cleveland Plain Dealer the other
day. Tom Brizatis, an writer for the Plain Dealer, was arguing
for a single payer system. It is not to be confused as
opponents often do with the government run health care system,
where the government actually provides care.
Single payer means that the financing of health care is
centralized, which puts an end to the gaps and the
inconsistencies that inevitably arise when you have a patchwork
of private and public financing mechanisms.
Implementing such a system would save about a $100 billion
in administrative costs out of the U.S. health care system,
dollars that could be used to actually provide care. We know
that the administrative costs of Medicare, which is a single
payer system by and large, that the administrative costs are
less than 2 percent.
And the administrative costs of private insurance are five
times that, eight times that, ten times that, depending on the
kind of individual or group plan. More importantly under single
payer, insurance could function like insurance.
Everyone would pay into the pool, and everyone would know
that should they become ill that their costs would be covered.
Individuals with health conditions wouldn't be shunned off as
we do now into high risk pools, and they would not be denied
insurance or face coverage, exclusions, and gaps because they
actually had the occasion to fall ill.
Small businesses wouldn't be forced to drop coverage
because their premiums spike upward when one employee gets
sick.
People in the individual insurance market would not face an
impossible tradeoff, unaffordable premiums, or deductibles so
high that health are remains out of reach with or without
insurance.
Steelworkers in my district, for example, and throughout
the U.S., wouldn't be left without health insurance when their
companies go under, or are sold, or declare bankruptcy, as well
LTV, and RTI, and others have recently.
Economic downturns would not automatically under single
payer swell the ranks of the uninsured. I am not minimizing the
potential pitfalls associated with single payer. The public
sector, the private sector, consumers, would have to work
closely to ensure high quality care and promote continued
medical innovation.
We could work through those issues. I am not as optimistic
as my friend, Jim McDermott, who is quoted in that op ed that I
cited earlier. He believes that the U.S. will see beyond the
stigma, recognizing that anything short of a single payer
system is just another temporary quick fix.
My guess is that the word, the term, single payer, sends
chills down the spine of my colleagues on the other side of the
aisle, not to mention probably several of our witnesses.
I think we are going to keep filling holes, unfortunately
just keep filling holes in this institution, our health care
system, for some time.
But if we are left with incremental solutions, let's
establish some ground rules. I will start with the most obvious
one. Let's not spend money on a proposal that ultimately
reduces access to coverage. My concern about MSAs and
association plans, is that by skimming healthier individuals
and groups into separate risk pools, these approaches could
increase premiums for everyone else.
What happens when premiums increase? So does the number of
uninsured. While we are at it, let's not encourage the
proliferation of high deductible plans. When an individual
faces a high deductible, what kind of care do they avoid?
They avoid, of course, routine and preventive care. Do we
really want to discourage the use of routine and preventive
care and what that means to costs, and what that means to human
health. Strike Two for MSAs.
Let's not spend money on a proposal that creates a two-
tiered system; one for healthy people, and one for sick people.
Insurance is supposed to be there when you get sick, not until
you get sick.
While current high risk pools of filled the gap for some
individuals, premiums are exceptionally high and participation
is relatively low for the very risk that the risk pool is not
balanced.
Again, for insurance to remain stable and to remain
affordable, you have to buy in when you are healthy as
protection in the event that you get sick. Taken to its
extreme, the risk pool says that you would relegate all of
those who might become ill into one pool, and all of those who
definitely won't become ill into another.
All of us would be in the high risk pool. That's why all of
us need insurance, and that's why those of us who are fortunate
enough to stay healthy can't abandon those who become ill.
Tomorrow your luck might change. Let's not spend money on a
proposal that is not well targeted.
My concern with tax credits is to help low income families
who comprise the bulk of the uninsured, these credits would
have to be huge. I checked out premiums in the individual
markets in my home State of Ohio.
Unless you want a plan with a $5,000 deductible, the
premiums are outrageous, upwards of $10,000 per year per family
in some cases. I understand the administrative load on a
typical insurance policy in the individual market--and keep in
mind what I said about Medicare--are 2 percent administrative
costs.
The administrative load on a typical insurance policy in
the individual market can be as high as 40 percent. Is that the
best way to spend limited Federal dollars? We would get more
bang for our buck by expanding existing public programs like
Medicaid, like S-CHIP, like Medicare.
My colleague, Mr. Stark and I, have introduced legislation
that would enable uninsured individuals 55 to 64 to buy into
Medicare. That is the fastest growing segment of the uninsured
population, and the segment with the greatest risk for
catastrophic health event.
I have joined Mr. Dingell and Mr. Pallone, and others on
this subcommittee on legislation that provides States
additional funding so they can get low income parents and other
groups into Medicaid and S-CHIP.
We should look seriously at both of those proposals. I want
to talk about one more principle, which is the most important
of all, and that is let's not expand coverage by taking away
from current Medicaid beneficiaries.
We are the world's wealthiest Nation, and we don't need to
make deals with the devil. As the committee with jurisdiction
over Medicaid, we have a responsibility to ensure that the
beneficiaries of that program are receiving the benefits to
which they are entitled.
Those beneficiaries remember Medicaid. They live in
poverty. Many are disabled severely and most are children. I am
concerned that the administration is promoting tradeoffs
through the HIFA waiver process that could easily undercut
access to care for current Medicaid beneficiaries. I will wrap
up, Mr. Chairman.
Some States have asked for waiver authorities to impose
significant cost sharing, even enrollment fees, on very low
income beneficiaries, using the savings to offer coverage to
higher income individuals.
Imagine charging more for the poor so we can offer more
benefits to higher income people. I hope, Mr. Chairman, because
this committee has a responsibility to Medicaid beneficiaries,
that we can work together on a bipartisan basis to monitor the
HIFA waiver process and take action to ensure that current
beneficiaries maintain access to the coverage that they have
now and absolutely need. Thank you, Mr. Chairman.
[The prepared statement of Hon. Sherrod Brown follows:]
Prepared Statement of Hon. Sherrod Brown, a Representative in Congress
from the State of Ohio
Thank you, Mr. Chairman.
First I want to echo the Chairman's comments about John Eisenberg.
As a physician, a reseacher, and a leader in the health care policy
arena, John has dedicated himself to making our health care system more
responsive, more efficient, and more inclusive.
I was fortunate to work closely with John during the
reauthorization of AHRQ, and I know that one of his personal priorities
has been to ensure the independence and scientific integrity of the
agency's products. He has fought hard to deliver objective, timely, and
scientifically valid research in what can sometimes be a politically
charged environment.
In that endeavor, as in so many others, John has been wholly
successful. I want to commend and thank him for his contribution. My
thoughts and prayers are with John and his family.
I want to thank our witnesses for joining us this morning.
There was an interesting op-ed in the Cleveland Plain Dealer on
Sunday. Tom Brazaitis was arguing for a single-payer system.
That's not to be confused, as it often is, with a government-run
health care system, where the government actually provides care.
A single payer system means that the financing of health care is
centrallized, which puts an end to the gaps and inconsistencies that
inevitably arise when you have a patchwork of public and private
financing mechanisms.
Implementing such a system could cut about $100 billion in
administrative costs out of the US health care system, dollars that
could be used to actually provide care.
More importantly, under a single payer system, insurance could
function like insurance again. Everyone would pay into the pool, and
everyone would know that, should they become ill, their costs would be
covered.
Individuals with health conditions wouldn't be shunted off into
high risk pools, and they wouldn't be denied insurance or face coverage
exclusions because they had the audacity to actually fall ill.
Small businesses wouldn't be forced to drop coverage because their
premiums spike upward when one employee becomes sick.
People in the individual insurance market would not face an
impossible trade-off, unaffordable premiums or a deductible so high
that health care remains out-of-reach with or without insurance.
Steelworkers in my district and throughout the US would not be left
without health insurance when their companies go under or are sold.
Economic downturns wouldn't swell the ranks of the uninsured.
I'm not minimizing the potential pitfalls associated with single
payer systems.
The public sector, the private sector, and consumers would have to
work closely together to ensure high quality care and promote continued
medical innovation.
We could work through those issues. But I'm not as optimistic as my
friend, Jim McDermott, who is quoted in the op-ed. He believes the US
will see beyond the stigma and recognize that anything short of a
single payer system is a temporary fix.
My guess is that the word ``single-payer'' sends chills down the
spine of my colleagues on the other side of the aisle, not to mention
several of our witnesses.
I think we're going to keep filling holes for awhile yet. So, if
we're left with incremental solutions, let's establish some ground
rules.
I'll start with the most obvious one: Let's not spend money on a
proposal that ultimately reduces access to coverage.
My concern about MSAs and association plans is that, by skimming
healthier individuals and groups into separate risk pools, these
approaches could increase premiums for everyone else.
What happens when premiums increase? So does the number of
uninsured.
While we're at it, let's not encourage the proliferation of high
deductible plans. When an individual faces a high deductible, what kind
of care do you think they avoid? Routine and preventive services. Do we
really want to discourage the use of routine and preventive services?
Strike two for MSAs.
Let's not spend money on a proposal that creates a two-tiered
system, one for healthy people and one for sick people. Insurance is
supposed to be there when you get sick, not until you get sick.
While current high risk pools have filled a gap for some
individuals, premiums are exceptionally high and participation is
relatively low, for the very reason that the risk pool is not balanced.
Again, for insurance to remain stable and affordable, you have to buy
in when you're healthy as protection in the event you get sick.
Taken to its extreme, the risk pool concept says you would relegate
all those who might become ill into one pool, and all those who
definitely won't become ill into another. All of us would be in the
high risk pool. That's why all of us need insurance, and that's why
those of us who are fortunate enough to stay healthy cannot abandon
those who become ill. Tomorrow your luck could change.
Let's not spend money on a proposal that is not well targeted.
My concern with tax credits is that to help the low income families
who comprise the bulk of the uninsured, these credits would have to be
huge. I checked out premiums in the individual market in Ohio.
Unless you want a plan with a $5,000 deductible, the premiums are
outrageous. Upwards of $10,000 per year in some cases. I understand the
administrative load on a typical insurance policy in the individual
market can be as high as 40%.
Is that the best way to spend limited federal dollars?
We would get more bang for our buck by expanding existing public
programs like Medicaid, SCHIP, and Medicare.
My colleague Mr. Stark and I have introduced legislation that would
enable uninsured individuals in the 55-65 age group to buy into
Medicare. That's the fastest growing segment of the uninsured
population, and the segment at the greatest risk for a catastrophic
health event.
I've also joined Mr. Dingell and others on this subcommittee on
legislation that would provide states additional funding so they can
get low income parents and other groups into Medicaid and SCHIP.
I think we should look seriously at both proposals.
I want to offer one more principle, and it is the most important of
them all: let's not expand coverage by taking away care from current
Medicaid beneficiaries.
We are the wealthiest nation in the world. We don't need to make
deals with the devil.
As the committee with jurisdiction over the Medicaid program, we
have a responsibility to ensure that the beneficiaries of that program
are receiving the benefits to which they are entitled.
Remember, these beneficiaries live in poverty. Many are severely
disabled, most are children.
I am concerned that the Administration is promoting tradeoffs
through the ``HIFFA'' waiver process that could easily undercut access
to care for current Medicaid beneficiaries.
Some states have asked for waiver authority to impose significant
cost sharing, even ``enrollment fees,'' on very low income
beneficiaries, using the savings to offer coverage to higher income
individuals.
Think that through: is there that much difference between imposing
cost sharing on a person with no resources, and abandoning that
individual altogether? At what point are we breaking our promise?
This subcommittee has a responsibility to Medicaid beneficiaries.
We cannot ignore any action, administrative or legislative, that
jeopardizes their access to care.
Mr. Chairman, I hope we can work together on a bipartisan basis to
monitor the HIFFA waiver process and take action if necessary to ensure
that current beneficiaries maintain access to the coverage they so
clearly need.
Thank you, Mr. Chairman.
Mr. Bilirakis. All right. I thank the Chairman for his
remarks.
Mr. Bryant.
Mr. Bryant. I want to thank the Chairman for holding this
hearing, and I know that is almost a tradition up here. We
always start out by thanking the Chairman for having this
hearing.
But I especially mean this today because I don't think that
anyone disagrees with the problem out there being so many
people that are uninsured, and you focusing on this, and how to
reach some realistic solutions to this problem, and bringing in
the talented people and experts that you have brought in today,
I think certainly will help us along that way.
And particularly as we move into a situation with the
economy where we realistically, even though we have seen a
decline, a slight decline over the last year in uninsureds, we
likely will see an increase unfortunately.
And I like your idea, too, that we remain open to all
opportunities out there, whether they be from the
administration, or Mr. Brown, and others, that we look at all
possibilities.
And it may not be one comprehensive plan. It may be a
series of different ideas that we are able to reduce this
number of uninsureds. Before I go too much further in this, I
want to also join in with my colleagues that have spoken so far
in recognizing John Eisenberg.
I met John--he is a Tennessean by the way, and that's what
I think makes him extra special. Were he still in Tennessee, I
would probably be his Congressman, and I actually met him the
day that this situation occurred with him.
We were at the conference together in Florida, the health
care conference, and I met him that morning. And immediately--
he still had a little bit of that southern accent, and so I
picked up on that very quickly, and liked he right away.
And we talked, and actually I was on the tennis court next
to him when he went down at that unfortunate time. And so I
followed him and got to know his wife, Dee Dee, and we share,
all of us share, that love for tennis that we have, and we are
really all pulling for him.
And I know that this is a difficult time for him, and I am
not sure what all was said before I arrived here, but I just
wanted to add the fact that I have grown to know him and his
reputation, and the fact that he has been so committed to his
work here.
And I want to add my thanks, along with those others that
have spoken, and our best wishes as a committee for his
continued health and recovery.
And back to the issue at hand. I want to apologize for
being late. Like so many Members, every Member in Congress, we
are bouncing around between hearings all the time, and I was at
the TRED Act before I came over here, but this is where my
heart is.
I really have an interest in this, and want to see us come
to some conclusions here. My State of Tennessee has a waiver,
and we are operating under a program called TIN Care, and Tenn
care is--we have added--we probably provide health coverage to
more people than any other State in the country on a per capita
basis. I think we are No. 1.
Almost 1 in 4 in Tennessee, and so about 24. something
percent of our folks are on Tenn Care, and it is breaking our
back financially. And I am not sure that we want a whole lot
more dropped on us if you start talking about expanding the
Medicaid, and things like that, that would impact us.
And I am sure that other States are the same way. It is
kind of an unfunded mandate to some extent, and we have to be
careful as we look at going down those types of roads to get
there.
I can just tell you again that Tenn Care is really
financially strapping our case right now to the point that we
are considering some ways to raise revenue that we have never
thought about in the past, including an income tax. We are one
of the few States that still does not have an income tax, State
income tax.
But I will tell you, too, also that we talk a lot about
prescription drugs here, and how are we going to make those
available, not just to senior citizens, which certainly need
prescription drug benefits, but to others out there.
I mean, it is not just the older folks that are paying high
costs for their drugs, and absolutely, the best answer--well,
not the only, but the best answer to this is that we provide
health insurance that would incorporate a prescription drug
benefit.
We provide better access somehow to coverage which would
help solve that problem of prescription drugs. I think the way
to do this, and I would agree with my Chairman, would be
incentives out there, and all these different issues that we
have talked about, all these different programs.
I see them in a more positive light than some on this
committee do. I think there are real opportunities out there to
do some good. And I also today want to hear from the
witnesses--and I know that it is probably part or some of your
testimony, and I will close with this--this issue of
uninsurable pools.
Now, I come out of a defense law practice where I
represented insurance companies, and I know that in most States
they have at the insurance level of automobile casualty an
uninsurable pool.
I mean, these are the folks that can't get insurance. They
have a bad record. Now, they have the ability to limit the
amount of coverage, and do other things that can allow them to
do it. But if you write car insurance in Tennessee, you have to
be a part of that pool, and take your assigned number.
I don't know how that would work with health insurance. It
is not the same thing. Obviously, you can't limit your
liability very effectively, but I would be interested in
hearing how other States handle these uninsurable pools, and
with that, I again thank you, and yield back the balance of my
time.
Mr. Bilirakis. I thank the gentleman.
Mr. Dingell.
Mr. Dingell. I want to thank the Chairman and the others
for making it possible for us to hear from the fine witness
panel that we have today. Years ago, Congress passed the
Medicare program as a response to the appalling lack of health
insurance among the elderly.
Today it is the most popular and successful health
insurance program in the country. It guarantees virtually every
senior citizen affordable health care coverage. Millions of
other Americans, however, do not enjoy a similar guarantee.
I think they should, and so in every Congress I have
introduced H.R. 16, a bill that will provide meaningful health
care coverage for all Americans. An incremental solution to
provide health care insurance to more Americans must be
designed carefully so that the current fabric of health care
coverage is not undone.
This means protecting existing employer-sponsored coverage
from erosion, and ensuring that those with public insurance can
continue to count on that coverage being both adequate and
affordable.
On the latter point the health insurance flexibility and
accountable HIFA waivers initiated by this administration cause
me great concern, and I do not believe will meet the test of
the light of the day, because the waivers erode coverage for
the poorest, most vulnerable Americans, in order to finance
coverage for higher income individuals.
That makes no sense, I suspect, except to those in the
higher income brackets, because where the need lies is with
those who have the least, and usually also have the greatest
needs.
No solution then can be successful unless it adequately
addresses the needs of low income families, even the healthiest
of whom are unlikely to be able to afford adequate health
coverage on their own, and the needs of those with severe
health conditions, even the wealthiest of whom may find no
coverage available, due to exclusions and restrictions on
coverage in the private insurance market.
In the current budget context, we may prefer to undertake
incremental coverage expansions rather than comprehensive
universal reform. If that is one of the tests we must meet,
then so be it.
But our response should be wise. Therefore, it is
particularly important that the efforts to help the uninsured
focus on solutions that will get us the most bang for the buck.
Some, improperly designed, spend billions of precious
taxpayer dollars on subsidies to those who are already insured,
or to insurance companies. There are a number of bipartisan
bills on both the House and Senate side that would target
coverage to the uninsured without eroding existing coverage and
misdirecting Federal funds.
While these approaches, such as the Family Care Act of
2001, the Family Opportunity Act, the Legal Immigrant
Children's Health Improvement Act, would not provide coverage
to every single one of 40 million uninsured Americans, they
would make substantial progress by extending coverage to some
of the most vulnerable groups of our uninsured people, and
would in that process use taxpayers dollars wisely and well.
Finally, lack of insurance coverage is not the only health
care problem Americans are facing. Many Americans currently
insured find their coverage lacking some of the basic
protections that make health insurance meaningful: access to
specialty care; and access to emergency care; and access to
independent external appeals procedures to resolve disputes;
care provided according to good medical practices and reliable
accounting principles; and a mechanism to assure that these
mechanisms and protections are enforceable. We need then to
pass a meaningful patient's bill of rights to provide these
basic protections.
I am still hopeful that we will, and I look forward to
working with all who will assist me in that undertaking. I look
forward also to hearing from our expert witnesses on options to
promote meaningful health care coverage for more Americans.
I hope that this committee and the Congress will soon move
forward on the issue, and I thank you for your courtesy to me,
Mr. Chairman.
[The prepared statement of Hon. John D. Dingell follows:]
Prepared Statement of Hon. John D. Dingell, a Representative in
Congress from the State of Michigan
Today the Health Subcommittee is discussing an issue that is of
great importance to me: providing health care coverage for the
uninsured. I thank the majority for holding a hearing on this crucial
topic and I look forward to hearing from our expert witnesses.
What motivated Congress to propose the Medicare program nearly half
a century ago was an appalling lack of health insurance among the
elderly. Today Medicare is the most popular and most successful health
insurance program in the country, guaranteeing virtually every senior
citizen affordable health care coverage. But millions of other
Americans do not enjoy a similar guarantee. I think they should, so in
every Congress I have introduced H.R. 16, a bill that would provide
meaningful health care coverage to all Americans.
Any incremental solution to provide health insurance to more
Americans must be designed carefully so that the current fabric of
health care coverage is not undone. This means both protecting existing
employer-sponsored coverage from erosion and ensuring that those with
public insurance can continue to count on that coverage being adequate
and affordable. On the latter point, the ``Health Insurance Flexibility
and Accountability'' (HIFA) waivers initiated by the Bush
Administration cause me great concern, because these waivers erode
coverage for the poorest, most vulnerable Americans in order to finance
coverage for higher-income individuals. That makes no sense.
No solution can be successful unless it adequately addresses the
needs of low-income families, even the healthiest of whom are unlikely
to be able to afford adequate health coverage on their own, and the
needs of those with severe health conditions, even the wealthiest of
whom may find no coverage available or exclusions and restrictions on
coverage in the private insurance market.
In the current budget context, we may prefer to undertake
incremental coverage expansions rather than comprehensive, universal
reform. Therefore, it is particularly important that efforts to help
the uninsured focus on solutions that get us the most ``bang for the
buck.'' Some improperly designed approaches spend billions of precious
taxpayer dollars on subsidies to those who are already insured.
There are a number of bipartisan bills in both the House and Senate
that would target coverage to the uninsured without eroding existing
coverage and misdirecting federal funds. While these approaches, such
as the FamilyCare Act of 2001, the Family Opportunity Act, and the
Legal Immigrant Children's Health Improvement Act, would not provide
coverage to every single one of the 40 million uninsured Americans,
they would make substantial progress by extending coverage to some of
the most vulnerable groups of uninsured people, and would use taxpayer
dollars wisely.
Finally, lack of insurance coverage is not the only health care
problem Americans are facing. Many Americans who are currently insured
find their coverage lacking some of the basic protections that make
health insurance meaningful: access to specialty care; access to
emergency care; an independent external appeals procedure to resolve
disputes; care provided according to good medical practice; reliable
accounting principles; and a mechanism to ensure that these protections
are enforceable. We need to pass a meaningful Patients' Bill of Rights
to provide these basic protections, and I am still hopeful that we
will.
I look forward to hearing from our expert witnesses on options to
promote meaningful health care coverage for more Americans. I hope that
our Committee, and the Congress, will soon move forward on this issue.
Mr. Bilirakis. Thank you, and the Chair now recognizes the
gentleman from Kentucky, Mr. Whitfield.
Mr. Whitfield. Mr. Chairman, thank you very much, and
obviously this is a very complex issue that we are dealing
with, but I can't think of a more important issue for this
hearing to focus on.
I know in the State of Kentucky, I'm sure like many other
States, this is one of the major problems facing people who are
uninsured. We are really in a dilemma, because if your income
is X-dollars and below, then you are covered by Medicaid.
If you are a senior citizen, then you are covered by
Medicare. And, of course, we want to expand that to include a
prescription drug benefit.
But we have lots of people whose employer does not provide
health insurance, or they run their own business. And while
they are paying payroll tax that helps support Medicare and
Medicaid, they cannot afford to buy health insurance for their
own families.
And that's why I am anxious to hear from these experts
today to help us come up with a plan, and develop a plan, in
which we can provide meaningful health care coverage. We have
talked about this, and we have talked about this, and we
continue to talk about this.
But I think it is imperative that we take some action. Now,
we have expanded the coverage for young children under the
Medicaid program, and under the CHIPS program, and we have
increased funding for the community health centers that
provides health care to anybody who wants to come in and
receive it.
But community health centers are certainly not available
everywhere, and I agree that we certainly want to place
emphasis on those on Medicaid, as well as those on Medicare,
but we also need to start emphasizing those people who are
paying payroll tax, but cannot afford to pay health coverage
for themselves.
Now, in Kentucky, 6 or 7 years ago, mandates were placed on
companies that sold health insurance in Kentucky, and every
insurance company left Kentucky with the exception of one.
And as a result rates skyrocketed, and more people became
uninsured than before those mandates went into effect. So I
think we have to move very carefully and explore any option
that is out there, but I do think it is imperative that we
start taking some action to try to solve this problem, and I
yield back the balance of my time.
Mr. Bilirakis. I thank you, and the Chair recognizes the
gentleman from New Jersey for his opening statement, Mr.
Pallone.
Mr. Pallone. Thank you, Mr. Chairman. Let me say right at
the beginning that I believe in universal health care, and I
think that the government has an obligation to provide health
insurance for everyone.
I realize that is not a position that we can obtain a
majority for in the Congress, in either House probably, but I
think ultimately that should be the goal. The problem that we
have had in the last few years is since the demise I guess of
the Clinton health care proposal is that the number of
uninsured continue to rise until we in Congress started to take
some steps, like the Children's Health Insurance Program, that
would try in a sort of case-by-case or area-by-area situation
to reach out to those large groups of uninsured.
And once we put the S-CHIP program in place, and within the
last few years until this recession, we started to see a
stabilization of the numbers of uninsured, and I guess at about
40 million.
But with the recession, and with September 11, those
numbers now are rising again. So I think it is important to
have this hearing today. The concern that I have with regard to
displaced workers, and workers that lost their jobs or have an
inability to find jobs because of the recession, is that we
just really haven't dealt with their problem effectively.
The economic stimulus package, which of course has never
been passed, should have included COBRA extension, and should
include expansion of Medicaid to deal with the problem of
displaced workers, and so far that hasn't occurred.
But beyond that a lot of the workers out there are not
eligible for COBRA, and so an extension does no necessarily
help them. We need to look at innovative ways to deal with
their problems, whether it is expansion of Medicaid or some
other suggestions, some of which have been made today.
The other problem is that the States face a real crisis
with Medicaid. My own State of New Jersey is in a terrible
situation. We have a budget deficit that we have to make up,
and it is about 12 percent of our budget.
And when our Governor was down here a few weeks ago, he
explained that a big part of that is Medicaid costs. If he
could deal with Medicaid costs in an effective way with Federal
help, he could probably cut back on half of the deficit that he
now faces.
My problem with the President's proposal is that he
announced essentially in the State of the Union his budget, and
that he is addressing this problem primarily through tax
credits, $1,000 or $2,000.
I just don't think that those are going to work. If they
are designed to deal with people who don't have health
insurance, and the idea is that they are going to go out in the
individual market and buy health insurance, we all know--Mr.
Brown mentioned the costs are way up.
A thousand dollars or $2,000 for couples is just not going
to cut it. You are not going to be able to buy that insurance.
All you are doing with the President's tax credit is probably
helping people that already have insurance, and not the problem
that we are trying to address today with the uninsured.
I think that we need to--if we are going to take this
approach of just dealing with one sector at a time, rather than
dealing with universal health care, then I think we have to
address the problem of the uninsured essentially with
government programs.
An expansion of the CHIP program to cover the adults has
been mentioned, and expansion of Medicaid, and having the near-
elderly, which is another large group, be able to buy into
Medicare, perhaps with some sort of subsidy on a sliding scale.
These are the types of things that need to be done, and I
am afraid--and I will be partisan now in saying this--that I
don't see much effort on the part of the President, or even the
Republican leadership, to move in that direction.
They seem to be fixated on the Republican side, and these
free-market approaches, and the tax credits, which are not
going to solve the problem of the uninsured.
And I would simply ask that my colleagues on the other side
of the aisle, let's be a little less ideological. I am sure
that we are going to hear today about the problems. I think if
we are a little less ideological, and we get together behind
government programs that maybe go back to the States, like S-
CHIP, and expansion of S-CHIP, this is the way this is going to
go to make a difference right now for people that don't have
health insurance.
And we just have to keep in mind that people are suffering.
When I go out and I have my forums, and I had a few the last
few weeks, this is the major issue. It is this, and it is
prescription drugs.
And we just can't sit around here for another year until
the end of this session and pretend that this problem is going
to go away. It's not and it is getting worse. Thank you, Mr.
Chairman.
Mr. Bilirakis. Thank you, and the Chair recognizes the
gentleman from Iowa, Dr. Ganske, for his opening statement.
Mr. Ganske. Thank you, Mr. Chairman. We have about 40
million uninsured, and that is the usual figure that is given,
in this country. Here are some quick ideas that I have just
jotted down on how we can help.
No. 1, we need to get the economy moving. When there is a
recession, people lose their health insurance coverage. It is
hard for people to get jobs, and if you don't get jobs, you
don't get benefits from your employers. We should extend the
health care benefits to those who have lost their jobs in this
recession.
No. 2. We need to get those who already qualify for
existing programs enrolled. There are many, many States that
put up impediments to enrolling the uninsured. My own home
State of Iowa is an example of this. You have to re-up every
month for Medicaid.
Other States have 25 or 30 page forms you fill out, and
other States may have one office every 200 miles on the second
floor.
No. 3. We need to get signed into law the Ganske-Dingell
Patient's Bill of Rights, because there are some very good
access provisions in that bill. For instance, the expansion of
medical savings accounts, tax deductibility for the self-
employed, 100 percent; tax credit for uninsured small
employers; private foundation grants to purchasing co-ops.
There are all sorts of things in that bill. I think it
would help.
No. 4, the money that the States are receiving for the
tobacco settlement should be used for health care.
It is being siphoned off for other uses. Iowa is one of the
few States in the country that is devoting 100 percent, or at
least nearly 100 percent of the tobacco money, to health care.
Other States are using it for many other different purposes.
No. 5. The Governors are asking for ways to deal with the
high cost of prescription drugs in their Medicaid programs. We
need to address that issue.
No. 6. We need to address the issue of the high cost of
prescription drugs, and why this country is paying a premium,
the citizens in this country, and basically subsidizing the
rest of the world.
We passed a reimportation bill by huge bipartisan
majorities in both the House and the Senate. It has not been
implemented and we should do so. There are many, many ways that
we can address this.
I am glad that the Chairman is dealing with and has called
for this hearing, and I look forward to reviewing the testimony
of our witnesses, and thank you for coming.
Mr. Bilirakis. Thank you.
The Chair recognizes the gentlelady from California, Ms.
Capps, for her opening statement.
Ms. Capps. Thank you, Mr. Chairman. I appreciate the
decision to hold this hearing and the witnesses who will
testify. As was just said by my colleague, Mr. Ganske, nearly
one-seventh of all Americans, somewhere around 40 million
people, cannot get access to routine health care because they
lack health insurance.
They either cannot afford insurance, or are not insurable
for some medical reason, and this is a terrible problem for our
country. These people are being forced to gamble with their
health and with their livelihoods. They have to bet that they
will stay healthy and not require health care.
Each day they wonder if this is the day that their luck
will run out, and is the day that they, or a dependent loved
one, contract a terrible disease. Will today be the day that
they or their family are stricken by something that will fill
their life with pain and bankrupt them.
These people should not have to face such fears without the
security that insurance can provide. And beyond the potential
suffering of individuals and families, this is a problem that
is very costly for the American public as a whole.
Today as we are so preoccupied, and rightly so, with
national security, this is a national security issue. It is
easy for many Americans who are insured to think that this is
not their problem, but it is. Because the uninsured cannot
easily get routine care, they end up in the emergency rooms for
more severe and more costly conditions. But since they cannot
pay for their care, the taxpayers and other patients will pay
for them, and it will cost more than if the government or some
insurance program had helped the uninsured in the first place.
This simply does not make any sense. We need to find a
better way to help the uninsured. These are not deadbeats. They
are not people trying to take advantage of the system. They are
hardworking people, whose employers cannot or will not help
them.
They are good Americans who have been laid off because of
the economy and cannot pay premiums, deductibles, or co-
payments. They are men and women who are taking care of a
family on their own, and need health insurance. They deserve
our help.
For many of us, these are numbers, and staggering numbers.
But for me, who spent two decades as a school nurse, they are
faces, because school nurses spend a disproportionate amount of
their time finding solutions, or helping families cope with
problems because they can't find insurance.
When you can call the parent of a sick child who has
insurance, it makes your job really easy, but I came face-to-
face and worked on a daily basis with those parents, anguished,
and who struggled to find access to health care for the dearest
possessions they owned.
And they felt ashamed and defeated when they could not do
such. Some have suggested that we can solve this problem with
tax credits for health care, but this would be a very expensive
approach and frankly I am doubtful that credits would go very
far.
A credit of $1,000 or even $3,000 for a family would not
even cover the average premium, and does nothing for
deductibles or cost-sharing, meaning that most of the uninsured
still would not be able to afford coverage.
Now, there is a proposal to expand the State high risk
pools, but this might create insurance ghettos of the sickest
and poorest, making it even more expensive to provide them with
health coverage.
The administration wants to give the States more
flexibility to expand their Medicaid and S-CHIP programs to
include more people. Some innovative changes might be worth
looking at, but there is a real possibility that the States
would provide questionable coverage for the poor by reducing
benefits or imposing increased cost-sharing on those who are
even poorer.
This would undermine the point of such an effort. Some of
my colleagues on this side of the aisle suggest that we might
better address the problem by enabling more people to access
Medicaid and CHIP benefits as they are now.
My colleagues, Mr. Dingell, and Mr Waxman, in particular
have championed this approach, and I have been proud to support
their efforts. In this time of budgetary limits and competing
national priorities it is important that we make sure that
Federal dollars are spent wisely.
We need to make sure that we do not throw money away on
approaches, as has been mentioned already, that will not work.
Instead, we need to make sure that resources are focused on
legitimate proposals with positive outcomes.
So I look forward to hearing the witnesses perspectives on
these proposals, and the issue as a whole. Their expertise will
be useful in making these judgments, and enacting solutions. I
think this committee needs to listen very carefully, and make a
truly informed decision to address this problem.
So I am glad, Mr. Chairman, that you have called this
hearing, and I look forward to working with you on it. I yield
back my time.
[The prepared statement of Hon. Lois Capps follows:]
Prepared Statement of Hon. Lois Capps, a Representative in Congress
from the State of California
Thank you Mr. Chairman. I appreciate your decision to hold this
hearing.
Nearly \1/7\th of all Americans, somewhere around 40 million
people, cannot get access to routine health care because they lack
health insurance.
They either cannot afford insurance or are not insurable for some
medical reason. This is a terrible problem for our country.
These people are being forced to gamble with their health and with
their livelihoods. They have to bet that they will stay healthy and not
require health care.
Each day, they wonder if today is the day that their luck will run
out. Is today the day that they or a dependent loved one contract a
terrible disease? Will today be the day that they or their family are
stricken by something that will fill their life with pain and bankrupt
them? These people should not have to face these fears without the
security that insurance can provide.
And beyond the potential suffering of individuals and families,
this is a problem that is very costly for the American public as a
whole.
It is easy for many Americans who are insured to think that this is
not their problem. But it is. Because the uninsured cannot easily get
routine care, they end up in the emergency rooms for more severe and
more costly conditions.
But since they cannot pay for their care, the taxpayers and other
patients will pay for them. And it will cost more than if the
government had helped the uninsured in the first place.
This simply does not make sense. We need to find a better way to
help the uninsured. These are not deadbeats. They are not people trying
to take advantage of the system.
They are hardworking people whose employers cannot or will not help
them. They are good Americans who have been laid off because of the
economy and cannot pay premiums, deductibles, or copayments. They are
men and women who are taking care of a family on their own and need
health insurance. They deserve our help.
Some have suggested that we can solve this problem with tax credits
for health care. But this would be a very expensive approach, and
frankly I am doubtful that the credits would go very far.
A credit of $1000, or $3000 for a family, would not even cover the
average premium and does nothing for deductibles or cost sharing,
meaning that most of the uninsured would still not be to afford
coverage.
Another proposal is to expand the state high-risk pools. But this
might create insurance ghettos of the sickest and poorest, making it
even more expensive to provide them with health coverage.
The Administration wants to give the states more flexibility to
expand their Medicaid and S-CHIP programs to include more people. Some
innovative changes might be worth looking at. But there is a real
possibility that the states would provide questionable coverage for the
poor by reducing benefits or imposing increased cost sharing on those
who are even poorer. This would undermine the point of such an effort.
Some of my colleagues on this side of the aisle suggest that we
might better address this problem by enabling more people to access
Medicaid and SCHIP benefits as they are now. My colleagues, Mr. Dingell
and Mr. Waxman in particular, have championed this approach, and I have
been proud to support their efforts.
In this time of budgetary limits and competing national priorities
it is important that we make sure that federal dollars are spent
wisely. We need to make sure we do not throw money away on approaches
that will not work. Instead we need to make sure resources are focused
on legitimate proposals with positive outcomes.
So I look forward to hearing the witnesses' perspectives on these
proposals and the issue as a whole. Their expertise will be useful in
making these judgements and enacting solutions.
I think this committee needs to listen carefully and make a truly
informed decision to address this problem.
So I am glad that you have called this hearing today Mr. Chairman,
and I look forward to working with you on it.
Mr. Bilirakis. Thank you. The Chair recognizes the
gentlelady from New Mexico, Ms. Wilson.
Ms. Wilson. Thank you, Mr. Chairman. I know that we have a
vote pending, and I will keep my remarks short. By most
estimates, New Mexico leads the Nation in uninsured citizens.
In the year 2000, 24 percent of New Mexicans did not have
health insurance, compared to a national average of 14 percent.
It is a huge problem, and it has only gotten worse in the
last few years. For a poor State like New Mexico, I think it is
highly unlikely that we will be able to solve this problem
ourselves without some help from the Federal Government.
And I also don't believe that there is a single bullet
solution. I suspect that there will be a pattern of things that
we may be able to put together at the State level, and from the
private sector, from the Federal Government, to reduce the
number of people who are uninsured, and need health insurance.
The most common reasons for a lack of coverage are costs or
unavailability, but what really strikes me is the number of
people who have a job that offers health care who decline that
health care, often because of costs.
Of the about 42 million people who are uninsured, 16.7
million, or 40 percent, are families with an employer offeror
of insurance, but the insurance was declined. In addition, 17.3
million people are in families connected with the work force,
but have received no offer of insurance.
In other words, they work for a business, a small business
employer, or self-employed, and they don't have health
insurance coverage offered to them. So really a little bit over
80 percent of the uninsured are in families connected with the
work force.
These are in many cases the working poor. I think there is
a tremendous opportunity to improve our employer-based system,
as well as to improve the safety net systems that help those
who cannot make it just on their own to provide health care for
their families.
I very much thank the Chairman for holding this hearing,
and giving us an opportunity to look at a variety of different
solutions, and how they might work together, because as I say,
I don't think there is one answer to this problem. Thank you,
Mr. Chairman.
Mr. Bilirakis. And I thank you.
We are in a vote, and about halfway through that, and we
have at least one more vote after that, or two votes, and so I
am wondering if the gentleman from Ohio, Mr. Strickland, would
you like to move forward, or would you like to come back?
Mr. Strickland. I think I would like to give my statement.
Mr. Bilirakis. Well, let's go ahead and recognize you for
your statement.
Mr. Strickland. Mr. Chairman, I attended a funeral
recently, a funeral of a young woman by the name of Patsy
Haines, and I have talked about Patsy before this committee
over the months.
She had chronic leukemia, and she was in need of a bone
marrow transport, and her insurance company refused to pay for
that transplant, and finally we got her qualified under
Medicare, 2 years after her surgery should have been performed.
She received her surgery, and a few days later died, and I
wonder as I sit here would Patsy Haines be alive today if she
had received this surgery when her physician first said she
needed it.
And I point out this issue of Patsy Haines because I think
we need to remember that we are talking about real people, and
it is shameful that in this country today we do not have a
patient's bill of rights which protects people like Patsy
Haines and her family from the mistreatment they receive from
insurance companies, who are more concerned with the bottom
line than with patient care.
Mr. Chairman, the majority of the uninsured today are a
part of working families who do not have access to employer
sponsored insurance benefits, or whose benefits are inexpensive
and provide only bare bones coverage.
Furthermore, about 10 million children are uninsured, and
that is particularly tragic since so much of a child's
pediatric health care is crucial to ensuring that he or she can
live a healthy adult life.
The State Children's Health Insurance Program does much to
reduce the number of uninsured kids, providing important basic
and cost effective health care to millions.
However, the program has gaps that include not providing
for pre-natal care for expectant mothers, or ensuring that
children are not forced to wait until coverage is provided.
It is for these reasons that I have introduced H.R. 3729,
the Start Healthy, Stay Healthy, Act. This bipartisan bill
seeks to expand the S-CHIP program by giving States incentives
to cover pre-natal care for pregnant women, increasing the
eligibility age through the age of 20, and prohibiting waiting
periods for pregnant women, and reducing administrative
barriers to the program.
It also provides coverage to any pregnant woman, regardless
of her age, if she meets the income guidelines. But regardless
of what approach that we take to reducing the ranks of the
uninsured, I hope that we do not simply attempt to placate
those who are calling for action by offering an inadequate
benefit that fails to address the real problem of a lack of a
comprehensive health care service.
Such an approach would not only hurt the currently
uninsured beneficiaries by giving them something that they
cannot really use, it could devastate our current employer-
based system of health insurance coverage.
We must make a strong commitment if we are going to provide
benefits that will truly help those who are currently without
ready access to health care. And in closing I would just like
to associate myself with remarks of Representative Pallone.
The real answer is a comprehensive, complete, universal
health care system in this country that does not let American
citizens like Patsy Haines or some 10 million children go
without the health care that they need. And I yield back the
balance of my time.
Mr. Bilirakis. I thank the gentleman. We have one vote, and
Mr. Green tells me that he can get his statement in very
quickly. So, the gentleman from Texas is recognized.
Mr. Green. Thank you, Mr. Chairman. I would like to put my
total statement in, but let me reiterate what Ms. Wilson said
from New Mexico, and myself from Texas; the uninsured is a
serious problem, particularly with the Latino community.
Even though Latinos only comprise 12 percent of the United
States population, they have one quarter of the uninsured. Like
my colleagues, I support the Family Care Act sponsored by our
Ranking Member, John Dingell, to expand Medicaid and S-CHIP
coverage, low income adults, and a particular project that we
have been working on, and I appreciate the help of the chairman
of our subcommittee on the Community Access Program, the CAP
Program, to make grants, and how we can make the current system
work more efficiently.
And we have had some success with that over the last 2
years, and we have the authorization bill, H.R. 3450, and I
appreciate any support on that. My last concern before we go
vote is that last August the Department of HHS provided
administrative guidance to help States expand the number of
individuals eligible for Medicaid or S-CHIP coverage.
It sounded really good, but the problem is that it had to
be budget neutral, and it is hard to expand some of these
programs and make it budget neutral, because you are trying to
serve more folks.
But, again, Mr. Chairman, I thank you for letting me talk
as fast as I could coming from Texas.
[The prepared statement of Hon. Gene Green follows:]
Prepared Statement of Hon. Gene Green, a Representative in Congress
from the State of Texas
Thank you Mr. Chairman for holding a hearing today on what is one
of the most pressing issues this subcommittee will consider--how best
to expand health care coverage to uninsured Americans.
More than 39 million Americans do not have health insurance. With
the downturn in the economy, this number is expected to increase
significantly.
The uninsured are hard working Americans. Eighty percent of the
uninsured come from working families.
Not surprisingly, though, these individuals are working in low-
earning jobs. Nearly two-thirds of the uninsured are individuals who
make less than 200% of the federal poverty level.
While all Americans are struggling to find affordable health
insurance, minorities are much more likely to be uninsured. For
example, Latinos comprise only 12 percent of the U.S. population, but
nearly one quarter of the uninsured.
The problem of the uninsured is serious in Texas, where 4 million
individuals, or 26.8 percent of our non-elderly population, are without
health insurance.
Mr. Chairman, uninsured adults are far more likely than the insured
to postpone or forgo health care altogether and are less able to afford
prescription drugs or follow through with recommended treatments.
According to one report, nearly 40% of uninsured adults skip a
recommended medical test or treatment, and 20% say they have needed but
did not received care for a serious problem in the past year.
Because the uninsured don't have access to primary or preventive
health care, they are more likely to be hospitalized for avoidable
health problems such as hypertension and diabetes.
Our nation's health care safety net is in dire need of repair.
I am a strong supporter of legislation such as the Family Care Act,
sponsored by Ranking Member Dingell, which would expand Medicaid and S-
CHIP coverage to low-income adults.
I also support efforts to double the funding for our core safety-
net providers, such as Community Health Centers, public hospitals, and
state departments of health, and private hospitals.
These providers have been working together in cities and towns all
over the country, developing community-based programs to address the
problem of the uninsured.
These coalitions use funding through the Community Access Program
(CAP) demonstration project to identify ways to better tend to the
uninsured.
Funding under CAP can be used to support a variety of projects to
improve access for all levels of care for the uninsured and under-
insured.
Each community designs a program that best addresses the needs of
its uninsured and under insured and its providers.
I am a strong supporter of this program, having seen how well it
has worked in my hometown of Houston, Texas.
Their project aims to improve the interagency communication and
referral infrastructure of major health care systems in the city, which
will improve their ability to provide preventive, primary and emergency
clinical health services in an integrated and coordinated manner.
Mr. Chairman, the CAP demonstration project has worked well in more
than 75 communities across the country. We should fully authorize this
program so that more communities can develop plans that will help us
provide health care to all Americans.
I have introduced legislation, the Community Access to Health Care
Act, which has seventy-six bipartisan cosponsors, several of whom are
members of this committee.
I know we have worked with your office to see this program included
in H.R. 3450, and I appreciate your efforts in that regard. I hope we
can see movement of this bill so that we can authorize this important
program.
Mr. Chairman, I'd like to shift gears for a moment now to discuss
another important issue, one that I have serious concerns about.
Last August, the Department of Health and Human Services (HHS)
provided administrative guidance to help states expand the number of
individuals eligible for Medicaid or S-CHIP coverage.
On the surface this sounds like a good idea, and something I would
support.
Unfortunately, the Administration's requirement that these
expansions be ``budget neutral'' poses a serious problem for current
Medicaid populations.
Some of the pending waivers would cut benefits for current Medicaid
enrollees in order to expand the program to other populations. This is
a classic example of robbing Peter to pay Paul.
The problem is that current Medicaid enrollees are THE most
vulnerable populations in our country.
Medicaid serves low income seniors, children, and the disabled.
These are individuals who rely on Medicaid to get essential, critical
health care.
I have grave concerns that these waivers could cause harm to the
very people Medicaid was designed to serve.
I also doubt that we can truly expand these programs without
providing commensurate increases in funding.
Finally, I am disturbed that the Secretary will be able to
negotiate these waivers without any public comment or input.
This proposal leaves Medicaid enrollees without a seat at the
bargaining table, without a say, and without representation. That is
not what this country was founded on.
Mr. Chairman, this is obviously a complex issue, and I look forward
to hearing from our witnesses about these issues and others.
Thank you, and I yield back the balance of my time.
Mr. Bilirakis. Well, we have another offer from Mr. Towns,
who is also going to talk very fast also and get his statement
in before the vote.
Mr. Towns. Mr. Chair, I would like to ask that my statement
be entered in the record.
Mr. Bilirakis. Granted.
Mr. Towns. I hope that this hearing will encourage the
Congress to act in a positive way. This is a shame that we have
allowed this to occur in this country, and I am hoping that we
would take some action and take it real soon, because they have
over 40 million people who are uninsured. So, Mr. Chairman, I
yield back.
[The prepared statement of Hon. Ed Towns follows:]
Prepared Statement of Hon. Ed Towns, a Representative in Congress from
the State of New York
Chairman Bilirakis. Thank you for holding this very important
hearing today. The United States has one of the best health care
systems in the world in terms of access and health care choices. The
majority of the U.S. population receives health care coverage through
employment-based plans. However there is a growing population of more
than 40 million uninsured Americans. Most uninsured Americans are
minorities, low to moderate incomes level, adults between the ages of
18-24 and worker's who are not offered or can not afford insurance
through the work place. As a result, their ability to take advantage of
our advanced medical systems is limited the emergency room because of
lack their of health insurance.
The U.S. Census Bureau conducted a survey in March 2001. The survey
found that one out of seven Americans went without health insurance for
the entire calendar year of 2000. Yet, over half of all uninsured
people were full-time, workers or their dependents. In addition, more
than 25 percent of those who worked less than full-time, or who were
not employed for the full year, were without coverage.
The issue of the uninsured is not only an individual issue but also
one that impacts small businesses. Many small businesses are unable to
provide employee coverage because small group health insurance coverage
is too costly for most businesses and lacks the ability to design
affordable health care packages.
I have addressed many issues that the witnesses will make
recommendations on today, but I would also like to bring to this
committee's attention a specific ethnic group's uninsured plight. Once
again, using the information from the U.S. Census, the largest
uninsured group in the U.S. are people of Hispanic origin. The data
shows that Hispanics have the highest percentage of working uninsured
people. Many Hispanics like my constituents, are unable to secure
health insurance because low wages, employment migration or insurance
are not offered.
Hopefully, today's hearing will begin to provoke the needed action
in Congress to formulate legislation on this critical issue. I look
forward to hearing from today's witnesses.
Mr. Bilirakis. Thank you.
[Additional statements submitted for the record follow:]
Prepared Statement of Hon. Fred Upton, a Representative in Congress
from the State of Michigan
Mr. Chairman, thank you for holding today's hearing on the
uninsured and alternatives for addressing this serious gap in our
nation's health care system. Nearly ten percent of Michiganders have no
health insurance, and nationally, 14 percent of our population is
without coverage.
As Members of Congress responsive to our constituents, every day we
see in letters and in our casework the often very poignant faces behind
these statistics. Recently, for example, I heard from a family member
of a 60-year-old widow suffering from congestive heart failure. She had
no private health insurance, and because she had a small piece of
rental property, she did not qualify for Medicaid. She already owed
bills from prior hospitalizations, and because she could not pay these
in full, she was refusing to seek further health care. In increasing
desperation, her family went from agency to agency, but found no help
for her. While we were able to provide some help and hope for her, how
many more individuals and families are going through similarly
desperate experiences?
A nation's greatness is measured not only in the might of its
armies or the size of its economy. It is measured as well, and perhaps
in the end most significantly, in its care for those who most need a
helping hand--the sick, the disabled, and the less fortunate. I believe
that most people in this nation believe that access to affordable basic
health care is a fundamental human right and that individuals and
families should not be denied care because they cannot afford to pay
for that care.
And there are practical reasons, as well, that we must tackle the
problem of the uninsured. The uninsured population's overall health
status may be lower, and individuals' overall productivity may be
lower. The uninsured are less likely to receive basic health care
services than insured individuals, and as a result are more likely to
seek care in costly emergency room settings. We all pay for these costs
in terms of higher premiums and greater demands on publicly funded
programs. At some point, we create a vicious cycle--higher premiums
push insurance out of the reach of increasing numbers of individuals,
employees, and employers.
Mr. Chairman, we have a proud tradition in this Subcommittee of
expanding access to health care and health care coverage through our
nation's community health centers, the National Health Service Corps,
Medicaid, Medicare, and the State Children's Health Program. In this
Congress, I want us to continue this tradition by working together on
bipartisan ways to extend health care coverage to the nearly 40 million
Americans--most of whom are in working families--who have no health
insurance coverage.
______
Prepared Statement of Hon. Barbara Cubin, a Representative in Congress
from the State of Wyoming
Thank you, Mr. Chairman.
We are confronted with many different variables in trying to
understand the plight of the uninsured in this country.
Factors like employment status, industry sectors, age, family,
race, income, and geography all play a role in whether or not an
individual may have health insurance.
So much of what we face in my home state of Wyoming, in terms of
the uninsured, comes down to our rural status.
Wyoming has roughly 480,000 people, and 100,000 square miles of
rugged terrain.
Access to medical care and facilities is limited, and folks often
travel hundreds of miles across the state, in adverse climate
conditions, just to see a doctor.
In 2000, Wyoming had roughly 70,000 people under the age of 65 who
were uninsured. Competition among health insurers in the state is
scarce as there are only 3 main companies that control the lion's share
of the market.
Without competition, health insurers have no incentive to keep
premiums down, which in turn leads to an increase in the number of
uninsured.
Wyoming does not have an adequate population size to bring in new
health insurers, and I believe that is the case with the majority of
rural states. Another issue we face with the uninsured in Wyoming is
our large small business contingency.
My state has nearly 15,000 businesses with under 100 employees
each, and the majority of those businesses do not offer health
insurance to their employees because it is too expensive, and choices
are limited.
In fact, I was alarmed to learn that 60 percent of small businesses
nationwide do not offer health insurance to their employees. That is
very substantial considering the small business community represents
99.7 percent of all employers.
It stands to reason that if we can help small businesses gain
access to health insurance, this could be a giant step toward vastly
reducing the number of uninsured in this country.
I also believe tax incentives could induce greater competition in
the health care market, which could then encourage insurers to come
into remote areas of the country.
Again, getting our hands around this whole issue is very
challenging because of the many variables. However, bit by bit, we can
incorporate real, positive changes that can help the private health
insurance industry function more efficiently.
Thank you. I yield back my time.
______
Prepared Statement of Hon. Robert L. Ehrlich, Jr., a Representative in
Congress from the State of Maryland
Mr. Chairman, thank you for holding this important hearing today on
one of the most significant public health problems in the United
States: nearly one out of seven Americans today, or almost 40 million
people, are without health insurance. In Maryland, there are
approximately 750,000 citizens who are uninsured.
What's left to the uninsured is a health care safety net of
inpatient and ambulatory health care providers that are legally
obligated to provide care for those who cannot afford to pay for it.
This safety net includes public and private nonprofit hospitals (often
teaching hospitals), public health departments, and community health
clinics (CHCs), including federally qualified health centers (FQHCs).
In Maryland, due to the unique nature of health care delivery, our
critical care hospitals' Emergency Rooms have taken on the role of
being de facto primary care providers. As you can imagine, this system
is neither cost effective for hospitals nor desirable for patients
long-term.
Clearly, steps Congress can take to assist the employer-based
health system as well as reduce the number of uninsured are critical to
the health of our citizens. I am pleased to consider President Bush's
Fiscal Year 2003 budget, which includes a refundable tax credit for
health insurance for individuals under age 65. For low-income
taxpayers, the credit would equal 90% of the premium and would be
decreased for higher incomes; the credit would be phased out at $30,000
for individuals and at $60,000 for families. The amount of the credit
is limited to $1,000 for an adult covered by a policy and $500 for each
child, up to two children. The Administration's tax credit proposal may
allow 6 million or more Americans who would otherwise be uninsured to
gain coverage.
Mr. Chairman, I agree with the President that tax incentives
greatly assist people with the cost of insurance--and will increase the
number of insured Americans. For the past two Congresses, I have joined
Congressman John Cooksey (R-LA), a physician, and Majority Leader Dick
Armey (R-TX) to introduce the Patient Access, Choice, and Equity (PACE)
Act. H.R. 2250 uses the tax code to give the subsidy directly to the
individual to reduce the number of uninsured, improve choice,
portability, eliminate tax inequity, and increase efficiency in our
health care coverage system. On our subcommittee, Congressmen Bryant
(R-TN) and Shadegg (R-AZ) as well as Congresswoman Cubin (R-WY) and
Chairman Tauzin are also original cosponsors of the PACE Act, which I
encourage my colleagues to consider to help expand access to health
insurance.
Mr. Chairman, thank your holding this important hearing. I look
forward to hearing from our witnesses to discuss steps we may take to
increase the number of Americans with health insurance.
______
Prepared Statement of Hon. Chairman W.J. ``Billy'' Tauzin, Chairman,
Committee on Energy and Commerce
Thank you Mr. Chairman: I want to commend you for holding this
important hearing. The problem of the approximately 40 million
uninsured in America has been a persistent one. For a few years, the
strong economy and low health care cost inflation seemed to make a dent
in the problem of the uninsured with the overall number lowered by as
many as 3 million. Now I fear that rising health care costs and a
weaker economy jeopardize these gains. Employers and particularly small
businesses face increasing pressures, which make provision of health
insurance benefits difficult. Public programs like Medicaid and SCHIP
are also under pressure as Governors must face tightening budgets and
falling State revenues.
A strong and growing economy is the engine that allows us to make
progress on social problems like access to affordable health care.
Mandates that increase private sector health care costs and policies
which do not promote economic growth can leave us helpless to address
other issues. At this time, and always, we must temper our desire to
spend more resources with our need to enact smart policies. We need
smart policy to address those who are left in the gaps between public
programs, like Medicaid and SCHIP, and those who have health benefits
through their employers or the individual market.
WHO ARE THE UNINSURED? These are people generally above the
official poverty level, and sometimes several times above that level.
Nonetheless, they have difficulty finding low-cost affordable health
insurance. As a result, this group experiences reduced access to care.
They are also more likely to delay seeking care. Often the uninsured
must receive their health care services in a more costly emergency room
setting. Providers of health care, especially hospitals, but also
physicians, are often uncompensated for the care that they provide to
uninsured individuals, and may seek to shift the cost of that care to
other private and public payers.
The President has provided thoughtful leadership on this subject
which deserves our support. He has proposed a refundable tax credit,
which would be available to anyone under 65 without employer-sponsored
or public insurance. The President's proposal provides up to $1,000 for
a single person and up to $3,000 for a family with two or more
children. For lower-income Americans, the proposed health insurance
credit generally covers more than half of the premium the purchaser
would face, and almost always covers more than a third of the premium.
In addition, those workers who lose their jobs and health insurance
would still be able to take advantage of this credit regardless of
whether or not COBRA continuation coverage was available to them. This
is particularly important to those part-time and seasonal workers
because they would be able to retain the coverage they purchase with
the tax credit even if their jobs change. The Administration estimates
at least 6 million uninsured Americans would gain health coverage under
this proposal.
This policy emphasizes a number of values and marries smart policy
with additional resources. These values include individual choice of
insurance plans, portability, strengthening of the private sector
insurance mechanisms, and accountability. Changes to Medicaid often
require passage of further state law provisions which can take time and
involve extended bureaucracy. The President's proposal, on the other
hand, can be implemented quickly. There is much to commend it. I know
it won't solve all the problems of the uninsured but it would make a
difference to millions.
I think we can also learn from the history of state initiatives
over the past few years. We have seen experiment in mandates which
undermine the integrity of the insurance market. Clearly, we need to
learn from the mistakes of several states and avoid pernicious mandates
and focus more of our attention on how we can improve the individual
market through market reforms. One such idea that our Committee has
focused on is the promotion of high-risk pools. In the recently passed
stimulus bill, we set aside $100 million expressly for that purpose.
Our legislation provides states which currently do not have high-risk
pools with seed money to start new programs. Additionally, that bill
give states matching funds if they are willing to cap the premium
amounts that individuals pay in the pool to 150% of the average policy
rate. I am not going to say that the consolidation of individual tax
credit, along with vibrant high-risk pools, is the answer to the
problem of the uninsured. But it is certainly a good start.
Our Committee will be working on additional legislation in the
future to ensure that some key reforms in the insurance market are
implemented. Reforms such as finding a new, more stable revenue source
for the States, so they can offer high-quality, affordable coverage;
and policies that may allow more families to take advantage of SCHIP if
they utilize private health insurance. Families should not be forced
into public programs against their will. The private insurance market
works. We should apply it in our effort to solve this critical problem.
Finally, I want to emphasize that these initiatives should not be
partisan. Let me stress: we would be using considerable public
resources to help address an important issue; that is a far cry from
where both parties stood on this issue over the past few years.
There is much to be done, and I am pleased our President is showing
leadership on ideas that focus on individual choice. I look forward to
hearing from today's witnesses on this important topic.
______
Prepared Statement of Hon. Henry A. Waxman, a Representative in
Congress from the State of California
I just want to make a brief comment today.
First, I am glad, of course, that this Subcommittee is focusing
once again on the serious problem we have in this country of some 40
million people who are uninsured. We all know this problem is severe.
We all know it has existed for years and years, and we have failed to
address it adequately. We all know that it is inexcusable for a country
like ours to allow this problem to persist.
And yet, over and over again, we have failed to take action. That
has to change.
This shouldn't be about ideology. This shouldn't be about
partisanship. This should be about devising a system that works, and
getting people the coverage they need.
It is our responsibility to act. But it is also our responsibility
to pass a program that will work:
That means we have to have a plan that doesn't only reduce the
number of uninsured but that also assures that people who really need
medical services are included in the ranks of people who get coverage.
If what we do results in coverage that is affordable only for the young
and healthy who are unlikely to need much service, but leaves behind
people who are less healthy, people who have medical conditions, people
who are older--then we will have taken a step in exactly the wrong
direction.
I fear a system of individual tax credits will do exactly that. It
can never work without radical reform of the individual health
insurance market. And that means not only guaranteed issue and no
preexisting condition requirements, it also means that the rates for
the coverage must be affordable. That means affordable for people who
have medical problems. That part is always the missing piece in this
debate. Surely we should have learned that lesson from our experience
with the Health Insurance Portability Act (HIPA)
We also have to be sure that what we do does not result in a
deterioration of the coverage that is already out there. Anything that
results in employers dropping the group coverage that is already there
will not only move us backward, it risks undermining the very core of
our existing coverage system.
Finally, I would just note that we do know that there are programs
out there that can work. Medicaid is certainly one. I am proud to note
that this year, as a result of the legislation we passed in the late
80s, we now will have every child below poverty covered in the Medicaid
program. Many said then that could not be done. But it has been, one
year at a time. And it has provided a base for the expansions that have
occurred with the CHIP program.
This is significant progress, and we should build on it.
I look forward to hearing from our witnesses today, and to working
with my colleagues on both sides of the aisle to bring real health
insurance coverage to the millions of Americans who are uninsured
today.
______
Prepared Statement of Hon. Bart Stupak, a Representative in Congress
from the State of Michigan
Mr. Chairman, thank you for holding this important hearing today.
The ongoing issue of America's uninsured is of paramount importance.
To our credit, we have had extraordinary success in getting people
insured with Medicare and the Children's Health Insurance Program or
CHIPs.
Very few senior citizens are uninsured--about 1 percent, or
420,000. The quality of this coverage is a subject for another hearing.
By September 30, 2002 all children under 18 will be required to be
covered under Medicaid, up to 100% of the federal poverty level.
The majority of uninsured--approximately 32 million--are those
Americans between 19 and 65.
We currently have approximately 43 million uninsured, about 15% of
the total population.
This number is growing daily.
Last week during President's Day recess I toured my district.
Not a day went past that I did not have a constituent coming up to
me to voice their concern over the high rate of health insurance
premiums, in some cases up to 50% over the past two years.
The Administration proposes a tax credit to help cover the
uninsured.
Let's say this credit is for $3000 per family.
Let's say a person can actually qualify for this credit, and wait a
year for his tax return to be credited for this amount.
Most programs you can use this credit on cost about $7300, with a
deductible of $1000.
This means the family receiving this voucher has to pay out of
pocket $4300 per year, with higher optional coverage for prescription
drugs, pre-existing health conditions, etc.
Because the majority of the uninsured are from low-income families,
do we really think this approach is really going to work?
Mr. Chairman, if you think we have an uninsured problem now, wait
until the insurance premiums go up even further.
I have to ask--is it time to institute government price controls on
insurance premiums for health insurance?
Thank you, and I yield back the balance of my time.
______
Prepared Statement of Hon. Eliot Engel, a Representative in Congress
from the State of New York
Mr. Chairman, thank you for holding this hearing on the uninsured.
It is certainly an issue that we in Congress need to address. I hope
this Committee will take a good hard look at the problem and work to
improve this terrible situation.
I find it ludicrous that almost 40 million Americans currently have
no health insurance whatsoever. We cannot allow this situation to
continue. The President has included $29 billion over 10 years in his
budget proposal for tax credits for low-income individuals to help
purchase private health insurance. While I welcome efforts to assist
the uninsured, this approach is simply inadequate and misguided. In
fact, the President's Economic Report estimated that the tax credit
would help only 6 million individuals obtain coverage, leaving more
than 34 million people out in the cold. Other estimates suggest that
the tax credit will reach far fewer uninsured individuals than the
President's estimate of 6 million. I am concerned that the tax credit
will simply assist those already with insurance and do little for the
ranks of the uninsured. I believe it is clear that the tax credit is
far from a solution and will absorb much needed resources with little,
if any, benefit.
There are a number of current programs in our health care safety
net that are in need of additional funding. I think that short of a
comprehensive fix to the problem, we should bolster those existing
programs and not simply patch another hole in what is clearly a broken
system. The CHIP program, for instance, has been a tremendous success
in New York, and we would welcome the opportunity to expand services if
additional funding were available. However, estimates suggest that, due
to decreased funding, about 900,000 people will lose their CHIP
eligibility between 2003 and 2006. CHIP is a proven success, however,
it is unclear if the proposed tax credit will provide any benefit to
the uninsured whatsoever. Furthermore, states are going to face severe
budget constraints due to the economic downturn. As a result, Medicaid
and CHIP beneficiaries may experience a reduction of benefits or
increased out-of-pocket expenses, forcing many to the ranks of the
uninsured.
Mr. Chairman, as we move forward to address the problem of the
uninsured I hope that we will consider other options than the
President's tax credit. I look forward to the testimony from our
panelists and hope we work in a bi-partisan effort to help all
uninsured Americans.
Mr. Bilirakis. We have a vote, and so we will adjourn and
return for those statements from the witnesses.
[Brief recess.]
Mr. Bilirakis. The hearing will come to order. The first
panel consists of Dr. Arthur L. Kellermann, Co-Chair of the
Committee on the Study of the Consequences of Unisurance, with
the Institute of Medicine; Ms. Mary R. Grealy, President of the
Healthcare Leadership Council; and Dr. Diane Rowland, Executive
Vice President of the Henry J. Kaiser Family Foundation.
As you know, your written statements are a part of the
record. We would hope that you compliment them orally. I will
turn the clock on to 5 minutes, and I would appreciate it if
you would try to keep it as close to that as you can, and if
you can't, we will certainly let you finish up.
Let's see. Dr. Kellermann, why don't we just start off with
you, sir.
STATEMENTS OF ARTHUR L. KELLERMANN, CO-CHAIR OF THE COMMITTEE
ON THE STUDY OF THE CONSEQUENCES OF UNINSURANCE, INSTITUTE OF
MEDICINE; MARY R. GREALY, PRESIDENT, HEALTHCARE LEADERSHIP
COUNCIL; AND DIANE ROWLAND, EXECUTIVE VICE PRESIDENT, HENRY J.
KAISER FAMILY FOUNDATION
Mr. Kellermann. Thank you, Mr. Chairman. Before I start, I
do want to thank you and all your colleagues about your kind
words about John Eisenberg. John is an old friend of mind, and
a fellow Tennessean, a mentor who played a pivotal role in my
career, and he really has dedicated his life to the health of
all Americans.
And personally it meant a great deal to me to hear you say
what you said.
Mr. Bilirakis. I hope that his ears are ringing this
morning. They should be, but we are all very sincere in our
thoughts for the doctor.
Mr. Kellermann. My name is Arthur Kellermann, and I am a
practicing emergency physician, and I chair the Department of
Emergency Medicine at the Emory University School of Medicine,
and I currently serve as co-chair of the Committee on the
Consequences of Uninsurance for the Institute of Medicine.
Two years ago the IOM Council identified the issue of
uninsured Americans as a priority for a major analytic
initiative. The Robert Wood Johnson Foundation asked the IOM to
conduct an extended study of the consequences of uninsurance,
not only for individuals and their families, but for the Nation
as a whole.
I am here today to discuss our committee's initial
findings. They are presented in our introductory report,
Coverage Matters, Insurance and Health Care, which was released
this past October.
Five additional reports will follow over the next 2 years.
The number of Americans without health insurance dipped
slightly in 1999 and 2000, but the overall trend for the last
25 years has been one of steady growth.
The trend has been upward in good times, as well as bad,
and it has persisted, despite incremental reforms. Now, much of
the information that our committee synthesized in coverage
matters is known within health policy circles, but it is not
well understood by the American public.
Here is some of the misconceptions our report attempts to
dispel. Myth Number 1. People without health insurance get the
medical care they need. In reality, studies show that the
uninsured are less likely to see a doctor, receive fewer
preventive services, and are less likely to identify a regular
source of medical care.
Myth Number 2. Most people without health insurance are
young, healthy adults. The reality is that while it is true
that young adults are more likely than persons of other ages to
be uninsured, it is largely because they are ineligible for
workplace health insurance.
Many are too new in their job, or they work in businesses
that don't provide insurance to their employees. Only 4 percent
of all workers, age 18 to 44, about 3 million people, are
uninsured because they decline available workplace health
insurance. And most who do, do it because they can't afford
their share of the premium.
And Myth 3, most of the uninsured don't work, or live in
families where no one works. As members of the committee have
already observed, over 80 percent of uninsured children and
adults under the age of 65 live and work in families. Even
members of families with two full-time wage earners have almost
a one in ten chance of being uninsured.
Myth 4. Recent immigration has been a major source of the
increase in the uninsured population. The reality is that over
a recent 4 year period more than 80 percent of the growth in
the size of the uninsured population consisted of United States
citizens.
Recent immigrants, those who have been in this country for
6 years or less, comprise only 6 percent of the uninsured
population. Now, folks who can't get insurance through their
workplace, or lose their coverage as a result of losing their
job, have two options for obtaining coverage.
They can purchase an individual policy or attempt to
qualify for public insurance, such as Medicaid. Individual
policies have gotten so expensive that they are out of reach
for many people, particularly those with low paying jobs.
The full premium for an employment-based package for a
family, the same cost-based by an ex-employee who tries to
avail themselves of COBRA coverage, averages now more than
$7,000 a year.
Since the median income of an American family in 2000 was
just under $41,000 and the incomes of those without insurance
are much lower, it is no wonder that people can't afford to pay
that kind of premium.
If private insurance is unavailable or unaffordable, the
only alternative for most people is public insurance, such as
Medicaid. Unfortunately, strict eligibility requirements, and
complex enrollment procedures, make Medicaid difficult to
obtain and even harder to keep.
Coverage under Medicaid lasts on average about 5 months. At
the end of any given year, approximately two-thirds of people
who are insured by Medicaid at the start of the year are no
longer covered.
In closing, I would like to emphasize four key points.
First, the rising cost of health care, and therefore the rising
cost of health insurance, is outpacing the purchasing power of
many employers, as well as consumers.
Unless health care is made more affordable, this trend will
continue until it becomes unsustainable. Two, while health
insurance is a voluntary matter in the United States, many
people are involuntarily shut out of the system.
Eighty percent of the uninsured are members of working
families. These are the folks who wait on our tables, fix our
cars, service consultants to business and start small
businesses of their own.
I know this because I take care of them in my emergency
room. They show up there in serious or even life-threatening
condition, with problems that could have been readily treated
at an earlier point in time if they had had access to care.
And even after my ER colleagues stabilized them, we often
can't get them follow-up medical care to manage that condition
and keep them out of the hospital. It just makes no sense.
Third, having health insurance is not a permanent state of
affairs. In any given year, millions of Americans move in or
out of the population of uninsured. As the events of the last 6
months have demonstrated, none of us under 65 can assume that
we will always have health insurance, no matter what happens.
My own brother learned this 3 months ago when he lost his
health insurance. Finally, people without health insurance do
go without needed medical care, including doctors' visits and
medications, far more often than people with coverage.
The health consequences of the lack of insurance are the
focus of our second IOM report, which is due out this May. I
commend the committee for holding this hearing, and for
attempting to come to grips with this problem. I will look
forward to answering your questions.
[The prepared statement of Arthur L. Kellermann follows:]
Prepared Statement of Arthur L. Kellermann, Co-Chair of the
Consequences of Uninsurance Committee, Institute of Medicine/The
National Academies and Chair, Department of Emergency Medicine, Emory
University School of Medicine, Director, Center for Injury Control,
Rollins School of Public Health, Emory University
Good morning, Mr. Chairman and members of the Subcommittee. My name
is Arthur Kellermann. I am Chair of the Department of Emergency
Medicine, Emory University School of Medicine and Director of the
Center for Injury Control, Rollins School of Public Health, Emory
University. I serve as Co-Chair of the Committee on the Consequences of
Uninsurance of the Institute of Medicine. The IOM is part of the
National Academies, originally chartered as the National Academy of
Sciences by Congress in 1863 to advise the government on matters of
science and technology.
Two years ago the IOM Council identified the issue of the large and
growing population of uninsured Americans as a priority for a major
analytic initiative. The Robert Wood Johnson Foundation shared this
interest and asked the IOM to conduct an extended study of significant
consequences of uninsurance. The study will also identify strategies to
address these consequences. I am here today to discuss our Committee's
initial findings. They are presented in our introductory report,
Coverage Matters: Insurance and Health Care, which was released this
past October. Our Committee will issue five more reports between May of
this year and September 2003. They will explore the impact of a lack of
health insurance, not only for individuals and their families, but for
our local communities and American society in general.
The tragic events of last fall have refocused Americans' attention
on our shared personal concerns, our collective fate, and our well-
being as a nation. Health insurance, the principal mechanism by which
we finance health care in the United States, is critical to ensuring
the financial security of American families as well as their access to
needed health care. Once again our nation faces a growing population of
uninsured Americans after a brief stabilization in the number of
uninsured. These circumstances deserve our thoughtful consideration
even--perhaps especially--in these exceptional times.
The past 25 years have seen a growing number of uninsured. This
trend has held despite incremental reforms in the regulation of private
health insurance such as COBRA and HIPAA that have increased
opportunities for maintaining coverage (if one already has it). This
trend has held despite substantial expansions in Medicaid eligibility,
beginning in the late 1980s and continuing through the enactment of the
Children's Health Insurance Program in 1997. Although the number of
Americans without health insurance dipped slightly in 1999 and again in
2000, after several years of an exceptionally vigorous economy in the
mid-to-late 1990s, by the fall of last year (after Coverage Matters
went to press) it was clear that the economy was softening. This
economic downturn, coupled with rising health care costs and insurance
premiums and stagnant or declining state tax revenues, has already
established that the longer-term trend of growth in the numbers of
uninsured Americans will continue.
What does this 25-year trend mean? The Committee's report, Coverage
Matters, documents
<bullet> the persistence of the problem of uninsurance, regardless of
whether the economy is weak or strong,
<bullet> the inherent instability of insurance coverage for all but the
elderly in the United States, stemming both from the structure
of our employment-based health system and from the conditions
of eligibility for coverage under programs like Medicaid and
SCHIP, and
<bullet> the reduced access to health care of Americans who lack health
insurance.
Each of these findings has important implications for the Congress,
for state legislatures, and for others as they design public policies
to address the issue of affordable health care for the uninsured.
While much of the information that the Committee has synthesized in
Coverage Matters is known within health policy circles, it is not
widely understood by the American public. In fact, much of what
Americans think they know about the uninsured is wrong.
Misunderstandings about the causes and consequences of uninsurance have
impeded the formulation of effective public policies to solve the
problem. Our Committee recognizes that one of its principal tasks must
be to broaden and deepen the American public's understanding of issues
related to health insurance and the lack or loss of it.
Coverage Matters addresses some of the most persistent myths about
the uninsured and the implications of lacking coverage. We have tried
to answer the ``Who, what, where, and why'' of this issue in order to
replace misinformation with good information. Consider the following
examples, drawn from public opinion polls and focus group research:
Myth: ``People without health insurance get the medical care they
need.''
Reality: In any given year, the uninsured are much more likely to
lack needed medical care. They are less likely to see a doctor, receive
fewer preventive services such as blood pressure checks, mammograms and
screening for colorectal cancer, and are less likely to have a regular
source of medical care. As will be further documented in our next
report, routine health care, particularly for those with chronic
conditions such as diabetes and high blood pressure, can result in
improved quality of life, prevent long-term disability and lead to
longer life. Health insurance is a critical link in obtaining such
care.
Myth: ``Most people without health insurance are young, healthy
adults who decline coverage offered in the workplace because they feel
they don't need it.''
Reality: Young adults are more likely than persons of other ages to
be uninsured largely because they are ineligible for workplace health
insurance--many are too new in their jobs, or they work for a business
that does not provide health insurance coverage to its employees. Only
4 percent of all workers ages 18-44, or about 3 million people, are
uninsured because they declined available workplace health insurance.
Many of these do so because they can't afford their share of the
premium. Nearly four times as many workers in the same age group,
approximately 11 million people, are uninsured because their employer
does not offer health insurance, and they cannot afford to purchase
insurance elsewhere. Purchasing coverage outside of work is not an
option for many, because individually purchased insurance policies are
frequently expensive, often exclude preexisting conditions, or are
simply unavailable.
Myth: ``Most of the uninsured don't work, or live in families where
no one works.''
Reality: More than eighty percent of uninsured children and adults
under the age of 65 live in working families. While working improves
the chances that both the worker and his or her family will be insured,
it is not a guarantee. Even members of families with two full-time wage
earners have almost a one-in-ten chance of being uninsured.
Myth: ``Recent immigration has been a major source of the increase
in the uninsured population.''
Reality: Between 1994 and 1998, over 80 percent of the growth in
the size of the uninsured population consisted of U.S. citizens. Recent
immigrants (those who have resided in the U.S. for fewer than 6 years)
are about three times as likely as members of the general population to
be uninsured, but they comprise only about 6 percent of the uninsured
population.
In the remainder of my testimony, I would like to fill in the
picture of Americans most vulnerable to being uninsured and expand on
the factors that contribute to this.
In the United States, health insurance is a voluntary matter, yet
many people do not choose to be uninsured. There is no guarantee for
most people under the age of 65 years that they are eligible for or
able to afford health insurance.
Almost seven out of every ten Americans under age 65 are covered by
employment-based health insurance, either through their job or through
the job of a parent or their spouse. Three-fourths of U.S. workers are
offered health insurance by their employers, and 83 percent of those
who are offered health insurance accept the offer of coverage. About 18
million Americans live in families whose head works for a company--
often a small one--that does not offer health insurance.
People who cannot get insurance through the workplace and who are
under age 65, too young to qualify for Medicare, have two potential
options to secure coverage--purchase an individual policy or attempt to
qualify for public insurance, primarily Medicaid. These two options
account for 21 percent of all coverage among persons under age 65.
Individual coverage is expensive and may be priced out of reach for
many people, particularly those who are in poor health. The full
premium for employment-based coverage for a family--which is the cost
faced by former employees who might avail themselves of COBRA
coverage--now averages more than $7,000 per year. Individual policies
are either more expensive than these group plans, less extensive in
their benefits, or both. As noted in our report, the median family
income in 2000 was just under $41,000, and the incomes of most of those
without health insurance was much lower than that--two-thirds of
uninsured Americans live in families with incomes below 200 percent of
the federal poverty level, about $34,000 for a family of four in 2000.
For individuals and families, the expense of insurance premiums and
competing demands on their income are the main reasons why some workers
decline employment-based insurance. Workers who accept an employer's
offer of subsidized health insurance typically pay between one-quarter
and one-third of the total cost of the premium for family coverage. In
addition, they may pay substantial deductibles, co-payments, and even
pay out of pocket for the costs of health services that are not covered
by their health plan. Among lower-income families, those earning less
than 200 percent of the federal policy level, health-related expenses
may easily consume 10 percent or more of their annual income.
It isn't easy to foot the bill for health insurance, given its high
cost. Employers' willingness to subsidize coverage is strongly
influenced by the scarcity or availability of workers, insurance
underwriting practices, the cost of health care, and the patchwork of
public policies that encourage (or discourage) firms to offer insurance
as a benefit.
The kind of job a person holds, and where they live, are strongly
related to their chances of having health insurance. Full-time, full-
year employment offers families the best chances of having health
insurance, as does an annual income above 200 percent of the federal
poverty level. The employment mix and strength of the economy, along
with eligibility and benefits for public programs like Medicaid and
SCHIP, vary across states and geographic regions, with the result that
opportunities for obtaining any kind of health insurance coverage and
the risk of being uninsured also vary regionally. Roughly a quarter of
the populations of Florida, Texas, Arizona, New Mexico and California
are uninsured, while less than 12 percent of the populations of Rhode
Island, Pennsylvania, Minnesota, Iowa, Nebraska and Hawaii lack
coverage. These disparities in rates of insurance coverage reflect very
different challenges facing individual states, employers, and the
federal government in addressing the persistent problem of uninsurance
across the nation.
Many find the opportunities for public coverage too limited. The
combination of strict eligibility requirements and enrollment
procedures makes public coverage difficult to obtain and even harder to
keep. The median length of time that someone under the age of 65 keeps
Medicaid coverage is about 5 months. At the end of any given year,
about two-thirds of the people who were insured by Medicaid at the
start of the year have lost their coverage for any number of reasons.
There are as many ways to lose health insurance as there are to
gain it. These include an increase in insurance premiums or a change in
terms, loss of a job or a drop in personal income, new terms of
employment, a change in health or in marital status, reaching
adulthood, or a change in public policy. For some, being uninsured is a
long-term or recurrent state of affairs. The median amount of time
without insurance is between 5 and 6 months. However, uninsured persons
living in low-income families and those with less education on average
experience longer periods without insurance.
Non-Hispanic whites make up about half of all uninsured persons.
African Americans, however, are twice as likely as non-Hispanic whites
to be uninsured, and Hispanics are three times as likely as non-
Hispanic whites to be uninsured. Foreign-born U.S. residents are three
times as likely to be uninsured as people born in this country. Among
the foreign born, non-citizens are more than twice as likely to lack
coverage as naturalized citizens.
The greater likelihood of being uninsured among racial and ethnic
minorities and recent immigrants reflects, on average, their lower
rates of employment-based coverage, which primarily reflects fewer
offers of employment-based coverage, rather than lower take-up rates.
Minority groups and recent immigrants also have, on average, lower
family incomes than non-Hispanic whites and U.S.-born residents, which
is associated both with employment that does not carry an offer of
health insurance and a lesser ability to afford an employer's offer of
coverage.
In closing, I want to emphasize several points:
<bullet> Since the mid 1970s, the rising cost of health care, and
therefore the cost of health insurance, has outpaced the
purchasing power of many employers and consumers. Some of the
most recent economic data released since Coverage Matters was
completed shows a resumption of double-digit inflation in
health care costs, contributing to a growing gap in
affordability. This gap between costs and purchasing power,
probably more than any other factor, has fueled the steady
growth in the ranks of the uninsured. Unless health insurance
becomes more affordable, this trend is expected to continue.
<bullet> While health insurance is a voluntary matter in the United
States, many people are involuntarily excluded from the system.
Among those excluded, the poor and members of certain minority
groups are disproportionately represented. However, the
uninsured include members of all racial and ethnic groups,
persons who live in rural as well as urban settings, and wage
earners from a wide variety of occupations. More than 80
percent of the uninsured are members of working families. They
wait on tables, fix cars, serve as consultants to businesses,
and start businesses of their own. They contribute in countless
ways to the U.S. economy and our society's well-being.
<bullet> Having health insurance is not a permanent state of affairs.
Many life transitions can result in the gain or loss of health
insurance. In any given year, millions of Americans move into
(or out of) the ranks of the uninsured. As the job layoffs over
the past 6 months have vividly demonstrated, few of us under
the age of 65 can assume that we will always have health
insurance, no matter what happens.
<bullet> Finally, people without health insurance go without needed
care, including doctors' visits and medications, far more often
than do people with coverage.
Thank you for inviting me to present the work of the IOM and the
Committee on the Consequences of Uninsurance. I would be happy to
answer any questions that you may have about the Committee or our
report.
Mr. Bilirakis. Ms. Grealy.
STATEMENT OF MARY R. GREALY
Ms. Grealy. Mr. Chairman, Congressman Brown, and members of
the subcommittee, I want to thank you for the opportunity to
testify today, and I also want to applaud you for the attention
that you are devoting to the most important health care issue
facing our Nation.
I testify today on behalf of the members of the Health Care
Leadership Council, chief executives of the Nation's leading
health care companies and institutions, representing all
sectors of health care; from hospitals, to physician groups,
health plans, pharmaceutical manufacturers, medical device
manufacturers, just to name a few of our rather eclectic
membership.
Last summer the members of the Health Care Leadership
Council initiated a nationwide campaign called Health Access
America. And they are devoting their energy and resources to
the challenge presented by the nearly 40 million uninsured
Americans.
As part of our Health Access America Campaign, we are
conducting research to better understand the varying needs and
circumstances of the people who make up the uninsured
population.
We are using the internet and our HLC website to link
people with health coverage and safety net programs in their
States. We are seeking out innovative local and regional
programs across the country that are successfully making health
care coverage more accessible for working families and for
small business owners.
Programs like the Wayne County, Michigan Healthy Choice
Initiative in Congressman Dingell's district, and we are also
talking to the people who are uninsured. People from all over
the country, like Lisa Crowley, a single mother, and self-
employed construction worker, from Fort Wayne, Indiana.
Ms. Crowley reached out to us because she works hard, long
hours, but she can't obtain insurance to pay for the medication
that she needs for her dangerous hypertension condition.
Lisa Crowley and millions of others like her are the focus
of the uninsured. They are the faces that we see when we now
know who are the uninsured. Are research as you have heard time
and again now, and it has really become part of the lexicon of
describing the uninsured, that 8 out of 10 of the uninsured are
in working families.
America's working class uninsured are to a large degree
people who work for small businesses, and these small
businesses want to offer coverage, but they can't make it
happen with their tight operating margins.
They are people also who receive an offer of insurance from
their employer, but they are not taking that offer because they
can't afford the premium. Sometimes they can for themselves,
but they can't afford the family coverage for their families.
The HLC believes that successfully addressing this
challenge will require a mix of public and private solutions.
It is not a question of public versus private. That is a false
choice.
There is not a single solution that will solve this
problem. We must be flexible and address the challenges of the
uninsured in a variety of ways with all the tools available. I
have addressed some of these possible solutions in detailing my
written testimony, but let me touch briefly on just a few.
If our goal is to significantly reduce the uninsured as
quickly and as efficiently as possible, then we need to focus
on the workplace, where the vast majority of the uninsured can
be found.
It makes enormous sense to utilize a prefunded advanceable,
refundable tax subsidy that could be advanced to the individual
and used immediately for their monthly premiums.
The combination of a refundable tax subsidy, the lower cost
of group health insurance, and the natural outreach
opportunities that exist in the employment setting create a
very promising environment for expanding coverage to many more
Americans.
We have found in programs like Healthy Choice in Wayne
County, Michigan, the Focus Program in San Diego, and FAMIS in
the State of Virginia, that a relatively small helping hand can
bridge that premium gap between what an employer is able to
subsidize, and what an employee is able to pay.
We also need to examine the most effective role for our
public programs like Medicaid and the State Children's Health
Insurance Program. These programs are extremely valuable in
providing health care to citizens with very low incomes. When
we discuss these programs though, we have to do it in the
context of current State budget situations and restraints.
According to the National Conference of State Legislatures,
28 States will consider cutting their Medicaid benefit packages
this year. Most States have balanced budget requirements, and
given that fact that Medicaid and S-CHIP represent the largest
line items in most of these State budgets, Governors will have
little choice but to take that direction when looking for
savings.
Given this environment, a logical approach would be to use
those Medicaid and those S-CHIP dollars to supplement employer
health benefit contributions. The administration has launched a
demonstration initiative, HIPAA, and that encourages this
direction.
It makes good sense in terms of stretching those limited
health care dollars. Mr. Chairman, the high number of uninsured
Americans is a problem that has perplexed our Nation for far
too long.
I believe though that we are seeing an unprecedented
determination to find and achieve solutions. Members of this
committee have introduced and co-sponsored legislation that
would make health insurance more accessible.
And the President has included in his budget more than $90
billion that would among other things provide a refundable,
advanceable health tax credit to help families purchase health
insurance.
The Health Care Leadership Council appreciates and applauds
all of your ongoing efforts to help the Lisa Crowleys of the
country to solve this most pressing and serious health care
issue.
We look forward to working with Congress, and working with
the White House on a variety of approaches that will be
required to get more Americans health insurance coverage. Thank
you.
[The prepared statement of Mary R. Grealy follows:]
Prepared Statement of Mary R. Grealy, President, Healthcare Leadership
Council
Mr. Chairman, Congressman Brown, and members of the subcommittee. I
am Mary Grealy, President of the Healthcare Leadership Council. On
behalf of the members of the HLC, I would like to thank you for
focusing today's hearing on the very important issue of uninsured
Americans. I welcome and appreciate this opportunity to discuss the
views of HLC members.
The Healthcare Leadership Council (HLC) is a coalition of chief
executives of the nation's leading health care companies and
organizations, representing all sectors of health care. Our members are
committed to advancing a market-based health care system that values
innovation and provides affordable, high-quality care.
The HLC believes there is no greater health care priority in this
nation than the approximate 40 million individuals who are without
health care coverage. The health consequences experienced by those
without health insurance are well documented. People without coverage
tend to get sick more often because they do not receive the preventive
and diagnostic care that so many of us take for granted. They miss more
time on the job. They are absent from school more frequently, and
statistics tell us they will die too early.
In addition, our nation as a whole is affected when such a large
segment of our population is uninsured. Our productivity suffers, and
our health providers absorb a tremendous economic strain caused by
uncompensated care. Hospitals alone are absorbing over $19 billion per
year in care provided to those who do not have adequate coverage.
Concern regarding this issue is increasing, and the greater
attention being given to the uninsured is both welcomed and necessary.
The President and the Congress, including this subcommittee, should be
highly commended for their recent efforts to initiate action on behalf
of uninsured Americans. As well, a number of private organizations have
begun devoting tremendous energy to this issue and should also be
commended.
I would like to particularly applaud the members of this committee
who have introduced and co-sponsored legislation that would make health
insurance coverage more accessible to greater numbers of Americans.
In passing the economic stimulus bill this month, the House of
Representatives highlighted the need to find ways to ensure that laid
off workers do not join the ranks of the uninsured. We support
provisions in that bill which would give those losing coverage a number
of options for extending their health care benefits or obtaining new
benefits. In particular, we support efforts to help hard-to-insure
individuals by providing funding for state high risk pools.
The members of the HLC also support the President's inclusion of
more than $90 billion in his recent budget to begin mapping the way to
coverage for a significant number of the uninsured. The majority of
this funding would provide a refundable health tax credit that could be
advanced to families to help them purchase insurance plans in the non-
group insurance market. The HLC believes this is an important step
toward providing easier access to health care coverage for the millions
of working Americans who are without it.
It is our goal to work with the Administration and Congress to
encourage the development and expansion of this proposal. This
initiative, as well as the Administration's proposals to increase
funding for community health centers, to assist hard-to-insure families
and individuals in purchasing coverage from state risk pools, and to
maximize use of existing State Children's Health Insurance Program (S-
CHIP) funds, exemplifies the Administration's resolve to strip away the
diverse array of barriers that keep people uninsured.
It is critical to point out that there is no single answer, no one
policy solution that will address the needs of more than 40 million
uninsured Americans. Taking on this issue requires flexibility and a
mix of targeted public and private solutions.
The HLC supports a three-pronged approach to reduce the number of
uninsured Americans: (1) refundable tax incentives to encourage the
purchase of insurance, including employer-offered coverage; (2)
improvements to the current Medicaid program and S-CHIP, including
improved outreach to enroll those currently eligible and the
flexibility to use program dollars to expand private coverage; and (3)
increased efforts to facilitate awareness of the importance and
availability of health insurance, especially among the nation's small
businesses.
The members of HLC are committed to this effort--to raising
awareness of the national problem of the uninsured and advancing
solutions to put health coverage within the reach of uninsured
Americans. Last year, we formed the national Health Access America
campaign because we believe that all Americans should have access to
today's modern medical miracles and life-enhancing technologies and
treatments.
Under this campaign, HLC members have pledged their leadership,
energies and resources to help solve the nation's uninsured crisis. We
are spotlighting local and regional programs throughout the country
that are developing successful, innovative approaches to help provide
coverage. We are using our Web page to provide uninsured Americans with
one-click access to information about coverage and safety net programs
in their states. We are conducting research studies on the most
effective ways to address this crisis. And, we are talking to people
who don't have health coverage, listening to their stories and telling
them to a wider audience to underscore the cost that will continue to
be paid if we don't solve this problem.
Our work in highlighting model programs throughout the country that
promote health coverage and access has been particularly valuable. We
spotlight these programs with the HLC ``Honor Roll for Coverage''
award. In 2000, we presented awards to the Wayne County, Michigan
HealthChoice program as well as the FOCUS program in San Diego. Both of
these programs provide subsidies to help small businesses and their
employees afford health insurance. In 2001, we recognized Virginia's
exemplary waiver program that allows S-CHIP funds to be used to help
expand employer health coverage, and South Carolina's Commun-I-Care
program, which provides care, health care services and products to
individuals who are not eligible for public assistance or employer-
based insurance.
This year, HLC will present its Honor Roll Award to a new program
in Sacramento County, California, called SACAdvantage. Modeled after
the San Diego FOCUS program, SACAdvantage will work with small
employers to increase access to coverage for their employees.
We believe these and similar state and local programs, small
business and association purchasing pools, and other creative ways to
encourage health care coverage merit national attention. There are a
number of different causes that lead to millions of people being
without health insurance, and each of these local programs has analyzed
the unique needs and potential solutions for their uninsured
populations.
These initiatives are not only providing coverage for a growing
number of individuals, families and small businesses, but they are
providing us with a critical road map leading toward workable solutions
that may encourage small employers and individuals to participate in
coverage programs. For example, Wayne County's HealthChoice program,
found that it was difficult to entice businesses to participate as long
as subsidies to those businesses were less than one-third of their
insurance premium costs. The premium formula that eventually made the
program a success was one-third paid by the employer, one-third paid by
the employee, and one-third subsidized by the county government.
In addition, these small employers received the benefit of the
pooling arrangement created by the county, which offered a negotiated
price as well as a subsidy. This mirrors some of the advantages enjoyed
by large employers and other types of purchasing pool arrangements.
Finally, in an effort to increase awareness about the importance of
health care coverage, HLC has worked with Congresswoman Wilson on the
introduction of H.Con.R. 271, The Importance of Health Care Coverage
Month, and securing bipartisan cosponsors for that resolution.
Concurrently, our grassroots organization is coordinating events around
the country with cosponsors of the resolution to help educate
individuals and small business of the importance and availability of
health care coverage.
I would now like to share with the Committee information from
several research projects that we have undertaken at HLC. These studies
are helping us to better understand the characteristics of the
uninsured and potential solutions to the significant challenges before
us.
Characteristics of the Uninsured
Four out of every five uninsured persons are in families with at
least one employed family member. This is the dominant picture of the
uninsured--hard-working people who are not offered or cannot afford
health insurance. Of the 33 million uninsured in working families, 13
million are in families where an offer of insurance from an employer is
turned down, usually because the family cannot afford it. Twenty
million of the uninsured in working households are not offered employer
insurance.
It is not surprising that affordability is the most significant of
the various barriers to having health coverage. A recent analysis
commissioned by HLC shows that 16 percent of those in families with
incomes under the federal poverty level with an offer of insurance are
uninsured, compared to six percent of those in families with incomes
over three times the poverty level.
Cost is a barrier to insurance enrollment for low-income workers
and their dependents, in part because their share of premiums consumes
a higher percentage of their income than is the case for workers with
higher incomes. Also, workers in middle and upper-income brackets tend
to work for employers who subsidize a larger portion of their health
insurance premiums, whereas low-wage firms offer a smaller subsidy to
their employees.
These characteristics suggest that pre-funded, refundable tax
incentives to lower income workers could serve to bridge the premium
gap that exists between what an employer and employee are each able to
contribute toward a health insurance policy. Such tax incentives could
encourage many employers not now offering coverage to do so, and also
will aid those workers who are not offered health insurance by their
employers.
Limitations of S-CHIP and Medicaid
S-CHIP and Medicaid have proven extremely valuable for providing
health care to very low income populations, and must play a role in the
package of solutions that will reduce America's uninsured population.
However, evidence suggests that we are reaching the limits of
effectiveness in reducing the number of uninsured through these
programs, as they currently function. Only about half of the
individuals currently eligible for Medicaid and S-CHIP actually
participate in the programs, suggesting that eligibility alone--without
considerable investment to remove existing barriers to participation--
does not and will not efficiently increase the number of people
receiving coverage.
A number of reasons have been cited for low participation in these
programs, including the fact that participation rates in means-tested
public insurance programs decline as incomes rise. A large number of
those electing not to participate are families with higher income
levels who were offered public insurance upon the inception of S-CHIP.
This pattern of lower participation among higher income persons is
also evident in other government health care subsidy programs,
including the Qualified Medicare Beneficiaries (QMBs) and Specified
Low-Income Medicare Beneficiaries (SLMBs) programs. Forty-five percent
of QMBs who have incomes at or below 100 percent of poverty do not
participate in the QMB program. Among SLMBs, who have slightly higher
incomes than QMBs at 100 to 120 percent of poverty, 84 percent of those
eligible fail to participate. Obviously, substantial outreach is
necessary to overcome barriers to participation, such as the stigma
many associate with public programs.
Any discussion of expanding S-CHIP or Medicaid eligibility must
also take into consideration the deteriorating fiscal health of many of
our states. Medicaid and S-CHIP account for the largest line item in
most state budgets. And, unlike the federal government, virtually all
of the states do not have the option of deficit spending, meaning that
budget cuts will have to occur. The National Conference of State
Legislature's annual Health Priorities Survey for 2002 found that 28
states will consider cutting Medicaid benefit packages this year. At
the recent Governor's meeting in Washington, several state chief
executives made it clear that Medicaid spending is one of the greatest
problems they face.
This challenging environment requires innovative approaches. For
example, using S-CHIP funds to supplement employer premium
contributions, as the Administration's new Health Insurance Flexibility
and Accountability (HIFA) Demonstration Initiative waiver encourages,
is a logical way to stretch scarce health care dollars. Virginia's
FAMIS program, which I mentioned previously, is one of the first
programs in the nation to combine its S-CHIP funding with employer-
offered coverage. This program is now enrolling thousands of uninsured
children into their parents' health plans in the work place.
This idea should be examined closely by other states as well as the
Federal government. Many eligible individuals in the higher income
categories of Medicaid and S-CHIP, as well as income categories under
consideration for Medicaid and S-CHIP expansions, are connected to the
workforce through at least one family member. Therefore, solutions
involving ways to supplement employer insurance may be highly effective
in increasing coverage rates for these populations, providing coverage
without the stigma of government dependence. There are steps that must
be taken, though, to make this approach work better. There are
administrative complexities within the Medicaid and S-CHIP programs
that discourage states from opting to coordinate with employer health
plans. HHS currently does not have the authority to eliminate all of
these barriers. Congress must address them legislatively. The HLC would
appreciate the opportunity to work with this committee to help identify
and overcome these obstacles.
Targeted, Refundable Tax Incentives
HLC members are committed to forging a health care system
characterized by innovation and constantly improving quality. Choice,
which drives competition, is essential to such a system. Health
coverage tax credits have the potential for providing consumers with a
great amount of flexibility for choosing health coverage options that
best suit their needs. They also can act as a stimulus to create new
and wider coverage choices in the marketplace.
The HLC believes tax credits should be refundable for persons with
little or no tax liability, and they should be paid in advance so that
individuals with limited or no savings can take advantage of them to
pay monthly premiums before the end of the tax year. Risk adjusting tax
credits for those with chronic diseases and other health conditions, as
well as facilitating the development of state high risk pools toward
which credits can be applied, can also help to ensure that the majority
of the uninsured are served by this approach.
While we are pleased to see proposals moving forward to use tax
credits to address the needs of individuals who do not have an offer of
employer insurance, it is our hope that these proposals will be
expanded to include others in the workplace who face health coverage
challenges. The HLC's strong advocacy for tax incentives to subsidize
the purchase of employer-offered insurance stems from the compelling
fact that over 80 percent of the uninsured are connected to the
workforce. The combination of a refundable tax subsidy, the lower cost
of group health insurance and the natural outreach opportunities within
an employment setting creates the most promising environment for
increasing coverage for families and individuals.
Assessing Cost and Value of Tax Incentives
Our tax code provides tremendous benefits to those who receive
their health insurance through their place of employment. Health
insurance premiums paid by the employer are not counted as taxable
income to the employee. However, this tax exclusion has less value for
low-income workers than for their better-paid counterparts.
For families with income levels between 200 to 300 percent of the
federal poverty level ($35,000 to $53,000 for a family of four), the
tax exclusion for employer-paid health insurance is worth only about
$661. For families between 300 and 400 percent of poverty, the
exclusion has a value of about $801. Thus, a refundable tax credit of
$2,000 to $3,000 per family, the most commonly discussed level, would
be particularly valuable for low-income workers, including those who
are offered insurance by their employers.
The cost of tax incentive proposals, as with any proposals to
reduce the number of uninsured, presents a financial challenge to
policy makers. The cost of legislation, of course, must be determined
before legislation is acted upon, and the price tags have been notably
high. This is particularly true for proposals that allow tax incentives
to be used for workers who already have an offer of insurance from an
employer. This is, in part, due to the fact that the Joint Tax
Committee, on whom Congress must rely for determining the cost of tax
legislation before it is passed, incorporates assumptions that many
workers already receiving employer-based insurance will be ``bought
out'' with federal dollars and current employer subsidies will cease.
A look at the real world of employer benefits leads to a different
conclusion. The extent to which employers will reduce their
contributions toward health insurance for employees when a subsidy such
as a tax credit is offered can be discerned by looking at economic
studies examining actual experiences with other types of wage
subsidies. In two such studies examined by HLC (Katz, 1996 and Witte
et. al, 1998), general wage subsidies and child care subsidies from the
government did not reduce overall employee benefit spending by
employers.
Additionally, we can project expected employer behavior if tax
credits are focused exclusively toward lower-income employees. It is
highly unlikely that an employer would discriminate by reducing premium
contributions for low-income workers receiving a tax subsidy, while
maintaining current contributions for higher-income workers not
eligible for the subsidy.
We would recommend that policymakers utilize these real world
examples and fair assumptions regarding marketplace behavior in
determining the likely impact of new tax incentive policies.
Phasing in a Tax Credit Approach
All Americans deserve access to affordable health coverage.
However, current budget constraints may require us to move in
incremental steps toward that goal. For example, targeting tax credits
toward populations less likely to already have coverage, such as low-
income families or workers in small businesses, can help to reduce the
cost of such an approach while still reaching many currently-uninsured
persons. The HLC is modeling a number of targeted tax incentive
policies and we would be happy to share our findings with the
committee.
Another segment of the population that should receive high priority
in targeting tax incentives includes dependents of lower-income workers
not eligible for S-CHIP or Medicaid. Small and medium sized businesses
offering health insurance to their employees contribute, on average, 48
percent of the premium amount for employees, but only 24 percent for
their dependents. Not surprisingly, in many cases, workers acquire
insurance for themselves, but cannot afford it for their family
members. In designing targeted tax incentive policies for the
uninsured, we should strive to assist all members of working families.
Conclusion
Mr. Chairman, the Healthcare Leadership Council appreciates your
efforts on the uninsured over this past year, and applauds you and your
colleagues for your ongoing work to find ways to solve this nation's
most pressing health care issue. The uninsured must be our national
health care priority for 2002. This multi-faceted problem will require
a variety of public and private approaches and we look forward to
working with you and the Administration to develop constructive
solutions.
Mr. Bilirakis. Thank you, Ms. Grealy.
Dr. Rowland.
STATEMENT OF DIANE ROWLAND
Ms. Rowland. Thank you, Mr. Chairman, Mr. Brown, and
members of the subcommittee for this opportunity to testify
today on how to extend coverage to our Nation's uninsured. At
last count in 2000, 38.4 million Americans were uninsured; 9.2
million children, and 29.2 million adults.
The profile of the uninsured as you have heard today is a
consistent one. They are predominantly low income working
families. Two-thirds have income below 200 percent of poverty,
and income of less than $30,000 for a family of three.
And, yes, 8 in 10 are from families with one or more
workers. Most are uninsured in fact because they do not obtain
coverage in the workplace. Only 60 percent of workers earning
less than $7 per hour have coverage through their own or a
spouse's job, compared to 96 percent of workers earning at
least $15 an your.
Low wage workers are 10 times as likely to not be offered
coverage in the workplace as higher wage workers. In fact, low
wage employment equals lack of health benefits. When coverage
is offered in the workplace the cost is often beyond the reach
of low income workers.
In 2001, the average employer premium for family coverage
was $7,000 and the employee's share of that premium was 26
percent, or $1,800 a year. For a low wage worker earning
$15,000 a year, the premium share equals 12 percent of that
individual's family income.
Most would consider that an unaffordable price, even to
obtain health coverage. The non-group market offers no bargains
for low wage workers. Cheap policies with high deductibles
afford little protection.
Better policies are too costly, but still often exclude
health conditions, limit benefits, require substantial co-
payments, and adjusted high premiums for those with health
problems.
Public programs, most notably Medicaid and CHIP, do help
fill in the gaps, especially for children. Today, 21 million
children, 1 in 5 American children, rely on Medicaid for
coverage, and another 4 million have been assisted by CHIP.
Medicaid and CHIP provide coverage for primary care,
preventive services, immunizations, and pre-natal care, without
financial barriers. They are not just catastrophic health
insurance plans.
But public coverage has been broadened primarily for
children, and leaves millions of low income adults behind, and
34 percent of low income women and 41 percent of low income men
are uninsured.
Medicaid's reach for these adults is extremely limited.
Income levels for eligibility of parents in most States remains
substantially below that of the levels that Congress has
mandated for children; well below poverty in 33 States.
Low income childless adults, who constitute one-half of the
low income uninsured population, are excluded from Medicaid
coverage unless disabled, no matter how poor. Clearly,
broadening coverage to parents and extending Medicaid to
childless adults at low incomes would be important steps in
addressing the low income uninsured.
Without public expansions, the poorest among the uninsured,
and the most chronically uninsured, are likely to remain
without coverage. But strategies to address the uninsured must
recognize the need economic realities.
As we sit here today, the situation has grown bleaker since
the 2000 snapshot. The recent economic downturn and the return
of double-digit inflation and health care costs now places
health insurance coverage for working families in jeopardy,
both from loss of employer sponsored coverage, and limits on
the availability and scope of Medicaid due to State physical
constraints.
We face the prospect of seeing coverage erode, not expand,
for millions of Americans. The combination of rising health
care costs and State fiscal constraints, puts the low income
population relying on Medicaid and CHIP at particular risk.
We must be careful to not strip benefits and impose
additional cost sharing burdens on America's poorest population
in order to provide minimal expansions to other groups. This
will worsen, not improve, health insurance coverage, and
undermine much of the progress that has been made in recent
years.
Maintaining the gains in public coverage over the last
decade, especially for children, may in fact require additional
Federal financing assistance to the States in return for a
commitment to maintain coverage for the existing low income
population.
Health insurance matters for the millions of Americans who
lack coverage. It influences when and whether they get
necessary medical care, the financial burdens that they face in
obtaining care, and ultimately their health and health
outcomes.
Extending coverage to the millions of Americans without
health insurance and securing coverage for those who have it
today, is both an important policy and health objective for
this Nation.
I look forward to working with the committee to help
achieve these objectives for our Nation. Thank you very much.
[The prepared statement of Diane Rowland follows:]
Prepared Statement of Diane Rowland, Executive Vice President, The
Henry J. Kaiser Family Foundation
Thank you for the opportunity to offer testimony this morning on
the critical issue of how to extend health coverage to our nation's
over 38 million uninsured. I am Diane Rowland, Executive Vice President
of the Henry J. Kaiser Family Foundation and Executive Director of the
Kaiser Commission on Medicaid and the Uninsured. The national bi-
partisan commission serves as a policy institute and forum for
analyzing health care coverage and access for low-income populations
and assessing options for reform.
Combined with notable expansion in coverage, especially through
public coverage of low-income children, the strong economy and
sustained economic growth over the last decade helped to bring about
the first decline in the number of uninsured in over a decade. However,
the downturn in our economy, coupled with increased pressure on state
budgets and rising health care costs, now place that progress in
jeopardy. My testimony today will focus on the characteristics of the
uninsured population, the factors that contribute to their lack of
insurance, and the challenge of broadening coverage in the current
fiscal environment.
The Uninsured Population
Today, two out of three nonelderly Americans receive their health
insurance coverage through an employer-sponsored health plan offered
through the workplace. However, for millions of working families such
coverage is either not offered or is financially out of reach. Medicaid
and the State Children's Health Insurance Program (CHIP) help fill in
the gaps for some of the lowest income people, but this publicly
sponsored coverage is directed primarily at children and varies in
availability across the states. While 20 percent of children are
covered by Medicaid or CHIP, only 6 percent of adults are covered,
resulting in a greater likelihood of being uninsured for adults (Figure
1). Of the 38.4 million Americans who were uninsured in 2000, 9.2
million were children and 29.3 million were adults. While young adults
ages 19 through 24 have the highest rate of uninsurance of any age
group, they represent only 17 percent of the uninsured population (see
Table 1).
Low-income individuals are disproportionately represented among the
uninsured. Because poor and near-poor families have a greater chance of
being uninsured, nearly two-thirds (64%) of the uninsured come from
low-income families earning less than 200 percent of the poverty level
(Figures 2). [In 2002, an income of $27,476 per year places a family of
three at 200% of poverty.] Over a third (36%) of the uninsured come
from families living below the poverty level.
The likelihood of being uninsured decreases substantially as income
rises (Figure 3). Over a third (36%) of the poor and 26 percent of the
near-poor are uninsured in contrast to 6 percent of people with incomes
at or above 300 percent of poverty, or roughly $41,000 a year for a
family of three. Employer-sponsored coverage is extremely limited for
the low-income population; only 18 percent of the poor and 47 percent
of the near-poor receive coverage through their employer. Medicaid
helps to offset the lower levels of private insurance for over a third
(37%) of the poor and 17 percent of the near-poor. The near-poor run a
high risk of being uninsured because with their higher incomes they are
less likely to be eligible for Medicaid than the poor, but also less
likely than higher income families to have access to employer sponsored
health insurance.
This confluence of factors relating to the characteristics of the
uninsured places low-income adults at the center of the issue. In 2000,
47% of the 38.4 million uninsured Americans were low-income adults--16
percent parents of low-income children and 31 percent low-income adults
without children (Figure 4). The higher level of uninsurance among low-
income adults reflects both the lack of insurance coverage in many low
wage workplaces and the exclusion of coverage for childless adults in
most Medicaid programs. Medicaid coverage, and the availability of
federal matching funds to states for coverage, has historically not
been available for childless non-disabled adults, no matter how poor.
Assuring coverage for this group, as well as the parents of low-income
children who are now largely eligible for public coverage, poses the
next challenge in coverage expansions.
Limits to Private Insurance
While most Americans rely on employer-sponsored coverage to provide
group insurance coverage for themselves and their families, many
working families fall outside the scope of workplace coverage. Eight in
ten of the uninsured come from working families--72 percent come from
families where at least one person works full-time outside the home and
another 11 percent come from families with part-time employment. Among
the low-income uninsured, 58 percent of the poor and 96 percent of the
near-poor are working or have workers in their families.
Most uninsured workers (over 70%), and consequently their
dependents, are not offered job-based health coverage, either through
their own or a family member's job. Lack of access to employer-
sponsored coverage is particularly a problem for low-wage workers
(Figure 5). Only 60 percent of low-wage workers (those earning less
than $7 per hour) have access to job-based coverage through their own
or a family member's job, compared to 96 percent of high-wage workers
(those earning at least $15 per hour). For 40 percent of low-wage
workers, in contrast to only 4 percent of high-wage workers, health
benefits were not offered.
The likelihood of being offered coverage in the workplace depends
largely on where one works, including the size, industry, and wage
level of the firm. Most large firms offer coverage, but many smaller
firms do not. Small firms face particular challenges in offering their
employees coverage due to high turnover rates and small risk pools,
which may lead to high premiums for group coverage. Low wage workers
often work in small businesses, particularly in retail and service
industries where health insurance is not widely offered as a fringe
benefit. Low wage workers who are ``typical'' employees in a firm are
also less likely to be offered coverage: surveys and research have
shown that the more low wage workers an employer has, the less likely
they are to offer health coverage.
When health insurance is offered in the workplace, most employees
opt for coverage even though the share of the premium borne by the
employee can be substantial, especially for low-wage workers. In 2001,
the average annual family premium for employer sponsored group coverage
was $7,053 (Figure 6). The worker's contribution to that premium was,
on average, 26 percent, or $1,801 for the year. For a full-year, full-
time worker earning $7 an hour, the employee share of premiums
represents 12 percent of the family's $14,500 annual income. However,
for many low wage workers, the employer covers less than half of the
premium, making the cost of coverage even more unaffordable. As a
result, even when coverage is offered, many low wage workers are unable
to finance their share of the premiums.
If health insurance coverage is not available through a group
policy from an employer, families are hard pressed to be able to find
and pay for a policy in the individual insurance market. Most directly
purchased policies are expensive and have more limited benefits and
more out-of-pocket costs than group coverage plans. Moreover, the cost
of these policies is based on age and health risk, and any preexisting
health conditions are generally excluded from coverage. For the average
low-income family, a $6,000 family policy in the individual market
would consume a quarter or more of their income, provide only limited
protection, and could exclude coverage for any family members with
health problems.
The limits of employer-sponsored and privately purchased health
insurance leave millions of low-income children and adults at risk for
being uninsured. While on average 16 percent of nonelderly people are
without insurance today, uninsured rates vary widely across the
country, reflecting the economic environment and employment structure
in different states. States with more agriculture and small business
and retail industry and less manufacturing have higher rates of
uninsurance. From 1999 to 2000, 17 states and the District of Columbia
had 16 percent or more of their nonelderly population uninsured (Figure
7).
Public Coverage for the Low Income Population
The lack of employer-sponsored coverage leaves millions of low-
income families without private coverage; for many, Medicaid, and most
recently CHIP for low-income children, helps to fill the gap. Medicaid
now covers one in five of America's children, providing health
insurance coverage with limited cost sharing and comprehensive benefits
to 21 million low-income children and 8 million low-income parents.
CHIP has extended coverage to another 4 million children.
Together, Medicaid and CHIP already play a strong role in reducing
uninsured rates among low-income children, with over half (52%) of poor
children and nearly a third (30%) of near-poor children now receiving
coverage through these programs. With the decoupling of Medicaid and
welfare as part of welfare reform in 1996 and the enactment of CHIP in
1997, states have substantially expanded the income limits to extend
eligibility to millions of poor and near poor uninsured children. By
2002, 39 states and the District of Columbia had raised their income
eligibility levels to at least 200 percent of poverty (Figure 8).
However, the potential to cover almost all uninsured low-income
children will only be realized if steps are taken to make enrollment
easier for the eligible population. Often, eligible children remain
uninsured because their parents are not aware of the coverage available
or find the hurdles to establish eligibility and enroll too cumbersome.
Long application forms with extensive questions on work history,
assets, and personal information, coupled with use of welfare offices
and personnel for processing enrollment, have discouraged many
applicants from initiating or completing the process. The steps that
states are now taking to simplify enrollment and reduce the burden of
enrolling on families are essential to make public coverage work
effectively for low-income working families.
While much more progress can be made in improving how Medicaid
works for children, Medicaid's current reach among low-income families
is compromised by limitations in coverage of parents of eligible
children. Medicaid originally covered low-income families by including
both children and parents receiving welfare assistance. However, over
time, as eligibility expansions focused on children and pregnant women,
coverage of parents lagged behind, often remaining at state welfare
levels. As a result, millions of low-income children have gained
eligibility while their parents, unless pregnant or disabled, remain
uninsured. In addition, many families who are eligible for Medicaid but
not enrolled lost coverage in the wake of welfare reform, as confusion
and computer systems problems erroneously dropped many from Medicaid
coverage when they left cash assistance. Moreover, welfare reform also
restricted public coverage for many immigrants.
Nearly one-third of low-income parents are uninsured, and of these
5.3 million uninsured parents, less than a third (31%) are potentially
eligible for Medicaid but not enrolled. The bulk of uninsured parents
(69%) do not currently qualify for Medicaid coverage because their
limited income or assets make them ineligible under the stringent
eligibility standards for adults. One of the key strategies for
improving coverage of the low-income population is to raise parents'
eligibility levels to those of their children to achieve coverage for
the whole family. This step would not only cover more low-income
adults, it would also provide an additional incentive to parents to
enroll their children.
While welfare reform contributed to increasing the number of low-
income uninsured parents, the changes enacted along with the welfare
legislation under Section 1931 of the Social Security Act also offered
states new opportunities to substantially expand family coverage.
States were granted greater flexibility in family composition rules and
the counting of income and resources, enabling them to extend coverage
to single- and two-parent households and more low-income, working
parents. Using either this new authority or Section 1115 waivers from
the Secretary of Health and Human Services, 18 states now provide some
Medicaid coverage to parents up to and above 100 percent of the poverty
level (Figure 9). However, in 15 states, coverage for parents remains
at or below 50 percent of poverty.
The most glaring omission in Medicaid coverage, however, is the
exclusion of coverage for low-income childless adults. Nearly half of
the uninsured low-income population falls outside Medicaid's reach
because they are adults without children. Low-income adults without
children have the highest rates of lack of insurance--45 percent of
poor and 35 percent of near-poor childless adults are uninsured. Unless
they become totally and permanently disabled and can qualify for
disability assistance under the Supplemental Security Income cash
assistance program, they are generally ineligible for Medicaid. Eight
states have used Medicaid waivers to provide Medicaid to low-income
childless adults, but coverage remains limited.
Clearly, Medicaid plays a crucial role as an insurer of low-income
children and adults, but coverage for the low-income population remains
limited by restrictive eligibility and policies and procedures that
have carried over from Medicaid's welfare heritage. Converting Medicaid
from a welfare assistance program to a health insurer for low-income
people and building on Medicaid and CHIP offer an opportunity to bring
broader-based coverage to the low-income population and fill the gaps
left by employer-based coverage.
Health Coverage in the New Economy
Extending coverage through employer-sponsored and public coverage
faces additional challenges as our weaker economy puts new stress on
the system. In recent years, the thriving economy helped to moderate
growth of the uninsured population as employers used health care
benefits as a way to attract and retain workers in a competitive
market. At the same time, states expanded Medicaid and CHIP coverage of
children. The economic downturn now places health insurance coverage
for working families in jeopardy from both loss of employer-sponsored
coverage and limits on the availability and scope of Medicaid as a
fallback.
Both employer-sponsored coverage and Medicaid(and, as a result, the
number of uninsured(are sensitive to economic conditions. In times of
recession, employer-sponsored coverage declines, and while Medicaid
absorbs some of the loss in coverage, many more people go uninsured. It
is estimated that for every 100 workers added to the unemployment
rolls, 85 people will join the ranks of the uninsured. When our
national unemployment rate rose from 4.0% in December 2000 to 5.8% in
December 2001, we estimate that the number of uninsured increased by
2.2 million (Figure 10).
In addition, the changing economy also poses other threats to
coverage for workers. Employers who began to offer coverage to lure
workers in a tight labor market are likely to cut back on those offers.
Employees' hours may be cut back, making them ineligible for health
benefits as part-time workers. As employers face shrinking profits,
they may also look to health insurance as a way to cut costs, either by
cutting eligibility for some workers, cutting back benefits, or passing
a larger share of the cost of insurance on to employees.
All of these scenarios are made even more likely by the fact that
the cost of employer-sponsored coverage is rising again after several
years of decline (Figure 11). Our recent survey of employer-sponsored
health benefits found that from 2000 to 2001, premium costs increased
on average 11 percent. However, even more troubling, most employers,
especially large employers who are most likely to offer coverage,
reported it was likely that these increased costs would be passed along
to their employees by increasing their premium share or reducing plan
benefits. For workers with marginal incomes, such actions could make
maintaining coverage for themselves and their families unaffordable.
Just as the slowdown in the economy could bring a return to the
erosion in job-based coverage, the weakened economy and the return of
rising health costs could severely compromise public coverage for the
low-income population. Declining tax revenues and growing budgetary
concerns will undoubtedly drive many states to reduce Medicaid spending
and limit expansions of coverage to new populations if additional state
spending is required.
During difficult economic times, Medicaid programs get caught in
the crossfire between the need for increased coverage and spending and
the erosion of state revenues and constraints on state budgets. Rising
unemployment drives Medicaid enrollment upward. Using Congressional
Budget Office estimates of Medicaid enrollment in 2002, simulations by
the Urban Institute predict Medicaid enrollment for children and non-
elderly adults at 44.7 million when unemployment is at 4.5%, but rising
to 47.9 million if unemployment rises to 6.5%, assuming no other
changes than those directly attributable to increases in unemployment
(Figure 12). Such increases in Medicaid enrollment have fiscal
implications for federal and state Medicaid spending.
Open-ended federal matching funds through Medicaid allow spending
to increase automatically in response to higher enrollment levels, but
states must provide matching funds to avail themselves of the federal
assistance. Reduced state revenues are now placing severe strains on
many state budgets. The strong economic growth during the mid- to late-
1990s allowed states to build up significant balances, but at the end
of 2000 states began to see their tax collections fall and their
spending exceed expectations. Many states had to dip deeply into their
year-end balances to cope with budget pressures. By the end of December
2001, 39 states were reporting budget shortfalls for fiscal year 2002.
The return of health care cost escalation, as reflected both in
employer premiums and rising Medicaid payments, makes both maintaining
and expanding coverage more difficult. Cost increases in the private
market put pressure on Medicaid programs to keep pace as a major
purchaser of care. In order to maintain access to care for its
beneficiaries, Medicaid programs are being pushed to raise payment
rates for health plans and providers and pay for the escalating cost of
prescription drugs. In a recent survey, state Medicaid officials
reported that the top reasons for Medicaid expenditure growth in FY2001
were pharmacy costs (48 states); provider rate increases (31 states);
enrollment increases from eligibility expansions and growth of the
disabled population (27 states), and increased costs for long-term care
(24 states) (Figure 13). Given Medicaid's role as a provider of health
and long-term care services for the nation's sickest and most
disadvantaged populations, these cost pressures are only likely to grow
over time.
The challenge for states and their Medicaid programs is how to meet
the growing demand for coverage when fiscal resources are constrained.
Some states are trying to hold the line and not reduce funding this
year, but others have already initiated budget reduction actions for
fiscal 2002. States are considering, and some have implemented,
reductions in provider payments, eligibility and/or benefits; capping
enrollment in the SCHIP program; or putting planned expansions on hold.
Others are planning to use the new waiver authority (the Health
Insurance Flexibility and Accountability Demonstration Initiative, or
HIFA) to alter eligibility and benefits under Medicaid to address
budget problems.
State budgetary problems coupled with the pressure to restrain
health care spending portend difficult times ahead for health coverage
of the low-income population. As health care costs rise, there will be
increased pressure on states to cut back on spending and reduce
services and/or coverage. If states respond to their difficult fiscal
situations by cutting Medicaid in the months ahead, it will not only
make it more difficult for newly unemployed workers to secure coverage,
but could also reduce coverage for those currently enrolled.
Limitations in public coverage would further exacerbate our nation's
uninsured problem.
Conclusion
While the profile of the uninsured population and the factors
contributing to their lack of coverage remain the same as in earlier
years, the prospects for reducing the number of uninsured Americans
have dimmed in light of the changes in our economy. Given the recent
economic downturn and the renewed growth in health care costs, it
appears we are facing the potential of seeing health care coverage
erode, not expand, for millions on Americans.
Health care is expensive--beyond the reach of most American
families to purchase on their own. As health costs grow and the
premiums for insurance rise, health coverage through the workplace is
likely to become less available and more unaffordable for working
families. Clearly, efforts to control health care spending and make
coverage more affordable for employers and employees alike is an
essential part of any strategy to maintain and broaden coverage over
the long term.
Rising health costs and state fiscal constraints put the low-income
population relying on Medicaid and CHIP particularly at risk.
Maintaining the gains in public coverage over the last decade,
especially for children, may require additional federal financing
assistance to the states in return for a commitment to maintain
coverage at current levels. Increasing the federal matching rate for
Medicaid for low-income children and families would both provide
additional resources to states to maintain coverage and even provide an
incentive to states to extend coverage. Supplementing and retaining
CHIP dollars would also help stabilize coverage for low-income children
in the short-run.
I commend the Committee for its efforts to highlight the plight of
the 38 million Americans without health insurance coverage and to look
at options that could help address this growing problem. I look forward
to working with the Committee to meet the challenge of making health
care coverage a reality for all Americans.
Thank you for the opportunity to testify today. I welcome any
questions.
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Mr. Bilirakis. Thank you very much, Dr. Rowland. Well, the
Chair recognizes himself. Dr. Kellermann, you state that the
combination of strict eligibility requirements and enrollment
procedures make public coverage--well, you have given us some
staggering facts I might add, but make public coverage
difficult to obtain, and even harder to keep.
And then you go on and state that the medium length of time
for someone under the age of 65 that keeps Medicaid coverage is
about half-a-year, 5 months, 6 months, whatever.
And at the end of any given year, about two-thirds of the
people who were insured by Medicaid at the start of the year
have loss their coverage for any number of reasons. Those are
all staggering facts, and it seems to me that before we can
complete our work in terms of whatever it is that we might
ultimately decide might be the solution, we are going to have
to really look into these facts.
I wonder if you can elaborate a little bit on why all of
these things might take place.
Mr. Kellermann. Our report gives a fairly detailed
breakdown of these issues. I think the theme in my mind is that
our system is just incredibly complex, and it is complex in a
way that changes and evolves almost in a month to month or year
to year basis.
It is as if we have a target that we want people to hit,
but we move it whenever we can just to make sure that they
miss, whether it is an uninsured family trying to qualify for
Medicaid, or it an ER doctor trying to fill out the paperwork
properly to get paid for the care they have given.
Or any of the other issues in the system, and regardless of
the direction we go in, I think we have to understand that
systems have to be simple and understandable if our true goal
is to ensure that we get medical care to people who need it.
And complexity alone, independent of financing and other
issues, is a tremendous obstacle to getting people insured, and
keeping people insured.
Ms. Rowland. Mr. Chairman, if I could add that much of the
work that the committee has done around children and around
improving the retention of children in both Medicaid and CHIP
has been an incredible step in the right direction from the
studies that Dr. Kellermann was stating.
We now help to keep children enrolled throughout the course
of a year, and have tremendously simplified the enrollment, and
I think the committee should be quite pleased with the progress
that has been made in most States at improving the enrollment
process for both Medicaid and CHIP at your direction.
Mr. Bilirakis. Are you saying then that we should possibly
hitch-hike upon the S-CHIP program as a partial solution?
Ms. Rowland. Well, Medicaid has certainly already begun to
hitch-hike on the S-CHIP program, in terms of coverage of
children, and I think the ground has been laid in many States
for really improving the way enrollment is handled and
participation is maintained. But we still have a ways to go
clearly.
Ms. Grealy. Well, Mr. Chairman, I think there is a way that
we could also reduce that complexity for employers and those
States that are using this new demonstration authority to
leverage those State dollars and help purchase coverage for the
parents, as well as the children, through the employer.
So it is a way that we can leverage the dollars, but the
employer certainly could be helped, as well as the
beneficiaries of these programs, by making it much less complex
for them being able to do that coverage.
Mr. Bilirakis. Well, let me--and I wold like to get back
into that if my time doesn't run out, but let me ask--I am sure
that you are all familiar with the President's plan. We don't
really have all of the details yet.
He calls it a refundable tax credit approach, and I would
like to look at it more as a voucher if you will, or a
certificate, or something like that. Maybe not even call it a
tax credit quite frankly.
How do you feel--if that were to talk place, how would you
feel this might work, and would it work, and to what degree
might it work?
Mr. Grealy. I will start. I think the key here is
flexibility. That it is something that could be used in a
variety of settings. If one is able to find something in the
marketplace where those products are available, my guess is
that every time we make modifications in the tax code, we see
the market develop and respond to those new incentives.
But another approach would be, and as we heard Diane
comment, that families are having trouble bridging that premium
gap. For low income workers, if they are paying $1,800 out of
their paycheck, that is a big amount.
If we could take that tax credit and allow them to use it
to offset their premium costs for that private coverage through
their employer, that would be something that would be extremely
useful.
So I think again being flexible in using this tax subsidy,
voucher, whatever you want to call it, in a variety of ways
would really be key here.
Mr. Bilirakis. Anyone else in that regard?
Ms. Rowland. Clearly, one of the issues with a voucher or a
tax credit is where you can utilize that credit. And one of the
concerns about a credit that must go into the non-group market
is that it is very difficult to purchase reasonable coverage,
especially for low income people unless the voucher is
tremendously generous.
And so I think the key issue there is what is the
generosity of the voucher, and where can you utilize it. What
you gain from public coverage is that the State is then
responsible for linking you up to coverage, and when you get
with a voucher is the individual has to look into where they
can it in the market.
Mr. Bilirakis. Dr. Kellermann.
Mr. Kellermann. I think commenting on a specific policy is
beyond the scope of at least the first IOM report. Our second
report will look a bit at different features of the impact of
uninsurance on people's health.
Two of the major benefits of health insurance are
catastrophic coverage in the event that you wrap your car
around a phone pole or have a heart attack. The other is
encouraging access to preventive care and primary care.
So I think whatever solution we do, I hope will include a
mechanism that will encourage people to get medical care early
and appropriately so that I will see fewer of those patients in
the emergency room with a costly condition.
Mr. Bilirakis. All right. My time has expired. Mr. Brown,
to inquire.
Mr. Brown. Thank you, Mr. Chairman. I thank all three of
you on the panel. Ms. Rowland, you talked about people in low
wage jobs are obviously much less likely to have insurance in
your response to the Chairman about the vouchers or tax
credits.
We hear talk about insurance, and we hear talk about
coverage. Would you make the distinction, Ms. Rowland, on what
that means when we all brag about, well, maybe with tax credits
we can give insurance to people. What does that really mean in
contrast to coverage?
Ms. Rowland. Well, I think that really is highlighted by
the comment just made by Dr. Kellerman; that what I think of as
health insurance coverage is access to primary care, to
preventive services, to immunizations, to pre-natal care, as
well as coverage for more intensive hospitalization,
chemotherapy, and other services.
So it is really assistance at gaining access to the whole
range of health care services. What I think about in terms of
insurance coverage is that often we end up more looking at kind
of covering after the initial primary care is paid for out of
pocket.
So I think a policy in which there is a $1,000 deductible
before the policy begins to cover any services is not going to
promote the kind of access to primary care and preventive
services that we feel are so important, especially for the low
income population.
Mr. Brown. I would like to switch to Medicaid for a moment.
Ms. Rowland, you talked about the health insurance flexibility
waivers. Proponents suggest that the waivers allow flexibility,
more flexibility with respect to cost sharing for optional
Medicaid groups.
They also say that proponents also say that they give
States flexibility with respect to optional benefits. Would you
describe what some of those options are, and what that means,
and what some of those optional groups are, and what some of
those optional benefits are?
And would you also in this same answer talk about what Utah
did, and what Michigan is considering doing?
Ms. Rowland. Well, the Medicaid statute obviously has
requirements in the Federal statute on what populations and
services States must cover. And then it gives States the option
to receive Federal matching funds for other groups of
individuals and other services.
So the optional groups are those for which Federal matching
is available, but there is no Federal statute requiring
coverage. Children up to the poverty level are now mandatory
covered by Medicaid because Federal statute requires all States
to cover them People who, for example, are medically needy, and
have large medical expenses, and spend down to Medicaid
coverage, are optional because they are offered at the option
of the State.
Or even the parent of a child at 50 percent of poverty is
optional because the State is not required to cover parents of
Medicaid eligible children. So the concept of optional really
depends on whether the State has elected to cover them or not.
Most of them we would consider to still be among the
poorest part of our population, and in need of the same kind of
services as the mandated populations. The kinds of benefits
that are optional include most of the long term care spending
for the elderly, for example, under Medicaid.
So when States are looking at these waivers, the dollars
that they spend are mostly on optional groups for optional
services, but this means for elderly and disabled people
getting their long term care services.
And when they look at this waiver, the waiver requires
budget neutrality. They can't spend any more money on Medicaid
to expand coverage than they would in the absence of the
waiver.
So there are going to have to be real tradeoffs within the
program of how you stretch benefits for one group of poor
people to cover additional groups of low income people. And
that is one of the concerns that has come up around the Utah
waiver, where people at 50 percent of poverty, who are parents,
who are optional groups, earning probably around $8,000 for a
family of three, are being asked to pay up front a $50
enrollment fee to get coverage, would have a $100 deductible
before they could get hospital care, and would have substantial
cost sharing.
And the question is whether that kind of coverage is really
going to provide them to the kind of health services that we
have previously talked about, and whether that is a good way to
finance a minimal expansion of coverage to other populations.
Mr. Brown. In Michigan?
Ms. Rowland. I am not familiar with the Michigan program.
Mr. Brown. We on this committee a couple of 3 years ago
passed the Breast and Cervical Cancer Treatment Act as you
remember. We had done the program several years before for the
screening.
What does the waiver policy mean for those groups--the
disabled and the people that have, say, breast cancer, cervical
cancer, low income women--that are eligible for those programs?
What does the waiver policy mean for Medicaid and CHIP
beneficiaries there? Well, I think the key in the waiver policy
is that no new money is put on the table. So it means that any
expansion of services has to take place within the same dollar
levels as the State is currently spending.
So you need to reduce benefits for some groups in order to
have available dollars to expand coverage to other groups,
groups like those being treated for cervical and breast cancer,
and the disabled are among the most expensive, because they use
the most health services on Medicaid's roles.
That's where the dollars are that you can really try and
cut back on in order to finance additional care. So I think
what the waivers mean is we will be covering a few new people
at the expense of some of the sick and low income people on the
program.
Mr. Brown. Thank you, Mr. Chairman.
Mr. Bilirakis. I thank the gentlemen. Mr. Burr to inquire.
Mr. Burr. I thank the Chair and I thank our witnesses
today. I just have one question and I will get all three of you
to address it. If the Federal Government were to raise the
minimum wage, and let's say just for simplicity sake $1 an
hour, what would your position be if we gave employers the
option of providing it in pay or in similar health benefits?
Let me start with you, Ms. Rowland.
Ms. Rowland. Well, I think raising the minimum wage and
giving the employers the choice would do very little to
alleviate our uninsured problem, because the minimum wage
workers are the ones in which insurance is not offered
generally now.
And I think that most workers obviously think that getting
health insurance is important, but the minimum wage workers
don't have that coverage.
Mr. Burr. Maybe you misunderstood. If an employer chose
rather than to pass the $1 on in a wage increase, and to use
that if it were a 40 hour week, $2,080, in-turn to purchase an
insurance policy for that employee or partially for the family
under a group negotiated plan, which would for the first time
provide insurance coverage to the minimum wage worker, what
would your position be?
Should an employer have that option if in fact they chose
to do that?
Ms. Rowland. Well, I would certainly think employers should
be encouraged in every way to offer health insurance coverage,
though I still think raising the minimum wage may be a more
effective way for low income families to go than getting the
health insurance coverage partially supported by their
employer.
Mr. Burr. Your belief would be that the individual would
take that dollar and would use it for health care?
Ms. Rowland. I believe the individual at a minimum wage
level would probably take that dollar and use it for living
expenses, which could include health care, but might not.
Mr. Burr. But health care would be down the list?
Ms. Rowland. Generally, I think for the lowest wage people,
there are other demands on their family budget before they get
to affording health care.
Mr. Burr. Thank you. Ms. Grealy.
Ms. Grealy. I think anything we can do to help those small
employers offer health insurance is a good thing, and if that
is an option that would be presented, I think that would be a
very positive thing.
Again, I just keep coming back to flexibility. But also
sort of referring back to Congressman Brown's comments about
the Medicaid program, and how stretched they are, and how they
are shifting benefits and dollars around.
How can we best leverage those limited dollars? I think
what you are talking about with the minimum wage, what would be
the best way to use those dollars. With the Medicaid program,
is there some way we can leverage. And what those employers who
do offer insurance, or those that would like to offer
insurance, and use our limited dollars and add those employer
dollars.
Because employers are willing to put a lot of money on the
table for health are, and they aren't doing it. So I think any
way we an aid them in enhancing that would be a very positive
thing.
Mr. Burr. Doctor.
Mr. Kellermann. Again, our committee has spoken
specifically about policy options. I will tell you as a doctor
and as a brother, my brother is living on top of a mountain in
East Tennessee.
He is 2 months behind on his mortgage, and he doesn't know
how he is going to buy his groceries next week. You ask him if
he can make a little extra money on a minimum wage job, and he
is going to probably opt for groceries and the mortgage before
he opts for insurance. Anything is better than nothing. So I
would encourage you and your fellow members to struggle with
the issue, but I think we are going to have to really analyze
those choices in a very careful way before we lay policies out
for folks.
Mr. Burr. Well, let me just add as a commentary for any of
us to determine arbitrarily what any individual needs to meet
their living expenses really is to guess what their living
expenses are.
And if they rent, or they own, or wherever they are. The
question that I was really trying to get in is how important is
it that we provide a health care benefit, and that we find a
mechanism to get coverage to individuals?
And when we talk about a dollar increase or an increase in
the minimum wage, there is a real opportunity--it may not be
the employee's first choice, and we may all agree that the
minimum wage level should be higher than where it is.
But if the objective is to provide coverage, do we have a
mechanism through employers, and based upon their group plans,
where they negotiate more extensive coverage with less money,
and money that we have mandated that they put on the table.
And I think it is something that we all need to think
about, because it is a mechanism for some percentage of those
individuals out there today that are uninsured, and I have yet
to hear a plan where we wipe out the uninsured population in
America with one silver bullet.
This will take a number of initiatives, and this may be one
of them, and I hope that you will put some thought to it. Thank
you, Mr. Chairman.
Mr. Bilirakis. Would the gentleman yield?
Mr. Burr. I would be happy to.
Mr. Bilirakis. I appreciate that. Are there advantages to
covering the uninsured through employer programs, versus the S-
CHIP and Medicaid programs, public programs?
Ms. Grealy. Well, I think we have heard several reasons as
to why that might be the better approach. Let's look at what
the likely benefit package is going to be in an employer-based
insurance market.
It probably is going to have those preventive services that
Dr. Kellermann feels is so important. And it is probably likely
to be more stable. It is something that is going to last for a
year, and not something that you have to qualify for every
month.
So I think there are definitely advantages, and we also
find that as income rises, there is less participation in some
of the public programs, whether it be Medicaid, S-CHIPS, SLIMB,
QUIMB, or whatever.
So if we are looking at expanding those programs, we might
want to take a look at is there some way we can help employers
offer medical coverage.
Mr. Bilirakis. Dr. Kellermann, do you agree?
Mr. Kellermann. Well, one of the complexities that I think
we have, particularly when we are dealing with small
businesses--and I come from a small business family--is that
the very economic times when folks need health insurance the
most is when small businesses are least able to afford it, and
have more workers than they have positions to offer.
And so they don't need health insurance as a benefit to
attract them. So there is some real--the problem with the
system right now is when we need it to work the best, it
typically works the poorest. And it is a real challenge for
small businesses, as well as for workers.
Mr. Bilirakis. But you agree that if that challenge were
somehow met that there would be advantages to go that route?
Mr. Kellermann. Well, the devil is in the somehow, but I
think if we can work together, and there is a feasible way to
make it happen, anything we can do to make it--I will take any
improvement that we can get on the short term.
On the long term, I think we have to look at a 25 year
trend, and realize that we have to understand this very
fundamental level, and not making decisions itself is going to
create enormous problems.
Mr. Bilirakis. Dr. Rowland, very briefly.
Ms. Rowland. I think we really need to look at combination
strategies, and for the very lowest income population, and
especially for those with severe disability who now rely on
Medicaid, I think the public program approach is very important
and should be maintained.
But obviously as one goes up the income spectrum, one needs
to deal more with the employer-based system and try and shore
that up. The saddest fact to me is that in the best economy we
have had with the lowest health insurance premiums, we made so
little progress in getting a higher pick-up rate in the
employer-based system.
And I think that really shows that in harder economic times
that the lower end of the income spectrum, always public
programs will be an important safety net.
Mr. Bilirakis. Thank you. Mr. Strickland, to inquire.
Mr. Strickland. Thank you, Mr. Chairman. Ms. Rowland, you
made a good point there; in the best of economic times. We went
in the wrong direction of having more of our citizens insured;
isn't that correct?
Ms. Rowland. We did make a little modest progress in the
best of economic times in-part because of the expanded public
coverage under the S-CHIP program, and along with Medicaid and
in-part because there was an increase in employer offerings,
and people at the higher incomes did get some health insurance
through the employers.
But it was a modest dip in light of a very robust economy
and low premiums.
Mr. Strickland. So are you telling me that in terms of raw
numbers there were fewer people uninsured 5 years ago than
there are now?
Ms. Rowland. In 1999 and 2000, we saw the first dip in a
decade in the number of uninsured, but it was about a million
to 2 million dip.
We are now expecting because of the decline in the economy
that the next snapshot that we take will show a rise of maybe 2
or 3 million more uninsured just over the course of this year.
Obviously, the Census numbers always lag behind the economic
reality of today.
Mr. Strickland. Thank you. Ms. Rowland, one way to measure
the success or failure of any policy to cover the uninsured is
to look at how it addresses the needs of those with above
average health risks, like the disabled and the chronically
ill.
And I think that is especially the case when we think of
giving someone voucher to go out and look for insurance. Now, I
know the Kaiser Foundation, and in particular the Commission on
Medicaid and the Uninsured, has done work on the issue of the
disabled and their insurance coverage.
Could you please provide us some background about who the
disabled or the chronically ill are, and what their particular
health are needs may be?
Ms. Rowland. Well, the Medicaid disability population is
one that generally qualifies for supplemental security income,
cash assistance, from the Federal Government, along with having
severe enough disabilities to make them permanently and totally
disabled.
They include the developmentally disabled, people with
mental retardation, children with spinal bifida and other
special health care needs, and people with HIV and AIDS.
So the disability population within Medicaid is a very high
risk population, one that virtually no private insurer would
want to see enter upon their roles.
That population is among the most expensive on the Medicaid
program. They consume 80 percent of all the prescription drug
spending under Medicaid today, and have very high acute care
costs, and very high long term care costs.
In addition, among Medicaid's more disabled populations,
they take care of 5 million of low income Medicare
beneficiaries who count on Medicaid to provide drugs, long term
care, and other issues to supplement Medicare.
So the most expensive, the 73 percent of the dollars spent
in Medicaid, go for the disabled and the elderly, as opposed to
the children, who make up 51 percent of the beneficiaries, but
only about 15 percent of the expenditures.
Mr. Strickland. What success do you think these individuals
would have if they were provided with a voucher and asked to go
out into the market and find coverage?
Ms. Rowland. I don't think they could find any coverage
that would be both affordable, and that would also cover the
kinds of services that Medicaid overs, because here Medicaid is
not an insurance policy.
It is really a coverage policy, providing not only acute
care, hospital, and physician services, but rehab services,
institutional care for the mentally retarded. And I think that
is where we have to be very clear about what the Medicaid
program is.
It is not a health insurance program for low income
families. It is a complex set of multiple services for the
elderly, the disabled, including long term care, mental health
services, and other benefits, generally not available through
any private health insurance plan.
Mr. Strickland. The disabled community has recently
successfully supported Medicaid expansion. For example, the
Ticket to Work Act, which Congress passed in 1999, which allows
the working disabled to buy into or continue Medicaid coverage
as their income increased.
Also, the Family Opportunity Act, which we hope will pass
this year, would allow disabled children to receive coverage
through Medicaid. Could you talk about why the Medicaid program
is so successful in providing coverage for this population?
Ms. Rowland. Well, because the Medicaid program has to
provide coverage for this population that it does. The
employers of these individuals are reluctant to hire them if
they think they are going to be adding this disabled person
into their employer risk pool, because it will influence the
premiums that they as an employer have to pay.
So one of the things that the Ticket to Work Act really
does is helps make those individuals employable because their
health insurance costs and coverage are still provided by the
Medicaid program.
So again that is Medicaid's role as a safety net,
compensating and making public or private insurance through the
employer not become unduly expensive because of the hire of a
severely disabled individual.
Mr. Strickland. So the Medicaid program--and I think this
is important for us to understand. The Medicaid program does
not discriminate against people on the basis of their illness
like the individual market discriminates. Is that a correct
statement?
Ms. Rowland. No, the Medicaid program is set up to cover
the sickest and the illest people in our society who cannot
otherwise get coverage elsewhere. You might remember years ago
that this committee dealt with a young woman named Katie
Beckett, who was hospitalized with a severe respiratory
illness, and on a respirator, and unable to be released from
the hospital.
Private insurance wouldn't cover her, or let her go home,
and her mother successfully argued for Medicaid waivers, where
Medicaid now covers such individuals, and allows them to return
home.
And one of the success stories of Katie Beckett is that she
has now graduated from college instead of living in an
institution for her whole life thanks to the kinds of coverage
Medicaid gives.
Mr. Strickland. Thank god for Medicaid. Thank you.
Mr. Bilirakis. The gentleman's time has expired. The
gentleman from Kentucky, Mr. Whitfield, to inquire.
Mr. Whitfield. Dr. Kellermann, you had indicated that you
were going to have five more studies coming out; is that
correct?
Mr. Kellermann. Yes, sir.
Mr. Whitfield. And will one of those studies go into more
detail on options available to expand?
Mr. Kellermann. It will. The second report in May is going
to deal with the individual health consequences of uninsurance.
The third will examine children and families. The fourth--and
very important one--is going to look at the effect of large
numbers of uninsured on ERs, trauma centers, and public
institutions that care for everyone.
The fifth report is going to look at how much are we
paying, and how are we paying for the uninsured. And the final
report will examine what private business, communities, State
governments, and the Federal Government are doing that may
offer us some insights into effective strategies.
I don't suggest you wait to deal with this problem, but
that is the basic sequence the committee has mapped out for its
work.
Mr. Whitfield. You are the Chairman of the Emergency
Medicine Department at Emory University; is that correct?
Mr. Kellermann. Yes, sir.
Mr. Whitfield. Let me give you a hypothetical. If a person
comes into the emergency room at Emory University Hospital, and
they have been in a car accident, and they do not have any
insurance whatsoever, you treat them; is that correct?
Mr. Kellermann. Yes, sir. We treat them both as a matter of
ethics, and also as a matter of Federal law. The only health
care in America to which every American is legally entitled is
care in an emergency department.
Mr. Whitfield. Okay. When you finish at the emergency room
and if they need hospitalization, what do you do?
Mr. Kellermann. We hospitalize them, and we eat that cost,
and that has implications for everybody in the country.
Mr. Whitfield. And how much was that cost last year? Do you
have any idea?
Mr. Kellermann. Well, it would be more accurate to say for
Grady Hospital, which is Atlanta's only level one trauma
center, 60 percent of my patients at Grady are uninsured.
Grady carries tens of millions of dollars in unreimbursed
costs every year, and at the same time State and Federal
funding are being dwindled every year. So there are issues here
not only of access of care for the uninsured, but everyone in
the country involved in these sorts of issues.
Mr. Whitfield. And obviously those costs raises the costs
of health care for everyone, too?
Mr. Kellermann. Absolutely. Every time somebody talks about
emergency department care being so expensive, they forget that
we give out enormous amounts of, quote, free care, although we
know it is not free, because we are the only place that people
are legally entitled to go to.
And when you have to go to get medical care, we are the one
place where we have got to take you in. The problem we have
today is that this is a system that everyone takes for granted,
and assumes that I can always go to the ER if I have chest
pain, or I have a bad headache, or I am injured.
But as hospitals have gotten whittled and whittled, and
have cut back on beds, and closed, and cut back on staff, we
now have not only in public and teaching hospitals, but private
hospitals as well, emergency rooms full of seriously ill and
injured patients who can't get upstairs because there are no
vacant beds.
Mr. Whitfield. Well, I might also add at this point that
you are very familiar with Medicaid Dish payments, and of
course there is a cap on that right now, and we are trying to
raise that cap to make more money available for those hospitals
that are dealing with Medicaid patients.
Mr. Kellermann. Yes, sir.
Mr. Whitfield. And receiving a disproportionate share of
payments.
Mr. Kellermann. If that doesn't happen, we could be in a
world of hurt.
Mr. Whitfield. Right. And as you mentioned, people come to
an emergency room--and it doesn't make any difference whether
they have been in an accident. Many people come because they
have a headache, or they have chest pains, or any number of
things, and they will come, because they don't have any other
place to go; is that correct?
Mr. Kellermann. They don't know where else to go, and they
often don't have any where else to go.
Mr. Whitfield. Now, all of you are familiar with these
community health centers; is that correct?
Mr. Kellermann. Yes, sir.
Mr. Whitfield. And I noticed that the President is
increasing the amount of money for community health centers,
which raises the whole question in my mind that most people are
saying--which is probably correct, that the only way that you
are going to solve this problem is you are going to have to
have a fragmented approach.
I mean, you have the public health system, Medicaid,
Medicare, and then they say that 80 percent of the uninsured
come from working families, or in working families. So
obviously anything that we could do to assist employers be able
to afford health insurance, or even sole proprietors, would be
something worth exploring. But another option would be to
simply expand community health centers so they would be
available to everyone. Now do any of you advocate that or----
Mr. Kellermann. Providing people access to care that can
provide preventive and primary care is important, and I know in
our report that we observed that currently community health
centers only provide access to about 3.5 of the some 39 to 40
million uninsured. So there is a major gap there.
Mr. Whitfield. Right. Absolutely.
Ms. Grealy. Mr. Whitfield, I think we definitely want to
get insurance coverage for me, but the community health
coverage do form an important part of the safety net. And until
we can get as most coverage and insurances that we would like
to see, I think it is important to have that resource available
for people to access.
Mr. Whitfield. Right. Now, Dr. Rowland, you had mentioned
that Medicaid is not a health insurance program, but the effect
is the same isn't it? I provides--I mean, do you feel that the
Medicaid Program is adequate?
Ms. Rowland. Well, the Medicaid program is more than a
health insurance program was really what I was trying to say.
That it provides far more than access to basic primary care.
With regard to your community health centers, too, I think
that they provide a very important source of access for primary
and preventive care, but they really don't help with the
hospitalization and some of the follow-up care that Dr.
Kellermann mentioned.
And certainly there are lots of rural uninsured people who
really have no access to the kind of services that a community
health center would provide. So the problem is that they can't
be everywhere for a very disparate uninsured population.
Mr. Whitfield. Well, we have a community health center in
my district, and which is very rural district, and if you had
the primary preventive care covered in some way, and then you
had insurance for hospitalization, that probably would
significantly reduce health insurance I am assuming.
If I may ask one other question. Ms. Grealy, you had
mentioned in your testimony something about a program in San
Diego, and one in Sacramento, California that they are now
looking at as well. Could you elaborate on this little bit?
Ms. Grealy. Well, these are modeled after the FAMIS program
and actually the Wayne County, Michigan as well. And the idea
here is that we know that there are employers out there that
are offering health insurance or their employees.
And we also know that there are other small businesses that
would like to do it. And in studying these programs, what we
found is that if the employer could get help with about one-
third of the premium from some program, whether it be Medicaid,
S-CHIP, a local government that is willing to do it, and if the
employee could come up with about a third of the premium, then
that small business employer could come up with the other
third.
And that's what I mean when we talk about how can we
leverage these limited dollars in the best way. So we now see
under the S-CHIP, and Medicaid waiver demonstration
authorities, more and more localities are looking at these
programs as a way to work with the employers.
And instead of bringing the parents on to Medicaid, what
they are trying to do is bring the whole family into the
private employer based coverage.
Mr. Bilirakis. The gentleman's time has expired. Mr. Green
to inquire.
Mr. Green. Thank you, Mr. Chairman, and I would like to
thank our panel, and even the next panel, because this is such
an important hearing on our uninsured. Dr. Rowland and Dr.
Kellermann, let me ask my first question.
The Iowa IOM study points out that national immigrants are
a small part of the overall population, although it is growing
nationally, but in some States like Texas, and my colleague,
Ms. Wilson, from New Mexico, mentioned that there are a high
number of immigrants. Do you agree with that?
Mr. Kellermann. Yes.
Mr. Green. These immigrants are likely to work in jobs
where they aren't offered or cannot afford the coverage, and as
you know, they also don't qualify for the public coverage
because the States are banned from covering legal illegal
immigrants under the Medicaid and CHIP.
And it seems that lifting this ban and giving the States
the option to cover illegal immigrants would be one small, yet
helpful, step, and particularly with the States with high
immigrant populations. Would you comment on that, on lifting
that ban on legal immigrants?
Ms. Rowland. Well, certainly that ban has been one of the
contributing factors to the very high rates of uninsurance in
those States, and also to the problems faced by a large part of
the immigrant community.
I think it would be very helpful to lift those bans so that
we could provide health care access to them through the
Medicaid program, and through the S-CHIP program. It would
certainly be a great benefit to the States with the largest
immigrant population.
But there is a lot of other States that are now seeing a
large growth in the number of immigrants, and they are seeing
similar problems.
Mr. Green. Dr. Kellermann.
Mr. Kellermann. I would encourage all of you if you want to
get a window into both the complexities and at times the
absurdity of the situation, is when you go back to your
district, call up one of your mission critical hospitals,
public teaching, or community, and spend a couple of hours in
the emergency room and see who comes in, and talk to them.
I know that in Arizona that a colleague of mine has pointed
out that with the immigrant population there that they have
very limited or no access to care. Their answer is that they go
to the emergency room.
And they have Ers in Arizona that are dialysising patients
three times a week when they come to the emergency room. They
are legally obligated, mandated to do that, with no provision
to pay for that care.
So that gets passed on to everyone else. We should not only
be worried today about access to care for 40 million Americans.
We need to be worried about the fact that the most critical
elements of our health care system are collapsing under the
strain of the burden of care, and the care for 280 million
Americans is being jeopardized.
So we have to be smart, as well as compassionate, and I
think anything that can provide care in the most efficient and
timely manner for the people that we know are going to end up
taking care of anyway is going to make more sense in the long
run.
Mr. Green. And that is true not just for immigrant
populations, and just as you said, the uninsured show up at the
emergency rooms, because I have seen it in Houston, and our
emergency rooms there, and frankly even for profit hospitals.
Ms. Rowland, in your testimony you said that 2 out of 3 of
the non-elderly receive insurance through employer sponsored
insurance?
Ms. Rowland. Yes.
Mr. Green. I keep hearing in the last couple of years a
proposal to--there is a goal of eliminating employer-based
insurance in our country. It seems by like maybe a small
minority, but I hear it on Talk Radio and things like that.
When you have two-thirds of our non-elderly receive
insurance through employer-sponsored insurance, is that really
rational?
Ms. Rowland. Well, I think having two-thirds of our
population get coverage through employer-based coverage means
if we wanted to address the uninsured that we should not
unravel what we have before we find new solutions for those
that don't have it.
And which is why I think looking at maintaining and
stabilizing the coverage through public programs, as well as
trying to shore up what is available in the employer-based
system today are important strategies.
Moving people out of employers and refinancing the whole
system is going to be extremely disruptive, and I think will
both increase the number of uninsured in the process, not
decrease it.
Mr. Green. Thank you. Both in the testimony of this panel,
as well as the next panel, the $1,000 tax credit is talked
about as something that would be beneficial, and I think the
goal of my colleagues on at least this side of the aisle was
universal coverage, and we realize that we can't get to that.
And so we have to take the good in the system we have,
where two-thirds are covered by employers, and take care of
that third in the uninsured and immigrant. So we are actually
nickel and diming to get to that uniform or universal coverage
in different ways.
And so that's why CHIP was created, and that's why we are
looking at expanding CHIP, we hope, and so I know that we have
a lot of estimates on what the private sector can offer, and I
know in the next panel there is--in the testimony there is a
cost that is given for an on-line insurance of $159 per month
per person.
And about $1,900 a year, and Dr. Kellermann, in your
testimony you say that it is about $7,000 a year. And $1,900 a
year for a family plan and yours is about $7,000, and the next
panel will talk about that. Why do we have that disparity?
Is that $1,900 a $5,000 deductible or something like that?
Mr. Kellermann. I wouldn't know. I would have to ask. I
would say show me the policy and what are the terms. How large
are the co-payments, and what services am I entitled to
receive, to know.
I mean, we can buy very cheap cars or very expensive cars.
The devil is in the details. I would have to know what
specifically was being offered in that plan to know whether it
is value or not.
Mr. Kellermann. And I guess what worries me is that we can
find a low quote, but it would be a high deductible, and for
trying to get the uninsured who are either moderate or poor,
they are not going to have $5,000 or $10,000 to pay before they
even go into a hospital anyway.
Mr. Green. Thank you, Mr. Chairman.
Mr. Bilirakis. Mr. Bryant.
Mr. Bryant. Thank you, Mr. Chairman. Let me address this
panel, and I am not sure anyone has any direct expertise on
this, but you probably have opinions on both panels about what
I alluded to in my opening statement about what I call the
uninsurable, and not just the uninsurable, the high risk.
And I tried to compare it to automobile insurance, and
again there is a much different environment there. I don't
think there is any way that you could limit your exposure
there, and I am still talking about bringing insurance
companies in to this type of thing.
And if you write in that State, you have to insure health
insurance for this and take your share. But I think the more
traditional approach on high risk is the State pool. And I am
wondering if any of you had experience with that, and how much
the State has.
Because obviously if your pool is high risk, and even if
they pay a premium in excess of the normal premium, and if they
pay high rates, I can't imagine that would still be sufficient
with such a high risk pool to cover, that that would be
sufficient money to cover the expenses of the high risk
population in that pool.
So I guess the State stands behind it. Does anyone have any
experience or is that a loser in terms of huge amounts of
money, or is that a reasonable solution to some of this higher
uninsured problem, or uninsurable problem. High risk.
Ms. Grealy. I would say it is part of the solution, and I
think that is what we have to keep coming back to when we are
talking about the $1,000 tax credit. That may not be the answer
for everyone.
But there may well be a segment of the population that does
have the income to purchase that type of policy. So, let's put
that aside and address your high risk pools. We are hearing
from the States that again if they can get some help from the
Federal Government, and I believe there is some funding within
the President's budget proposal, that that is a mechanism that
can address some of the problems.
And that that is probably a better way to go than trying to
do the guaranteed issue, which we saw did result in either
insurers leaving a particular locality, or resulting in very
high insurance premiums.
So you are exactly right. Getting the State and perhaps the
Federal Government to some extent to stand behind and fund that
risk pool. Again, it is not the solution, but it certainly is
part of the solution.
Mr. Bryant. The insurance companies you find will if forced
to do that, they will leave the State?
Ms. Grealy. On the guaranteed issue, yes. You must write a
policy for absolutely everyone.
Ms. Rowland. There has been some limited experience in some
of the States with high risk pools that they haven't been very
highly utilized, and have not really emerged as a major
strategy.
I think one of the concerns though that you would want to
have is whether you are taking all of the high risk people out
of the general insurance pool. That would make insurance fairly
cheap for everyone else, but it would put tremendous costs in
that high risk pool.
And so I would be quite concerned that you would be sort of
tiering our health care to where we have the highest and most
expensive people in a pool that will be extremely difficult to
finance.
Because what helps us finance insurance today is having the
sick in the same pool as the healthy to spread the cost over
the whole population.
Mr. Bryant. But my experience though is that some companies
aren't going to write those uninsurable high risk people.
Ms. Grealy. That's right. I think you do need a safety
valve mechanism to deal there as long as you don't have
guaranteed issue.
Mr. Bryant. Dr. Kellermann, do you have a comment?
Mr. Kellermann. I am sure our committee is going to look at
that in detail in its final report, but in fairness to the
process, I would rather have my co-chair come back and give you
that information once we have had a chance to really go through
it in a very methodical way.
Mr. Bryant. I am intrigued by the issue that was mentioned
earlier, and I think it was either Mr. Whitfield or Mr. Green's
questioning about the exclusion in Federal law about legal
immigrants being treated in the community hospitals.
And so obviously they are all ending up in the emergency
rooms, and there is no limitation under COBRA provisions. You
have to, no matter who walks in--legal, illegal, whatever--you
have to treat that person or be subject to the law?
Mr. Kellermann. Yes, sir. We have to treat that person and
there is absolutely no mechanism to pay for that care. It is a
totally unfunded mandate. Completely.
Ms. Grealy. It is about $19 billion a year for hospitals at
this point in uncompensated care. And that is a very hidden
cost, and one that I don't think we focus on enough. Someone is
paying for that, and so if we could address and get coverage
for a broader population, it certainly would reduced that
burden.
Mr. Kellermann. The other half of that issue that I am very
personally quite concerned about as an emergency physician or
as hospitals have cut back on beds, and we have a shortage of
nurses, we can't get sick and injured patients, insured or
uninsured, out of the ER and up into the hospital.
I held this up a moment earlier. This was an issue of the
U.S. News and World Report earlier this fall that is titled,
``Crisis In the E.R. Turnaways and Huge Delays are a Sure Fire
Receipt for Disaster. What You Can Do.'' I want to point out
that the issue date for this was September 10, and nothing has
happened to change this reality with the increasing potential
now for mass casualty events.
So as an emergency physician, irrespective of my role in
the committee, I am deeply concerned about access to emergency
care for everyone in this country, insured or uninsured today.
Mr. Bryant. Well, I thank the panel and yield back my time.
Mr. Bilirakis. And that is the September 10 issue?
Mr. Kellermann. Of U.S. News and World Report.
Mr. Bilirakis. I just wanted to get that into the record.
Mr. Wynn.
Mr. Wynn. Thank you, Mr. Chairman. There is a lot of talk
about insurance and standard of care, and my first question is
do you believe that Medicaid is the appropriate standard for
coverage or care, and that if we talk insurance, we ought to be
talking about policies that address that standard of care?
Ms. Rowland. I think there are various standards of care. I
think what we talked about a little today is that the Medicaid
population is in fact a very diverse population, including some
very highly disabled individuals, as well as the elderly.
And so the benefit package in Medicaid is very broad to
take care of individuals at that level who would not get
coverage. But I think the basic protections in Medicaid, and
the coverage for the low income populations are in fact a
standard that we should hold for looking at further expansions
of coverage, or insurance coverage for the low income. Basic
benefits and low cost sharing.
Mr. Wynn. Then should we be talking about insurance
policies that provide that standard of care as a policy matter?
Ms. Rowland. I think we should look at insurance policies
to be comprehensive and to promote primary and preventive care,
as well as hospitalization and other care.
So I think it is important that we not just provide
catastrophic care with high deductibles.
Ms. Grealy. I think it is important that we have a variety
of options. Probably a great model to look at is the Federal
Employees Health Benefit Plan, where the individual makes the
decision about what type of cost sharing that they might want
to do.
We have a vast array and variety, and so I think it is hard
to say we would want a kind of one size fits all package for
any extension.
Mr. Wynn. Well, I was speaking in terms of if we are paying
for it, and we are subsidizing it. The Federal Employees Health
Benefits Package has been described as a Cadillac of health
insurance plans.
I am not sure in the worlds of Mr. Kellermann we can afford
the most expensive car. Let me ask another question. On the
benefits side, there is a question of whether or not children
can get, for example, dental care.
In an insurance package that is being touted as accessible
to the uninsured, what are the consequences of that if you are
talking about insurance policies that don't provide dental care
for young people?
Ms. Rowland. Well, certainly under the Medicaid program
children, especially those covered mandatorily because of the
early periodic screening and diagnosis, and treatment program,
or better know as EPSDT, are guaranteed that for anything they
are diagnosed for that they should be treated, and which would
include dental care.
So that that has been a very comprehensive package for
children. So when children talk about the Medicaid benefit
package, they are talking about providing any health care
service that a child needs, subject to virtually no cost
sharing for those under the poverty level.
What I think is harder is when you start looking at the
sort of expanding coverage to adults, and at higher income
levels what should be in those benefit packages. So that we
really need to look at what level can cost sharing be
introduced and not be an impediment.
And at what level should some of these additional benefits,
like dental care, be included in what is a standard health
insurance plan.
Mr. Wynn. Do you have a recommendation?
Ms. Rowland. Well, I certainly think for the case of
children, especially low income children, dental care has
proven to be as important a part of their health care services
as basically medical care.
And mental health services, which are often excluded from
some of the private health insurance plans, are also a critical
part of the benefit package for many of Medicaids.
Mr. Wynn. So if we are designing a program----
Ms. Rowland. I think Dr. Kellermann has a comment here,
too.
Mr. Wynn. I just wanted to pose this as a question. So we
are talking about insuring people in private health insurance,
your argument, and don't let me state it for you, but it seems
to be that it ought to include dental care. Is that a fair
summation of where you are?
Ms. Rowland. I think for the low income population,
especially dental care, is very important.
Mr. Kellermann. And you made the comment about Cadillac
care. I would only respond and say that if the car is a beater
and you have to spend a lot of money every week to keep it on
the road, that's not necessarily a bargain either.
I will never forget a woman I took care of several years
ago who came in, a working mother who came in with a massive
stroke, and I learned as we were trying to save her life that
she had stopped taking her blood pressure medication because
she felt that she needed to pay the money to buy food for her
kids.
We spent more money in a unsuccessful attempt to save her
life in the space of 2 hours in one of the leading academic
medical centers in the country than it would have cost to have
taken care of her blood pressure and kept her working for the
next 25 years. That is no bargain, for her or for us.
Mr. Wynn. Okay. I think that is a good point. This issue of
deductibility. Is there a level at which deductibility becomes
a problem and where is that?
Ms. Rowland. Well, the question there is at what income
does the individual start. So that if I am earning $50,000 a
year, for me a $100 deductible is not probably a problem.
But if I am earning $15,000 a year, and I have three
children to feed, and housing to pay for, a $100 deductible is
really a financial barrier that I would think twice about going
to get medical care before I paid for the food or other things
for my children.
So I think the issue really is that for someone who is
relatively young, and relatively healthy, insurance policies
with higher deductibles are probably okay, because they don't
assume they are going to get sick.
But we never know when we are going to get sick, and for
those at the lowest incomes we don't want people to defer care
because they can't afford to access early primary care.
Ms. Grealy. But I think that Diane makes a very important
point here, and I think that we need to not look only at the
individual, in terms of their income. But if we are looking to
expand private coverage, we also need to look at what can the
employers do.
And we don't want to put it out of their reach, as well as
out of their employee's reach. So I think we really have to be
again flexible, and not try to mandate that this is the only
way to go, and that is the only way you are going to get the
subsidy.
Mr. Wynn. If we are talking about subsidizing employers in
order to expand an employer-based program, what would we have
to do on an average to enable them to provide care without
deductibles being a barrier, and that would include a
sufficiently comprehensive benefit package to cover dental
care?
Ms. Rowland. Well, I think the problem is that you have a
lot of employers who don't offer coverage today, and many of
them would argue that unless you almost fully subsidize the
cost of the insurance premium that they are not going to be
able to offer coverage.
And what we know from studies we do of employer coverage,
is that the average group payment rate today in the country for
a policy for a family is $7,000 and for an individual, it is
$3,000.
So it is going to cost a lot of money to subsidize
employers directly for providing them insurance. And then we
get back into what strategy works most effectively. Some
partial subsidies to employers, combined with subsidies to
individuals, combined with expansions of public programs.
And that is why we are in such a mix of options, because
the cost of any one option is substantial.
Mr. Wynn. Thank you, Mr. Chairman.
Mr. Bilirakis. It is a question that if we had had a second
round, and we are not going to have one, that I wanted to
really go into. I would like to excuse this panel, but to first
of all ask you if you would be willing--I know that you would
be--to respond in writing to questions that the committee staff
will send to you.
But I am particularly concerned about the question that Mr.
Wynn went into, the fact that--and I believe it was Ms. Grealy
that said that 8 out of 10 of the uninsured aren't working
families. What can we do.
I mean, it seems like that that is something that we can
maybe grab a hold of and it certainly would go a long, long way
toward maybe solving the overall problem. So I would love to
hear from you all in writing any answers that you may have, and
what do you suggest that we might be able to do to try to get
to all of those people or a substantial number of them at least
covered by their employers.
And so having said that, unless there is anything further,
we will excuse you and thank you with much gratitude, as you
have helped an awful lot. The Chair now calls the second panel
forward.
And they are Ms. Grace Marie Turner, President, of the
Galen Institute; Mr. Robert de Posada, President of the Latino
Coalition; The Honorable Thomas R. Donnelly, Junior, Board
Member, of the Coalition of Affordable Health Care Coverage;
Ms. Judy Feder, Dean of Public Policy, Georgetown University;
and Mr. Alan Weil, Center Director, Assessing the New
federalism, with The Urban Institute.
Thank you, ladies and gentlemen, for your willingness to be
here. We apologize for the break that we had to take because of
the vote, a very important vote. And again your written
statement is a part of the record, and we would hope that what
you would do is sort of compliment it if you would, orally. And
we will start out with Ms. Turner, President of the Galen
Institute. Ms. Turner, please proceed.
STATEMENTS OF GRACE-MARIE TURNER, PRESIDENT, GALEN INSTITUTE,
INC.; ROBERT de POSADA, PRESIDENT, THE LATINO COALITION; HON.
THOMAS R. DONNELLY, JR., BOARD MEMBER, COALITION FOR AFFORDABLE
HEALTH CARE COVERAGE; JUDITH FEDER, DEAN OF PUBLIC POLICY,
GEORGETOWN UNIVERSITY; AND ALAN WEIL, CENTER DIRECTOR,
ASSESSING THE NEW FEDERALISM, THE URBAN INSTITUTE
Ms. Turner. Thank you, Mr. Chairman, and members of the
committee for inviting me to testify today. My name is Grace-
Marie Turner, and I am President of the Galen Institute, a not-
for-profit organization that focuses on health policy.
The problems of the uninsured are serious and a continuing
concern to us as they are to this committee as you demonstrate
once again in holding this hearing today. Thank you.
I would like to begin with a brief overview of who the
uninsured are, and why getting health insurance is so difficult
for them. I am encouraged that some new options are being
considered to provide help.
As we have heard the uninsured are primarily minorities,
especially hispanics, young adults, workers who are not offered
or can't afford to buy health insurance at work for themselves
or their families, and workers who are between jobs.
The Census Bureau finds that the uninsured are most likely
to be in families earning less than $25,000 a year, to be self-
employed, and working in small companies. The likelihood of
someone having health insurance is closely tied to income, and
to whether or not their job provides health insurance.
Only one-third of those earning under 200 percent of
poverty have coverage at work, while three-quarters of those
with incomes above that level get insurance through their jobs.
Most of the uninsured make too much to qualify for public
programs, and they don't have higher paying jobs that provide
coverage. They have fallen through the cracks of the current
system.
Several options are being discussed to help them. One is
expansion of Medicaid. But State and Medicaid budgets are
stressed to the limit, and threatening higher taxes, benefit
cuts, or cuts in other programs.
Adding millions to the working Americans to Medicaid roles
appears neither politically nor financially feasible in this
climate. For example, New Mexico has the highest uninsured rate
in the country, yet the State is about $50 million short in
being able to provide coverage next year just for those who are
currently on Medicaid.
What about mandates in insurance regulations? Forcing an
employer to provide health coverage, especially now, would
cause many marginal businesses to lay off workers and even go
under.
Insurance regulations also would likely backfire. A recent
study by E-Health Insurance shows that States with community
rating and guaranteed issue laws had premium prices that were 2
or 3 times higher than States that did not employ these market
reforms.
Another option is to provide tangible support through a
fundable, sensible tax credits. President Bush has proposed
health credits of up to $1,000 for individuals, $3,000 for
families, and the credits phaseout, ending in income levels of
$30,000 for individuals and $60,000 for families.
These credits would likely be target to those who are most
likely to be uninsured and least likely to have job based
coverage. The credits would be refundable so that people would
get the same amount of money, no matter how much they owed in
taxes.
The President's plan also would be advanceable, meaning
that people would get the subsidy up front. The White House
estimates that under its proposal that 6 million of the
uninsured would get coverage.
The uninsured are getting a bad break from the tax code
now, and tax credits would help to level that playing field.
Workers can get their health insurance tax free as long as
their employer writes the check for the premium.
That means that an executive earning $100,000 gets a $2,600
tax break for health insurance at work, while a waiter serving
her lunch, and making $1,500 a year, gets $79 a year in tax
help for the subsidies.
This is clearly a system we would have designed if we were
starting from scratch. A study by respected Wharton School
economist Mark Pauly says that a refundable tax credit would
provide a powerful incentive for the uninsured to purchase
coverage.
One of his studies showed that up to two-thirds of the
uninsured would buy coverage if they received a subsidy worth
just half the value of a good policy. Pauly also found that the
individual market is stronger than it is reputed to be.
Achieving universal coverage would require a mosaic of
solutions as we have discussed all morning. Tax credits are not
the answer for everyone. Older, sicker citizens may find that
they still cannot afford or get coverage and safety net
programs will continue to be important.
But the fact that credits won't work for some people
doesn't seem to me justification for not extending this
meaningful help to millions of Americans who would benefit.
Others are concerned that tax credits would damage the
employment based system by draining younger, healthier, workers
from their pool.
However, I would argue that most of those who have coverage
at work receive a more generous subsidy than the credits would
offer, and they would opt to stay where they are.
The administration estimates that only 15 percent of tax
credit users would previously have had employer coverage.
Finally, almost any plan you create would have some crowd-out.
The question is do you want more people moving into government
programs or private health insurance.
In every other sector of the economy, competition forces
prices down, and quality up, and the health insurance market
would be no different. If you were to provide tax credits for
the uninsured or vouchers, the market place would respond by
making more affordable, more diverse, more appropriate health
insurance available so that people could be deciding what
coverage works for them and their families.
That would strengthen the health insurance market place and
provide citizens with more coverage and more choices. Most
importantly, tax credits tell hard working Americans who are
left out of the current system that they count, too. Thank you
for the opportunity to present this testimony, and I would look
forward to your questions.
[The prepared statement of Grace-Marie Turner follows:]
Prepared Statement of Grace-Marie Turner, President, Galen Institute
Introduction
Thank you Mr. Chairman and members of the committee for inviting me
to provide testimony today on the important issue of ``The Uninsured
and Affordable Health Coverage.'' My name is Grace-Marie Turner, and I
am president of the Galen Institute, a not-for-profit research and
educational organization that focuses on health policy.
The problems of the uninsured are of serious and continuing concern
to this committee, and I commend you for holding this hearing to keep
the spotlight on the importance of action to address the needs of a
population that is as large as it is diverse. I am encouraged that some
new options are being considered to provide them with help and look
forward to discussing them with you today.
In my testimony today, I would like to present a very brief
overview of who the uninsured are and explain some of the key reasons
that obtaining health insurance is so difficult for them. I will
briefly explore several of the options under consideration to extend
health coverage to the uninsured. And finally, I will describe why I
believe that providing refundable tax credits for the uninsured is the
best solution to extend meaningful, viable help to millions of
uninsured Americans.
Who are the uninsured?
More than 38 million Americans were uninsured at the last official
count, but the number surely has risen during the current recession.
While the numbers change, the profile of the uninsured remains quite
constant.
The uninsured are primarily: 1) minorities, especially Hispanics;
2) lower and lower-middle income Americans; 3) young adults between
ages 18 and 24; 4) workers or dependents of workers who are not offered
or cannot afford to purchase health insurance through the workplace;
and 5) workers who are between jobs.
The Census Bureau finds that the uninsured are most likely to be in
families with annual incomes of less than $25,000, to be self-employed
or employees of small companies, and/or to work in service-industry
jobs, such as hotels and retail stores.
The Commonwealth Fund, a respected health coverage research
organization, conducted a survey between April 27 and July 29, 2001,
and confirmed that family income is one of the strongest predictors of
being uninsured.<SUP>1</SUP> The Commonwealth Fund 2001 Health
Insurance Survey found that 75 percent of the uninsured had annual
incomes below $35,000, while only two percent had incomes of $60,000 or
more.
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\1\ Lisa Duchon, et al. Security Matters: How Instability in Health
Insurance Puts U.S. Workers At Risk. Findings from the Commonwealth
Fund 2001 Health Insurance Survey. New York. December, 2001.
---------------------------------------------------------------------------
The likelihood of someone having health insurance is closely tied
not only to higher income but also to whether the worker's job provides
health insurance. Only 36 percent of those under age 65 with incomes
below 200 percent of the federal poverty level have employment-based
insurance coverage, while 77 percent of those above do.<SUP>2</SUP>
---------------------------------------------------------------------------
\2\ White House Council of Economic Advisors. Health Insurance Tax
Credits. February 14, 2002.
---------------------------------------------------------------------------
The uninsured are overwhelmingly working Americans. The Kaiser
Commission reported that more than 80 percent of those who are
uninsured either are working themselves or live in families headed by a
person in the workforce, <SUP>3</SUP> a finding confirmed by Paul
Fronstin of the Employee Benefit Research Institute.
---------------------------------------------------------------------------
\3\ Kaiser Commission on Medicaid and the Uninsured. Health
Insurance Coverage in America. 1999 Data Update. Washington, D.C.,
December, 2000.
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More than half (52%) of employees working in firms with fewer than
100 workers and with earnings of under $20,000 were not offered or were
ineligible for employer-sponsored health plans.<SUP>4</SUP>
---------------------------------------------------------------------------
\4\ Lisa Duchon, et al. Listening to Workers. Findings from
Commonwealth Fund 1999 National Survey of Workers' Health Insurance.
New York, January, 2000.
---------------------------------------------------------------------------
Small businesses with fewer than 50 workers account for 94.7
percent of businesses in the United States and employ more than 40
percent of the workforce.<SUP>5</SUP> Forty percent of these small
businesses do not offer health insurance coverage to their
workers.<SUP>6</SUP> A key reason is the high cost of health insurance
and the fact that small firms lack the advantages of large companies in
designing and purchasing affordable health care packages.
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\5\ U.S. Bureau of the Census. 1998 County Business Pattern Data,
Table 2.
\6\ Larry Levitt et al., Employer Health Benefits: 1999 Annual
Survey, Henry J. Kaiser Family Foundation and Health Research and
Educational Trust, 1999.
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One-quarter of uninsured workers are self-employed.<SUP>7</SUP>
While Congress has enacted legislation that will provide full tax
deductibility of health insurance for the self-employed as of next
year, a tax deduction is worth only as much as the individual's tax
bracket. If someone is in the 15 percent tax bracket, even full
deductibility means just a 15 percent reduction in price. For many,
this is simply not enough of a price break for them to afford coverage.
---------------------------------------------------------------------------
\7\ Duchon, et al. Listening to Workers. The Commonwealth Fund.
---------------------------------------------------------------------------
Minorities are also disproportionately likely to be uninsured.
Hispanics are more likely to be employed in blue collar jobs which are
much less likely to provide health insurance coverage, but whatever
their income, Hispanics are less likely to be offered job-based health
coverage than non-Hispanic whites.<SUP>8</SUP>
---------------------------------------------------------------------------
\8\ Claudia Schur and Jacob Feldman, Running in Place: How job
characteristics, immigrant status, and family structure keep Hispanics
Uninsured, The Commonwealth Fund. May 2001.
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Profiles of the uninsured
For most of those who are uninsured, obtaining health insurance
through the traditional channel of the workplace is not an option. For
example:
1) An Hispanic woman who works two jobs to feed and house her
family is likely to fall through the cracks of the U.S. ``system'' of
health coverage. She makes too much to qualify for Medicaid, is not
offered health insurance through either of her jobs, and cannot afford
to purchase health insurance on her own and still meet her other
responsibilities to pay for housing, clothing, transportation, and food
for her children.
2) Lower and lower-middle income adults, such as a cab driver
making $25,000 a year, are unlikely to qualify for any public or
private health insurance. The cab driver is often much more worried
about a major car accident or family illness that not only would
destroy his livelihood but also his finances to pay for medical care.
But he cannot afford to purchase insurance for himself or his family
and still meet his other obligations.
3) College students and young adults working at their first job
often do not place health insurance as a top financial priority and
often go without.
4) A man working as a mechanic at an automobile garage or a waiter
at a restaurant is unlikely to be offered health insurance through his
job. The owners of the business are so busy trying to run the business
and keep it afloat that organizing and paying for health insurance are
too difficult and expensive. As a result, as much as the owners may
want to provide health insurance, they simply can't afford it.
5) Finally, a worker who has lost his job generally loses health
coverage in the process. A federal program instituted as part COBRA
(Consolidated Omnibus Budget Reconciliation Act) allows workers who
have left their job-based coverage to continue their insurance by
paying 102% of the premium. This coverage is generally very expensive,
and only 19% of eligible employees continue COBRA coverage.<SUP>9</SUP>
While the workers may get another job in a few months, the four or five
months between jobs also means that he and his family likely will have
no health insurance during that time.
---------------------------------------------------------------------------
\9\ Becca Mader. ``Few ex-employees choose COBRA: But those who do
are heavy users, study finds.'' The Business Journal, November 2, 2001.
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What is life like for the uninsured?
The uninsured are more likely to wait to get the medical care they
need, putting off tests and treatment until illnesses are at more
advanced stages. They are more likely to face difficulties in paying
for the care they do get. And they live in constant fear that they or
their children will have an illness or accident and that the family
will not be able to afford needed medical care.<SUP>10</SUP>
---------------------------------------------------------------------------
\10\ Connecticut Department of Public Health, Office of Policy,
Planning, and Evaluation, Looking toward 2000: State Health Assessment,
available at http://www.state.ct.us/dph/OPPE/sha99/
uninsured__and__underinsured__popul.htm
---------------------------------------------------------------------------
Unfortunately, those who do not get their health insurance through
the workplace or who do not qualify for government programs have few
options in obtaining coverage. Either they purchase health insurance on
their own, most often with after tax dollars that make the policy even
more expensive, or they take the risk of going without.
One of the leading causes of bankruptcies in the United States is
medical bills.<SUP>11</SUP> Being without health insurance is not only
a problem for 38 million Americans and counting, but also for society
as a whole. Those who do not have predictable access to medical
treatment often wait until an illness becomes acute before seeking
treatment. Not only is the cost of treatment then generally higher, but
also at least part of the cost is more likely to be borne by the
taxpayer through any of the various channels hospitals and doctors are
compensated and through higher premiums for those with private
insurance. Most importantly, the person may suffer long-term
consequences of going without needed medical treatment.
---------------------------------------------------------------------------
\11\ Ian Domowitz and Robert Sartain. Determinants of the Consumer
Bankruptcy Decision. National Bureau of Economic Research. 1997.
---------------------------------------------------------------------------
Economic pressures on these families and on society would be
reduced if the uninsured were protected by providing options for them
to obtain affordable health coverage.
Medicaid expansion, more regulation, or employer mandates?
Several options are being discussed:
Public program expansion: Many policy makers are recommending
expanding coverage to the uninsured through Medicaid and S-CHIP. But
the costs of public programs, especially Medicaid, already are
consuming up to a third of state government budgets, threatening higher
taxes, benefit cuts, or reduced spending on other state
programs.<SUP>12</SUP> State Medicaid budgets are stressed to the
limit, and adding millions of working Americans to their rolls appears
neither politically nor financially feasible.
---------------------------------------------------------------------------
\12\ Vernon Smith, and Eileen Ellis, Medicaid Budgets Under Stress:
Survey Findings for State Fiscal Years 2000, 2001, and 2002. Kaiser
Commission on Medicaid and the Uninsured. October 2001.
---------------------------------------------------------------------------
For example, New Mexico has the highest uninsured rate in the
country, yet the state is $50 billion short in being able to finance
Medicaid for current recipients in the upcoming fiscal year.
The nation's governors were in Washington just this week pleading
with Washington to help them with their skyrocketing Medicaid expenses.
Expanding Medicaid to millions more working Americans would mean
restricting care to those currently on the program, especially the poor
and elderly, or further reducing payments to providers. Already, the
program pays doctors so little that many physicians say they lose money
when they treat Medicaid patients.
Low Medicaid payment rates in many states already are compromising
access to care for those who have Medicaid coverage. For example, the
California HealthCare Foundation, an independent philanthropic
organization, surveyed almost 1,700 physicians in the state's largest
urban counties, and found that only 55 percent of primary-care
physicians said they treated Medi-Cal--California Medicaid--
patients.<SUP>13</SUP>
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\13\ Tony Fong, ``Nearly half of physicians shun Medi-Cal,'' San
Diego Union-Tribune, February 15, 2002.
---------------------------------------------------------------------------
Medicaid recipients often wind up waiting in long lines in hospital
emergency rooms to receive even routine care. This drives up costs of
this entitlement program even higher.
Employer mandate: Many small employers want very much to provide
health insurance for their employees, but they are especially
vulnerable to the rising cost of health insurance. Nationwide, more
than 200,000 Americans lose their coverage every time the cost of
health insurance rises by one percent, according to the Congressional
Budget Office. It is almost always small businesses operating closest
to the margin that are forced out of the market first. Forcing
employers to offer insurance is not a viable option for many marginal
businesses that are struggling just to survive, much less to provide
health insurance with costs rising at double-digit rates.
Insurance regulations: Evidence has shown that trying to force
employers or health insurers to provide coverage through mandates and
regulation creates a series of unintended consequences. In 1998, the
Galen Institute produced a study based upon GAO studies that
highlighted this problem. Our results showed that 16 states that had
been most aggressive in regulating their health insurance markets
through guaranteed issue, community rating, and other directives, had
uninsured rates that rose eight times faster than the 34 states that
were less regulatory.<SUP>14</SUP>
---------------------------------------------------------------------------
\14\ Melinda Schriver and Grace-Marie Arnett. Uninsured Rates Rise
Dramatically in States With Strictest Health Insurance Regulations. The
Heritage Foundation. 1998.
---------------------------------------------------------------------------
A very recent study by the on-line health insurance brokerage, e-
HealthInsurance, showed also that states that employ community rating
and guaranteed issue had premium prices that were two or three times
higher than states that did not employ this type of insurance market
``reform.'' <SUP>15</SUP> While there are likely other factors
involved, the average single monthly premium in New York, for example,
is $266. California, which does not employ community rating and
guarantee issue, has an average monthly premium of $143.<SUP>16</SUP>
---------------------------------------------------------------------------
\15\ Statement of Vip Patel, Founder and Chairman,
eHealthinsurance, Inc., Sunnyvale, California. Testimony before the
House Committee on Ways and Means Hearing on Health Care Tax Credits to
Decrease the Number of Uninsured. February 13, 2002.
\16\ eHealthInsurance, Inc. The Cost and Benefits of Individual
Health Insurance Plans. January 2002.
---------------------------------------------------------------------------
Another option: Equalize the subsidies
Another policy option is to provide the uninsured with tangible
financial support through refundable, advanceable tax credits to help
them purchase private health insurance.
The U.S. tax code provides a generous tax benefit to workers if
their employer purchases health coverage for them. This system of
protecting job-based health coverage from taxation has provided a
powerful incentive for workers to get their health coverage at work.
But the tax benefits are skewed to favor higher-income individuals and
to provide much less help to those with lower incomes. Millions of
workers simply are being left behind by this system. Tax credits would
provide meaningful help to millions of uninsured families to obtain
coverage.
The employment-based system in the United States that serves
approximately 175 million workers, dependents, and retirees is not an
option for many uninsured workers. Providing tax credits would be a
small step to begin to give them subsidies much like those who have
job-based coverage so they can obtain their own health insurance.
President Bush has proposed a set of incentives for the uninsured
with ``health credits'' of up to $1,000 for individuals and $3,000 for
families. He proposes phasing out the credits on a sliding income
scale, with subsidies ending at $30,000 for individuals and $60,000 for
families.
This system of tax credits would be targeted to those who are most
likely to be uninsured and least likely to have the option of
employment-based health insurance.
The Council of Economic Advisers' February 14, 2002, white paper on
Health Insurance Credits provides additional details on how the
administration's credit would be structured and administered and the
anticipated market response.
The idea of providing health credits has tri-partisan backing with
bills introduced by House Majority Leader Dick Armey (R-TX) and Ways
and Means Chairman Bill Thomas (R-CA), and in the Senate by Sen. John
Breaux (D-LA), Sen. James Jeffords (I-VT), and Sen. Bill Frist (R-TN),
among others.
Under virtually all of the proposals, the credits would be
refundable if taxpayers owed few or no taxes. Many, including the
president's, would also provide ``advanceable'' tax credits--meaning
people wouldn't have to wait until they file their taxes to get the
subsidy.
How the current tax preference works
The main reason that health insurance is so tightly tied to the
workplace in the United States is the highly favorable tax treatment it
receives. The system of providing health insurance through the
workplace in the United States dates to early in the 20th century.
The tax benefit to workers is provided in the form of a tax
exclusion. That means that the full value of the health insurance
policy is ``excluded'' from the worker's income before federal, state,
and payroll taxes are calculated. As a result, the value of the health
insurance policy and the generous tax break for health insurance are
invisible to the employee.
What workers often don't realize is that their health insurance
actually is part of their full compensation package--a form of non-cash
(and non-taxable) wages. The tax code explicitly allows the non-wage
income they receive in the form of health insurance to be free from
taxation.
But workers may receive this tax-favored benefit only if their
employers write the checks for the premiums. Because of this invisible
tax benefit, the value of the health insurance policy, the tax benefit
employees receive, and the cost in forgone wages are largely invisible
to workers.
In 1999, tax subsidies for job-based health insurance were worth
$130 billion.<SUP>17</SUP> But it is a very regressive subsidy,
favoring the rich over the poor. A taxpayer earning $100,000 a year or
more gets an annual subsidy worth $2,638 while one earning $15,000 gets
only $79 a year in assistance toward the purchase of health insurance.
---------------------------------------------------------------------------
\17\ John Sheils, Paul Hogan, Randall Haught. Health Insurance and
Taxes: The Impact of Proposed Changes in Current Federal Policy.
National Coalition on Health Care 1999.
---------------------------------------------------------------------------
What that means is that the executive with a high-paying job gets a
generous tax subsidy for health insurance from the taxpayer while the
waiter serving her lunch gets little or no help in purchasing health
insurance.
Clearly, this is not a system we would have designed if we were
starting from scratch. Instead, it has evolved as a relic of World War
II wage and price controls.
An increasingly mobile society
In our increasingly mobile society, millions of Americans are
constantly moving from one job to another and, for the fortunate ones,
from one job-based health plan to another. But this job mobility is
another reason that so many people lose their health insurance when
they lose or change jobs.
According to the U.S. Bureau of Labor Statistics, 13 million
workers change their employment status in a typical month.<SUP>18</SUP>
On average, that means 13 million Americans leave home or school to
enter the labor force, exit the labor force without looking for new
work, find new work after a spell of unemployment or search for work
after they quit or are dismissed or laid off--every month.
---------------------------------------------------------------------------
\18\ Michael M. Weinstein, ``Economic Scene: Cream in Labor
Market's Churn.'' The New York Times, July 22, 1999.
---------------------------------------------------------------------------
Tax credits would provide these workers with more stability by
giving them subsidies for health insurance that they could keep.
The impact
Wharton economist Mark Pauly, et al, (2001) find that a refundable
tax credit would provide a powerful incentive for the uninsured to
purchase health coverage. One study showed that 48 to 66 percent of the
uninsured would buy coverage if they received a subsidy worth half of
the value of the policy. And the uptake rate increases as the subsidy
rises: 74 percent of the uninsured would buy a policy if they received
a credit worth 75 percent of the premium cost.<SUP>19</SUP>
---------------------------------------------------------------------------
\19\ Mark Pauly, and Bradley Herring. ``Expanding Coverage Via Tax
Credits: Trade-offs and Outcomes,'' Health Affairs, Jan-Feb, 2001.
---------------------------------------------------------------------------
Pauly, et al, also have studied the market for individual health
insurance. They found that the individual market ``appears to be
improving, in both administrative costs and protection against high
premiums associated with high risk.'' <SUP>20</SUP>
---------------------------------------------------------------------------
\20\ Mark Pauly, Allison Percy, and Bradley Herring. ``Individual
Versus Job-Based Health Insurance: Weighing the Pros and Cons,'' Health
Affairs, Nov/Dec, 1999.
---------------------------------------------------------------------------
Validating their research, eHealthInsurance, the on-line health
insurance brokerage, recently pulled a sample of 20,000 individual
policies sold from its database of customers. The company found that
the average individual policy cost $159 a month and the average premium
for individual and family policies purchased through the company ranged
from $1,200 to $1,900 a year per person. Eighty-seven percent of
policies purchased by individuals can be considered ``comprehensive.''
<SUP>21</SUP>
---------------------------------------------------------------------------
\21\ Statement of Vip Patel in testimony before the House Committee
on Ways and Means. February 13, 2002.
---------------------------------------------------------------------------
The Health Policy Consensus Group, composed of experts from many
market-based think tanks and academic institutions, developed a vision
statement explaining why we believe that tax credits would be
beneficial.<SUP>22</SUP> Here are some highlights of the statement:
---------------------------------------------------------------------------
\22\ The Health Policy Consensus Group. A Vision for Consumer-
Driven Health Care Reform. The Galen Institute 1999.
---------------------------------------------------------------------------
Every American should be able to obtain needed medical care.
Reforming the tax treatment of health insurance is central to
achieving this goal.
Congress could begin by providing a new set of incentives for
people who do not have health insurance. These incentives
should be properly structured to create an opportunity to
purchase coverage in an open and competitive market.
We recommend providing credits or other comparable fixed
incentives, explicitly determined by legislation, to assist
people in obtaining private health insurance.
The size of the incentives will depend on how much taxpayer
money lawmakers deem to be available. It can be structured in
different ways.
Options
Credits or other fixed incentives could be used to purchase
private group or individual health coverage. If credits are
provided, they could be refundable.
The size of the credit or alternate financial incentive could
be adjusted to reflect risk or need, or it could be used to buy
into a high-risk pool. These adjustments should be made while
minimizing their effect on marginal tax rates.
To expand access to coverage, states could relax mandated
benefit laws for insurance purchased with federal assistance,
thus allowing a broader range of more affordable insurance
products.
Benefits of this approach
Millions of Americans not eligible for the current tax
subsidy would receive help in purchasing health insurance.
Assistance can be targeted to those who do not have health
insurance.
It can be targeted to those in specific age, income, or other
categories which legislators deem most worthy of the
assistance.
It gives individuals more choice as to where they obtain
health insurance.
It allows individuals the opportunity to select the kind of
health coverage that best suits their needs.
It helps to minimize distortions in the marketplace.
It is more equitable across income groups.
It is available whether an individual's insurance is
organized through employment-based groups or elsewhere. The
role of employers in assisting employees to obtain health
insurance could be maintained by each employer, if the company
so desired.<SUP>23</SUP>
---------------------------------------------------------------------------
\23\ For further information, see. Empowering Health Care Consumers
through Tax Reform, Grace-Marie Arnett, ed, University of Michigan
Press, 1999.
---------------------------------------------------------------------------
Application and benefits
Tax credits for the purchase of private health insurance would
provide today's uninsured workers and their families with financial
help in purchasing coverage to begin to equalize the subsidies that
employees with job-based insurance receive.
Some have proposed only allowing the credits to be used for job-
based coverage. But for too many of the uninsured, this would continue
to shut them out of the system. Allowing the credit to be used only for
job-based insurance would mean that it would be of little or no use to
an estimated 20 million Americans for whom job based coverage is simply
not an option.
If the tax credit approach is to be successful, it is imperative
that those eligible be allowed to use the credits to purchase insurance
outside the workplace--such as through church groups, professional or
trade associations, labor unions, or other groups that citizens trust
to negotiate in their best interest.
Offering tax credits to the uninsured is an important solution for
many reasons.
First, by giving people tax credits, they can choose the health
plan that best suits their needs and the needs of their families.
Second, tax credits are portable. Because the subsidies for health
insurance are not tied to the workplace, people can keep their health
insurance even if they lose their jobs or don't have the option of job-
based coverage.
Third, this army of newly empowered consumers will inject renewed
energy into the fragile market for privately purchased health
insurance. This market has been suffocated by state insurance
regulations and mandates that have made individual and small group
health insurance policies prohibitively expensive in many states and
have driven many insurers out of the market. Tax credits would improve
the market for private health insurance by giving consumers and
insurers an incentive to strengthen the market for private health
insurance.
Fourth, the cost of the insurance would be visible, and consumers
would be more motivated to shop for the best coverage for the money,
reversing the current trend for workers with job-based coverage to
demand more and more insurance coverage because the full cost of the
policy and the services they consume is hidden from them.
But most importantly, tax credits tell these hardworking Americans
who are left out of the current system that they count, too.
A step in the right direction
As this committee, this Congress, and this country have learned,
achieving universal coverage will require a mosaic of solutions. Tax
credits for the uninsured will create a new system of subsidies that
would be the best way, I believe, to reach millions of people who are
falling through the cracks of the current system. But they are not an
answer for everyone. Older, sicker citizens may find that they still
cannot afford or get coverage, even with the credits, and safety net
programs will continue to be an important part of the solution.
But the fact that credits will not work for some people does not
seem to me to be justification for not extending this meaningful help
to millions of Americans who would benefit.
Others are concerned that tax credits would damage the employment-
based system by draining younger, healthier workers from their pools.
However, I would argue that most of those who have employment-based
coverage receive a more generous subsidy than the credit, and they
would opt to stay where they are. Also, many employers who offer health
insurance feel strongly their obligation to their employees and would
find ways to encourage them to stay with the company plan. And if many
of the newly insured purchasing coverage with the tax credit are indeed
healthier, their expenses are likely to be lower, and they will help
reduce premiums for everyone in the pool.
Finally, the health insurance market is showing its ability to
respond to changing demands by creating new options, like
eHealthInsurance, for the uninsured to obtain affordable coverage on
their own. If billions of dollars in subsidies were available to
millions more workers, the market would be transformed to provide many
more options than are available today.
In every other sector of the economy, competition forces prices
down and quality up, and health insurance is no different.<SUP>24</SUP>
If the federal government were to provide tax credits for the
uninsured, the marketplace would respond by making more affordable,
more diverse, more appropriate health insurance available. That would
strengthen the health insurance market and would provide citizens with
more choices for coverage. If state governments were to provide
complementary tax incentives, they could expand health coverage to even
more uninsured citizens.
---------------------------------------------------------------------------
\24\ Hixson, Jesse. Six-Questions Everyone Should Ask about Health
System Reform: An Application of Basic Economics, Galen Institute,
March, 2002.
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Refundable tax credits would encourage the marketplace to be more
responsive to their demands. Further, it takes an important step toward
a system that provides health coverage for all and which still provides
the freedom for the health care industry to innovate so it can continue
to provide the world's best medical care.
Thank you for the opportunity to present this testimony. I would be
happy to answer any questions you may have and to provide additional
information.
Mr. Bilirakis. Thank you very much, Ms. Turner. Let's see.
Mr. Robert de Posada, President of the Latino Coalition.
Mr. Posada, please proceed.
STATEMENT OF ROBERT DE POSADA
Mr. Posada. Thank you, Mr. Chairman, and thank you, Mr.
Brown, and members of the committee, my name is Robert de
Posada, and I am the President of the Latino Coalition, which
was created in 1995 to address those issues that directly
affect the well-being of hispanics in the U.S.
Some of our members include the Inner-American College of
Physicians and Surgeons, and the Hispanic Business Roundtable,
among others. When it comes to health insurance according to
the U.S. Census Bureau, the highest uninsured rate in the U.S.
is among people of hispanic origin.
Over one-third of hispanics were uninsured, compared to
only 12 percent for non-hispanic whites. Foreign born
immigrants are even worse, with more than half without health
insurance.
The main reason why so many hispanics do not have health
insurance is that generally they have lower incomes and they
work for smaller firms than in the service industry. Employment
and income levels are the leading indicators of health
insurance coverage in this country, and the lower the income,
the more likely that the worker will not have coverage.
We have held health care conferences all around the country
to try to figure out what can we do to address this crisis, and
we have come to the conclusion that no one has all the answers
like everybody has said here.
It will take several different ideas, which together if
enacted, will help address this crisis. However, we strongly
believe that we must focus our resources on the working poor.
We call them the too poor, but not poor enough; too poor to
afford health insurance, yet not poor enough to qualify for
Medicaid.
And these are predominantly low income workers who do not
have access to health insurance through their employer. That's
why we strongly believe that the most important issue that this
Congress can take at this session is to pass a refundable tax
credit to help workers who do not get insurance from their
jobs.
And adding additional provisions to help reduce prices and
promote a real outreach to undeserved communities. But as Mark
Twain said, get your facts first, and then you can distort them
as you please.
Instead of trying to make good ideas even better, opponents
of a refundable tax credit will just say about anything to
shoot this idea down. The fact is that in most of the concerns
addressed by these opponents are already addressed by the
leading tax credit legislation sponsored by Congressman Armey
and Congressman Lipinski.
For instance, tightened policies won't reach low income
workers. Most hispanic groups in this country or around the
country, including the League of United Latin Americans, have
come to the conclusion that the past expansions of Medicaid and
CHIP did little to reduce the number of uninsured hispanics.
The fact is that these programs have failed to reach the
undeserved and uninsured in our communities. Even during boon
economic times there has been no real incentive for State
workers to go out to these undeserved communities to expand
these programs.
And we know because we have been there at the State level
fighting these cuts in services to Medicaid even during this
boon economic period. We believe the tax credit will help
address the situation because with a well crafted refundable
tax credit, most insurance companies will develop special
products to reach out to these new markets as potentially new
clients.
Also, something like the Shadegg-Lipinski bill from last
year, which established individual membership associations,
would allow community-based groups, churches, and other
associations to offer mandates of free health insurance
coverage to their friends and members.
And having community-based organizations and churches
directly involved in the outreach process will be the most
effective way to reach out to low income and undeserved
families.
Tax credits offer too few dollars. Well, a quick surge into
some of the health insurance costs in the District of some of
the members here today shows that people can find health
insurance for a married couple with two children for less than
the amount available in the tax credit.
Let me give you an example. In Leery, Ohio, for $1,800, you
can get a PPO with a $1,000 deductible. In L.A., for $2,600,
you can get a PPO with a $500 deductible.
In Springdale, Maryland, for $2,300, with a $1,000
deductible, and the list goes on for insurance available for
the amount of the credit. To go even further, the individual
members of the association would help low income workers pull
together and get mandate free insurance at much lower prices.
And next these employers will decide to drop their coverage
offering. Well, in our conversation with small business owners
from across the country, we do not expect this massive drop
out.
However, we do believe that any kind of tax credit
legislation should include provisions to make sure that this
doesn't happen. There has been talk about including provisions
that employers who drop health insurance for their employees
will lose their health insurance deduction retroactively to the
date that the tax credit becomes available, and maybe this is
the answer.
I believe that a well-crafted bill that is refundable will
be a great boost to addressing this crisis. There is not a
single magic bullet that will solve this crisis. It will take
several different approaches, and we hope that rather than
shooting down ideas, we can work together to implement tax
credits, strengthen access to Medicaid and CHIP, promote
pooling among individuals and associations, expand our
community health centers, and make sure that we encourage more
businesses to offer health insurance for their workers.
We are ready to help this committee achieving these goals
and thank you very much for inviting me here again and for your
commitment to this issue.
[The prepared statement of Robert de Posada follows:]
Prepared Statement of Robert Garcia de Posada, President, The Latino
Coalition
My name is Robert Garcia de Posada and I am the President of The
Latino Coalition. The Latino Coalition was established in 1995 to
address policy issues that directly affect the well-being of Hispanics
in the U.S. The Coalition's agenda is to develop and promote policies
that will enhance overall business, economic and social development of
Hispanics.
When it comes to health insurance, according to the U.S. Census
Bureau, the highest uninsured rate in the U.S. is among people of
Hispanic origin. Over one third, or 34.2% of Hispanics were uninsured
compared with only 12% for non-Hispanic whites. U.S. Hispanics also
have the largest percentage of the working uninsured at 37.9% compared
to only 14.9% for non-Hispanic whites. Foreign-born immigrants were
even worse off with more than half without health insurance. According
to the Commonwealth Fund, in small- to medium-sized companies with
fewer than 100 workers, 63 percent of white workers have health
benefits compared with 38 percent of Hispanic workers.
There is a strong relationship between un-insurance and the kind of
employment a person has. The reason is simple: Most Americans get their
health insurance through their place of work. Moreover, in getting
their health insurance through the workplace, they are also eligible to
get large and, under current law, unlimited federal tax breaks for the
purchase of health insurance. There is no such tax relief for workers
who get health insurance outside the workplace or for workers and their
families who cannot get employer-based health insurance.
Today, 65 percent of the uninsured are in working families where
the breadwinner works full time. Because Hispanic workers are heavily
concentrated in the service industry and in small businesses--working
for firms that do not or cannot offer them health insurance coverage--
they are disproportionately found outside of the normal channels of
health insurance in the United States.
People who are working should not be discriminated against by the
federal tax code in their purchase of health insurance simply because
they buy a policy outside of their place of employment. There is a
better policy. The best option to expand health insurance for Hispanic
workers is to give them direct tax relief, either in the form of tax
credits, if they are paying taxes, or vouchers--in effect, refundable
tax credits--if they do not have taxable income. This will establish
equity in the tax code and the health insurance market, reduce the need
for these families to depend on government insurance programs like
Medicaid or other forms of public assistance, expand health insurance
coverage, and mainstream millions of uninsured Hispanic workers into
America's private insurance market.
The health insurance market in the United States is uniquely job
based. All Americans, both employers and employees, get tax relief if
and only if they get their health insurance coverage through their
place of employment. If the employer offers health insurance, the
employer gets unlimited tax relief in the form of a tax deduction as
part of the cost of doing business. Likewise, under this arrangement,
employees also get unlimited tax relief for purchasing health insurance
through their employer. But, instead of a tax deduction, an employee
gets what is technically called a ``tax exclusion'' on the value of the
job's health benefits. If an employee does not get his health insurance
through the place of work, he gets little or no tax relief; indeed, the
federal tax code punishes workers who buy health insurance outside the
workplace by making that worker buy health benefits with after-tax
dollars. For most workers, this cost is a huge disincentive for
obtaining health insurance on their own.
The main reasons so many Hispanics do not have health insurance are
they generally have lower incomes and they work for smaller firms.
Employment and income level are the leading indicators of health
insurance coverage in this country. The lower the income, the more
likely a worker will not have coverage. If they are working
independently or with a firm that does not provide health insurance,
they simply do not have coverage because they cannot afford it. Small
firms with fewer than 25 employees are the least likely to provide
employment-based health insurance. Based on the 1990 Census, odds are
that Hispanic workers--with a per capita income of only $10,773 and a
solid majority employed by small businesses, particularly the service
industry--will not be offered health insurance at the workplace and
will not be able to afford it on their own.
If a worker is employed by a large corporation, the chances are
that both the benefits package and the tax benefits are very generous.
However, if a worker is middle- or low-income and is employed by a
smaller company, the tax benefits are less generous. Low-skilled
workers often do not work for large companies or command a wage that
enables them to buy health insurance, and they get little if any
government assistance in purchasing it. If a worker decides to purchase
individual policies, they will soon realize it is prohibitively
expensive. This is the problem facing America's working poor.1At The
Latino Coalition, we strongly support policies to promote equality and
equity between employer-based health insurance coverage and consumer-
based coverage. We are here to call on Congress to end the
discrimination that exists against people who buy health insurance
outside the place of business.
Most Americans are personally familiar with such cases. But, for
purposes of illustration, consider Martha Sanchez, a single mother of
two in Miami. Martha works as a receptionist for a small law firm,
earning approximately $10 per hour. Her employer does not provide
health insurance, and she cannot afford to buy an individual health
insurance policy.
This is the case for many Hispanic workers. They are not poor
enough to qualify for Medicaid, but are too poor to afford private
health insurance. In addition, there is a high degree of mobility in
the Hispanic workforce. And, as noted, the current system of
employment-based health insurance is simply leaving too many working
people who have families and are willing to work without affordable
insurance.
There is another angle to all of this, one that never crossed our
minds until we read the results of a recent study commissioned by
Consejo de Latinos Unidos. This study found that public and private
hospitals are taking advantage of self-paying uninsured Latinos
throughout the Greater Los Angeles area. After a careful analysis of
their hospital bills, the study found that these uninsured group was
being charged almost five times the amount that hospitals would charge
health maintenance organizations (HMO). When you read the testimonials
and the findings of this study, you truly understand why groups like
our have focused most of our efforts in trying to address the uninsured
crisis in this country, and particularly in the Latino community.
So what can Congress do to help someone like Ms. Sanchez get health
insurance?
First, enhance tax incentives for individuals without access to
employer-sponsored coverage. You can enact refundable tax credits or
vouchers to help low-income workers purchase health insurance. In order
to make these tax credits truly accessible to low-income workers and
small businesses, we believe that these tax breaks could be blended
into the withholding system. In other words, allow the worker to
withhold the cost of health insurance from the payroll tax, in order to
afford insurance. We should also offer employers the authority to pay
this premium if they wish. We salute President Bush and the bipartisan
group of senators and representatives who have signed on to support
refundable tax credits for the uninsured. This is without a doubt the
most important initiative that Congress can undertake if they seriously
want to improve access to affordable health insurance.
Second, Congress should support the President's initiative to
expand our Community Health Centers. These centers are in many cases
the first line of defense for many uninsured Latinos across the
country. However, while we expand the network of community health
centers, we should also develop a stronger public education campaign to
promote the existence of these centers, particularly in underserved
communities.
Third, Congress can equalize the tax laws so that associations and
community-based organizations have the same tax breaks as large
businesses, when they provide health insurance. This would promote a
more community-based insurance system that would have a better
understanding of the community they serve. Don't forget that health
patterns in our population are not the same. For instance, in the U.S.
Hispanic community, there is an instance of diabetes, three times the
level of the population at large. Having organizations and doctors who
understand these differences are critical to provide cost-effective
services to their customers.
Last year we strongly supported the bipartisan efforts of
Congressmen Lipinski and Shadegg to permit Individual Membership
Associations to offer mandate-free health insurance (H.R. 4119). This
effort would allow community-based groups, churches and advocacy
organizations to offer individual health insurance to its members. This
legislations required that these IMAs offer at least two health
insurance choices to its members, including one that is mandate-free.
According to the Council for Affordable Health Insurance, we can expect
a reduction in price of approximately 20-25% with this initiative. But
aside from the reduction in cost, what makes this plan so attractive is
the ability of community-based groups and churches to reach out to
underserved communities in a much more effective way than current
government health programs.
Fourth, Congress should eliminate the obstacles to pooling. This
will help promote more affordable, accessible and accountable coverage
for consumers. The Latino Coalition strongly supports Association
Health Plans, as a way to reduce the cost of health insurance and offer
small business a mechanism to pool together to increase their
bargaining power.
Fifth, Congress should allocate additional funds for Medicaid
programs in states that have been disproportionately affected by the
current recession. We salute the efforts by Congressmen Brown and King
to increase Medicaid spending. We would encourage Representatives Brown
and King to include provisions in their bill to guarantee that doctors
have the necessary flexibility to take the best care of their Medicaid
patients, particularly in the area of prescription drugs.
However, we oppose current legislative efforts to expand Medicaid
as a main tool to address the uninsured crisis. For the past three
years, The Latino Coalition has been battling severe cuts in Medicaid
services at State legislatures across the country. At a time when most
states are gutting the services available to Medicaid patients, it
would not be financially responsible to add millions of new patients
into this program. This would make the program less stable financially
and would force more severe restrictions on much needed services for
our most vulnerable citizens.
Sixth, Policymakers must make health insurance affordable for
people who can't qualify for health insurance because they have a
preexisting condition. The Latino Coalition believes sick people cannot
be left out of the world's greatest health care system and must have
access to affordable health insurance.
Yet, there are only two ways to provide coverage to uninsurable
individuals: (1) guaranteed issue or (2) health insurance safety nets.
One works, the other doesn't.
<bullet> Guaranteed issue. Guaranteed issue means that anyone can get
health insurance at anytime regardless of their health
condition. This means that people can actually wait until they
are sick before they buy health insurance, giving people an
incentive to opt out of the health insurance pool. When people
opt out and are guaranteed coverage at any point, rates
escalate in an actuarial death spiral. This is what happened in
New Jersey after the state legislature enacted guaranteed
issue. According to the New Jersey Department of Insurance,
family rates for a $500 deductible plan now range from $3,170 a
month to $17,550 a month!
Guaranteed issue has not succeeded in making rates affordable for
families, especially those who need access to our health care
system.
<bullet> High Risk Pools. Health Insurance Safety Nets, or high risk
pools as some refer to them, are the best and most affordable
way to provide coverage for individuals who are otherwise
uninsurable. A Health Insurance Safety Net is a special state-
based, privately funded comprehensive health insurance plan.
Currently, 29 states have safety net plans, and approximately
127,000 people were covered by these plans last year. The way
they work is pretty simple: The enrollees pay a premium, and
these premiums are usually capped so the enrollee has price
protection. To help fund the safety net plan, the state usually
assesses insurance companies based on the amount of business
they conduct in that state.
On February 14, Republicans and Democrats voted to send $120
million to the states to help existing safety nets plans and to
establish one in those states that currently do not have one.
The Latino Coalition supports that initiative and applauds
those members of Congress who voted to help sick people get
affordable health insurance.
Seventh, Congress can promote changes in our tax laws to help low-
income workers and small businesses have access to affordable heath
insurance. For example,
<bullet> Small businesses could get a tax credit that could be phased-
in beginning with the smallest firms of fewer than 10
employees;
<bullet> Individual purchasers of health insurance and the self-
employed should be able to fully deduct the cost of premiums;
<bullet> Employee contributions for health insurance should not be
considered taxable income: and,
<bullet> Tax credits should be made available for risk pools sponsored
by the private industry.
Finally, we cannot ignore the fact that reducing regulatory burden
and government mandates, reforming liability laws, and promoting
personal responsibility are also key components of any solution to this
problem.
Access to affordable heath insurance is a problem that
disproportionately affects the U.S. Hispanic community. The Latino
Coalition strongly commends this committee for addressing this issue,
and we look forward to working with you to break down the barriers and
build the necessary bridges to improve the access to affordable health
coverage for the uninsured.
Thank you.
Mr. Bilirakis. Thank you very much, sir.
Mr. Donnelly, please proceed.
STATEMENT OF HON. THOMAS R. DONNELLY, JR.
Mr. Donnelly. Mr. Chairman, and Congressman Brown, thank
you very much for the opportunity to be with you. I hope that
my voice holds out today, but thank god for microphones.
I also want to associate myself with your remarks regarding
Dr. Eisenberg, a dear friend, and someone with whom we have
worked on patient safety. We thank you for this opportunity to
show with you today our ideas about solutions for the growing
problem of the uninsured.
The Coalition for Affordable Health Coverage is a broad
based group that came together because of a strong common
desire to address the issue of the uninsured. Our members
include physician groups, like the AMA, business groups, the
insurance carriers, and insurance brokers, consumer groups, and
others who believe that affordability of coverage is a basic
component of access to health care.
The focus of my testimony today will be on why we believe
that the implementation of market oriented efforts, including
tax credits, will make health insurance more accessible and
more affordable to a significant portion of the uninsured.
Mr. Chairman, we start from the premise that it is critical
for as many as possible of the uninsured to be covered for
their health care. We are convinced that this is best
accomplished by enhanced access to the private health insurance
marketplace.
In the private marketplace, individuals and families can
evaluate their variety of options available to them and decide
what is best for their personal and unique needs. Additionally,
without increased private sector payments for health care, the
cost of both health care and health insurance will continue to
escalate.
If we increase public payment for health services by
relying on Medicaid expansion as the primary solution for the
uninsured, costs shifting to the private sector will only
continue to push the cost of private coverage higher.
Further, new private sector options for the uninsured would
encourage more healthy individuals to apply for coverage, and
which will lower health insurance costs for everyone.
One of the solutions that will help the uninsured who pay
income taxes, afford private health insurance coverage, is
increased deductibility for health insurance premiums.
Therefore, other individuals who have no tax liability, the
refundable, advanceable tax credit we have discussed will
provide better assistance with monthly health insurance
premiums when they are due, and directly to the insurance
companies.
It will also reduce adverse selection to COBRA, and State
continuation plans by providing funding so that all terminating
employees would have the incentive to continue coverage, and
not just those with serious health conditions.
Now, opponents of insurance tax credits claim that current
health credit proposals provide too little cost assistance
relative to the premium. I am reminded of Mr. Green's comments,
and I would love to engage you on that when the time comes.
Research reveals, however, that a credit in the range of
$1,000 for individuals, and $2,000 to $3,000 for families
contained in several of the bipartisan proposals in the House
and in the Senate, provide significant financial assistance
toward the purchase of private health insurance coverage
without creating an incentive for employers to stop providing
coverage for their employees.
Their exists a robust individual market that offers a
variety of policy coverage options in many States, and most
people can find a policy suitable for their needs. Contrary to
the analysis that accompanied it, a recent Kaiser Family
Foundation report actually showed that 6 out of 7 individuals
in less than perfect health were able to obtain health
insurance in every one of the geographic markets tested.
Further analysis of the markets compared in the Kaiser
study reveals that costs for the policies in more highly
regulated States with guaranteed issue requirements and
community rating were significantly higher than in other States
for most of the Kaiser applicants.
Additionally, experience at the State level with guaranteed
issue and community rating reveals that several States that had
previously mandated guaranteed issue in the individual market
have since repealed it.
I believe that Mr. Whitfield spoke about Kentucky, and now
provide access to health insurance for people with serious or
chronic health conditions through high risk pools.
These States found that the cost and availability of health
insurance coverage in the individual market was severely
restricted by guaranteed issue requirements.
A refundable health insurance tax credit would help
eligible individuals afford the cost of health insurance
coverage in high risk pools in the same way it would be used
for those to purchase coverage through regular individual
health insurance markets.
So for this reason, we are very encouraged by the recent
action of the House to provide Federal funding to help States
with costs associated with high risk pools. Funding of this
type should be a high priority for Congress to ensure that
everyone has access to health insurance coverage, and will
provide much more stability for existing health insurance
markets than costly new guaranteed issue requirements.
Mr. Chairman, I should also mention that a number of
members of our coalition are very concerned about the large
number of uninsured people who have access to employer
sponsored coverage, but are unable to afford their share of the
employer sponsored premiums.
A health insurance tax credit designed to be used either to
buy coverage in the individual health insurance markets, or to
help a low income employee pay his or her share of the premiums
would address this concern.
To keep the issue in perspective, we should remember that
individuals without employer sponsored health insurance
currently must purchase coverage in the individual health
market entirely on their own.
This is particularly hard for low-income employees who may
have to decide between health insurance and groceries, and tax
credits should be considered a base from which to build on the
financing of health insurance coverage.
It is not designed to take away the role of the employer in
the financing of health insurance coverage, or to replace
personal responsibility. The Coalition of Affordable Health
Coverage believes that it will take these and other creative
solutions to achieve affordable health insurance coverage for
uninsured Americans.
We are pleased that the Congress and the administration are
aggressively addressing the problem of the uninsured and
believe it is important to take action now on this very
important issue. Congress should not go home having done
nothing because it decided to wait until it could do
everything.
I appreciate this opportunity to testify, and I would be
delighted to answer any of your questions.
[The prepared statement of Hon. Thomas R. Donnelly, Jr.
follows:]
Prepared Statement of Hon. Thomas R. Donnelly, Jr., Representing The
Coalition for Affordable Health Coverage
Mr. Chairman, Congressman Brown, and distinguished members of the
committee, we thank you for this opportunity to share with you today
our ideas about solutions for the growing problem of the uninsured. The
Coalition for Affordable Health Coverage is a broad-based coalition
that came together because of a strong common desire to address the
issue of the uninsured by increasing access to private sector health
insurance options. Our members include physician groups, business
groups, insurance carriers, insurance brokers, consumer groups and
others who believe that affordability of coverage is the most basic
component of access to health care. We believe this Committee, and this
Congress, have a unique opportunity to take action to significantly
reduce the number of the uninsured, and we hope to serve as a resource
to you in your efforts to do so.
The members of our Coalition believe, as has been expertly
demonstrated, that the number of Americans lacking health insurance is
simply too high. As has also been demonstrated, these Americans are
often uninsured for different reasons. Consequently, our members
believe that a variety of approaches will be necessary in order to
address these different causes. The focus of my testimony today will be
on why we believe, based on how the marketplace works and the
characteristics of those who are uninsured, that the implementation of
tax credits and other market-oriented efforts will make health
insurance more accessible and affordable to a significant portion of
the uninsured.
Mr. Chairman, we start from the premise that it is critical for as
many as possible of the uninsured to be provided with access to the
private health insurance marketplace. The private marketplace allows
individuals and families to evaluate the variety of options available
to them and decide what is best for their personal and unique needs.
Additionally, without increased private sector payment for health care,
the cost of both health care and health insurance will continue to
escalate. Providers faced with increasing numbers of Medicaid patients
must address the issue of losses from low Medicaid reimbursements, and
they do this by cost shifting to private payers. If we rely on Medicaid
expansion as the primary solution for decreasing the number of
uninsured, we will increase the percentage of public payment for health
services. The cost shifting that occurs as a result will only push the
cost of private coverage higher, and eventually will drive some
providers out of business. Bringing newly insured people into the
system through the private sector greatly reduces cost shifting.
Further, private sector options for the uninsured will encourage
healthy individuals to apply for coverage, which will decrease the
losses experienced by health insurance pools in both the group and
individual health insurance markets. This will lower health insurance
costs for everyone that is insured.
Over half of the 40 million uninsured Americans are the working
poor or near poor. These workers may work one or more part time jobs
but not enough hours at any one job to qualify for health insurance
benefits, or they may be seasonal or temporary and move from one
employer to another. Still other low or moderate wage workers work for
employers who don't offer coverage at all, regardless of employment
status. Some have access to an employer-sponsored plan, but are unable
to afford their share of the premium, or have employer-paid coverage
for themselves but are unable to afford dependent coverage for their
families. The problem in all of these situations boils down to one
thing--affordability. Although individual or group coverage may be
available, it is beyond their reach due to their inability to pay for
it.
One of the solutions that will help the uninsured pay for private
health insurance coverage is increased deductibility of health plan
premiums. Increasing health insurance premium deductibility for people
who owe income taxes puts coverage for those who don't have employer
based coverage available on the same par with those who obtain their
coverage through an employer-sponsored plan. However, deductibility
does nothing for the many working poor who have no or very low tax
liability.
People with no tax liability don't benefit from a deduction because
they don't owe taxes to start with, and more important, because a
deduction is only available at the end of the year. Financial
assistance that is only available at the end of the year is of no value
to the low-income uninsured because without advance payment, they are
unable to pay their monthly premiums when they are due. They can't wait
a year to be reimbursed, so they remain uninsured.
For these individuals, a refundable, advanceable tax credit would
provide assistance with health insurance premiums monthly, when their
premiums are due. This type of credit, advanced monthly and
administered through the insurance company, would be available when
needed and would be difficult to abuse, since the insurance company
would certify that coverage was purchased. It would also reduce adverse
selection in COBRA and state continuation plans by providing funding so
that all terminating employees would have the incentive to continue
coverage, not just those with serious health conditions.
Opponents of health insurance tax credits claim that current health
credit proposals such as the one proposed by the Bush administration
provide too little cost assistance relative to the premium. Research
reveals, however, that a credit in the range of $1,000 for individuals
and $2,000-$3,000 for families provides significant financial
assistance towards the purchase of private health insurance coverage
without creating an incentive for employers to stop providing coverage
for their employees.<SUP>1</SUP>
---------------------------------------------------------------------------
\1\ To get an idea what is available in the individual health
insurance market, see ``Individual Health Insurance Coverage Options
Across the United States,'' March 2001, National Association of Health
Underwriters, or ``The Cost and Benefits of Individual Health Insurance
Plans'' eHealthInsurance.com.
---------------------------------------------------------------------------
The individual market offers a variety of policy coverage options
in many states for individuals who don't have access to employer-
sponsored coverage. Policies are available in a wide range of
deductibles and plan types, and most people can find a policy suitable
for their needs. Contrary to the analysis that accompanied it, a recent
Kaiser Family Foundation report showed that six out of seven
individuals in less than perfect health were able to obtain health
insurance in every one of the geographic markets tested.
Further analysis of the markets compared in the Kaiser study
reveals some interesting facts that should be carefully considered if
any new market mandates such as guaranteed issue accompany financial
assistance for the uninsured. Costs for policies in more highly
regulated states with guaranteed issue requirements and community
rating were significantly higher than in other states for most of the
Kaiser applicants.
Additionally, experience at the state level with guaranteed issue
and community rating reveals that several states <SUP>2</SUP> that had
previously mandated guaranteed issue on the individual market have
since repealed it and now provide access to health insurance for people
with serious or chronic health conditions through high-risk pools.
These states found that the cost and availability of health insurance
coverage in the individual market was severely restricted by guaranteed
issue requirements. For example, Washington State's guaranteed issue
requirements resulted in such a high level of losses that all
individual health insurance carriers in the state left the market. New
Hampshire barely avoided this same fate by repealing their guaranteed
issue coverage during their last state legislative session and
instituting a high risk pool for individuals with serious or chronic
health conditions.
---------------------------------------------------------------------------
\2\ Kentucky, Washington, and New Hampshire
---------------------------------------------------------------------------
Twenty-eight states now have high-risk pools to provide access to
health insurance if a person does not qualify for coverage based on his
or her medical history. Many of these states also use their high-risk
pools to provide access to health insurance coverage for HIPAA eligible
individuals. Other states use mechanisms such open enrollment or a
special category of guaranteed coverage through one or more carriers to
ensure that coverage is available. High-risk pools provide the most
affordable alternative for high-risk individuals who don't have access
to employer-sponsored coverage.
A refundable health insurance tax credit could help eligible high-
risk individuals afford the cost of health insurance coverage in high-
risk pools in the same way it would be used for those who purchase
coverage through the regular individual health insurance market. States
without high-risk pools should be encouraged and provided with
incentives to develop programs to ensure that coverage is available for
high-risk individuals. For this reason, we're very encouraged by the
recent action of the House to provide funding to help states with the
costs associated with high-risk pools. Funding of this type should be a
high priority for Congress to ensure that everyone has access to health
insurance coverage, and provides much more stability for existing
health insurance markets than costly new guaranteed issue requirements.
It is important in this analysis to include a discussion of health
insurance tax credits that could be used in an employer-sponsored plan.
A number of members of our coalition are very concerned about the
twenty percent of the uninsured who have access to employer sponsored
coverage but are unable to afford their share of employer-sponsored
premiums. A health insurance tax credit designed to be used either to
buy coverage in the individual health insurance market or to help a
low-income employee pay his or her share of premiums would address this
concern. Allowing low-income employees to supplement their employer's
contributions with a refundable tax credit would allow families to be
insured together, which many employees prefer, and would provide the
funds necessary to allow them to come up with ``their share'' of health
insurance premiums. It would also address concerns from the business
community over declining participation in their plans, and would
empower individuals to select their own place of purchase, rather than
having it imposed on them by the government.
One final note relative to the adequacy of current health insurance
tax credit proposals is that individuals without employer-sponsored
health insurance currently must purchase coverage in the individual
health insurance market entirely on their own. This is particularly
hard for low-income employees, who may have to choose between health
insurance and groceries. Even employees who have employer-sponsored
coverage available may not be able to participate because they can't
afford their share of the premiums. A health tax credit should be
considered a base from which to build on the financing of health
insurance coverage. It is not designed to take away the role of the
employer in the financing of health insurance coverage, or to replace
personal responsibility.
A third part of the umbrella of solutions for the uninsured is the
more flexible use of Medicaid and Children's Health Insurance dollars
in private sector plans. We are greatly encouraged by the development
of the new HIFA waivers, and have observed a high level of activity at
the state level concerning new applications for these waivers. Used
appropriately, we foresee the ability of many currently uninsured
individuals and their children to be insured under one employer plan or
through other private sector options using already available budget
dollars.
The Coalition for Affordable Health Coverage believes that it will
take these and other creative solutions to achieve affordable health
insurance coverage for uninsured Americans. We are pleased that
Congress and the Administration are aggressively addressing the problem
of the uninsured, and believe it is important to take action now on
this very important issue. Congress should not go home having done
nothing because it decided to wait until it could do everything.
I appreciate this opportunity to testify today and would be happy
to answer any questions the committee may have.
Mr. Bilirakis. Thank you very much, Mr. Donnelly.
Ms. Feder.
STATEMENT OF JUDITH FEDER
Ms. Feder. Thank you, Mr. Chairman. Mr. Chairman, and
members of the committee, it is a pleasure to be with you today
to discuss this critical issue of expanding health insurance
coverage.
Tax credits and public program expansions are the
alternative strategies currently on the table for addressing
this problem. My testimony addresses a number of the issues
that arise with respect to both tax credits and public
programs.
But I want to focus your attention on the results of some
work that is in progress for the Kaiser Family Foundation that
compares the impact of the two approaches. If you have the
testimony, then focusing on the charts at the end will help you
follow my remarks.
I want to focus in particular on two strategies that we
have talked about a lot already this morning, two particular
policies. One is a refundable tax credit for non-group coverage
for $1,000 for individuals, and $2,000 for families.
And the other is a Medicaid or CHIP expansion to parents
and any currently ineligible children with incomes up to twice
the Federal poverty level, about $39,000 for a family of three.
Under this option, the States would be required to extend
coverage to the maximum eligibility level. I want to talk to
you about the impacts of those two policies, and if you are
following the figures, you can see in the first one that it
shows pretty much the bottom line in terms of impact of the two
policies, the number of people who get benefits, and the number
of individuals who are newly insured.
The tax credit provides benefits to a very large number of
people, about 10.6 million people, but its impact on new
insurance coverage is far smaller, about 1.6 million people.
And let me clarify just so you will understand different
numbers, I am talking about the people who are covered at a
point in time, just as we talk about 40 million uninsured.
This is the same kind of number as that 40 million, and it
is different from the number of people who gain coverage over a
year, which is what the administration is reporting with
respect to its proposal. So 1.6 million people with gaining
insurance coverage on net with the tax credit approach.
By contrast the public program expansion to parents would
reach a smaller number of recipients, 5.4 million people, but
would have a bigger impact on the number of people who newly
have insurance, 3.8 million people, as compared with 1.6
million under the tax credit.
If you look at the next chart, it tells us something about
the people who have benefits, who gain benefits under these two
approaches.
Looking first at income in figure two, about 30 percent of
the people who get the tax credit have incomes above twice the
Federal poverty level; whereas, all the public program benefits
are targeted to people with incomes in this range.
An even greater contrast is apparent in Figure Number 3,
which shows that 70 percent, the vast majority of the tax
credit recipients, already have health insurance. Only a
minority of the recipients are uninsured.
By contrast under the public program the results are
flipped; 70 percent of the public program recipients are
uninsured before a program goes into effect. Figure 4 looks at
and compares these two program approaches in terms of impact
from another perspective.
The share of the uninsured population that receives
benefits from the new program. The tax program makes a lot of
people eligible, close to 40 million people. Whereas, the
public program expansion on parents is focused on parents and
low income parents, and it reaches or is estimated to make
about 7.6 million people newly eligible.
However, a far larger portion of the eligible uninsured
population participates in the public program expansion than in
the tax credit, and these estimates are based on experience to
date both with respect to tax credits, and public programs.
Over half of the parents who are the target of the public
program expansion participate. Whereas, with the tax credit, we
see only 8 percent of the newly eligible population
participating.
That reflects the fact that the tax credit with its limited
dollars is as some people have described it offering a 10 foot
rope to people in a 40 foot hole.
By reaching a larger proportion of a smaller pool of
eligibles the public program expansion benefits a larger number
of previously uninsured individuals than does the tax credit;
3.8 million people, versus 3 million people.
But when you examine these policies, you can't look just at
the people who get the new benefit and get coverage. You have
to look also at whether some people lose coverage as a result
of a new policy.
And experience tells us that if we equalize or expand tax
preferences beyond the work place to equalize tax treatment
inside and outside work, employers are likely to respond by
dropping coverage.
And the employees who lose coverage as a result will take
advantage of credits and buy coverage, but some of them won't.
Indeed, tax credits are likely to disrupt coverage, and we can
see the results of that on figure five.
Although the tax credit provides subsidies to an estimated
3 million previously uninsured people, an estimated 1.4 million
people with employer coverage are likely to lose coverage as
employers drop that coverage and individuals find themselves
unable to afford picking up a new policy.
I have focused this testimony on the numbers of people
covered, but there are also differences in the benefits that
people would received under the two approaches, and the kinds
of people who would receive benefits.
Because of the way the non-group insurance market works,
the recipients or beneficiaries of tax credits will be
disproportionately young and healthy, and their coverage will
not protect them from significant out of pocket costs.
Under the public program expansion, newly covered parents
and their children will be covered, regardless of age or health
status, and consistent with existing Medicaid and CHIP rules,
will face little or at higher incomes constrain out of pocket
obligations.
So, in sum, although the two policies appear to be
addressing the same problem, they have very different
consequences. Tax credits reach a lot of people, but most of
them are not uninsured.
For the uninsured who are the minority of recipients, they
provide quite a modest benefit to the disproportionately young
and healthy, many of whom are not low income, and they cause
people to lose insurance from their employers at the same time
they are seeking to expand coverage.
The sole purpose of a public program is to expand coverage,
and it concentrates a comprehensive benefit on a narrowly
defined population, the vast majority of whom are uninsured.
If the Nation's goal is to expand meaningful coverage for
those who need it the most and are least able to pay, the top
priority must be the expansion of a public program, which is
far more effective in targeting resources from the tax credit
approach. Thank you very much, Mr. Chairman.
[The prepared statement of Judith Feder follows:]
Prepared Statement of Judith Feder, Dean of Public Policy, Georgetown
University
Mr. Chairman, members of the Committee, it is a pleasure to appear
before you today to discuss the critical issue of expanding health
insurance coverage. Sadly, the 1990s demonstrated that prosperity is
insufficient to prevent millions of Americans from being uninsured and
therefore at risk of lacking access to health care when they need it.
And, with economic recession, millions more are at risk as the loss of
jobs carries with it the loss of health insurance. There is no doubt
that policy interventions are needed to assure that people--especially
people with low and modest incomes--have access to affordable, adequate
health insurance coverage.
There is considerable bipartisan agreement on the desirability of
public subsidies targeted to low and moderate income people to achieve
this goal. However, there is considerable disagreement on the form that
subsidies should take. Some advocate reliance on tax credits for the
purchase of private insurance, while others promote the extension of
publicly-sponsored or publicly-purchased health insurance coverage
(Medicaid or the State Children's Health Insurance Program or SCHIP).
Analysis tells us that the choice of policy mechanism makes an
enormous difference to the policy outcome--in particular, how many and
what kinds of people get covered and what kind of coverage they get.
Key questions that must be asked of any health insurance initiative
are:
<bullet> Will its resources be effectively targeted to people who lack
health insurance, especially those who can least afford to
purchase coverage on their own?
<bullet> Will its coverage be adequate to assure affordable health
care?
<bullet> Will it disrupt adequate coverage that people already have?
Analysis building on past experience allows us to estimate the
likely answers to these questions for future policy. Our analysis shows
that public program expansions are far more effective than proposals
that rely on tax policy in expanding meaningful coverage to those who
need it most, without disrupting coverage that is currently in place.
Differences in Policy Instruments
The appeal of reliance on tax policy to expand coverage appears to
be the potential to provide benefits with minimal government
involvement. However, three factors call this strategy into question.
Tax policy is not designed to reach low income people. About half
the people without health insurance do not file an income tax return or
owe any income taxes. As a result, most tax-based proposals would make
tax credits refundable, that is, available without regard to tax
liability. The Earned Income Tax Credit (EITC) is a refundable tax
credit that has been enormously successful in enhancing income for the
working poor. However, it is harder to support the purchase of health
insurance than to boost income. Tax credits, including the EITC, are
typically taken as refunds--money the taxpayer gets back at the end of
the year. To buy health insurance, people with limited incomes need the
cash in advance. Further, they need to know they can keep the money,
even if their income changes. ``Advanceability'' and ``non-
reconciliation'' of subsidies and incomes would require substantial
departures from current tax policies, which aim at ensuring the
accuracy and efficiency of the tax system. Such mechanisms are
uncertain and untested in their ability to finance health insurance
coverage for a low and modest income population. Promises to modify tax
practices to support the purchase of health insurance are therefore
subject to question.
Tax-based proposals rely on a problematic insurance market. Tax
credit proposals aim to enable individuals to choose health insurance
plans in the private market. Since 70 percent of the uninsured
population lacks access to employer coverage, most of the uninsured are
expected to turn to the non-group insurance market as a source of
coverage. But that market is riddled with problems. To avoid adverse
selection--that is, the purchase of insurance by those most likely to
use health care, insurers use practices to avoid enrolling people
likely to use services. Except in a few states with a broad range of
consumer protections, insurers can deny people access; exclude coverage
for services, conditions, body parts, or body systems; and charge
premiums that vary with health status. Such practices not only apply to
people with serious medical diagnoses, like cancer or AIDS; they also
apply to people with seemingly modest health care needs, related, for
example, to allergies. And, even for those who do get insurance,
benefits in the non-group market can be quite limited. Policies may
exclude maternity benefits and mental health care or limit drug
coverage. Equally important they may include significant deductibles or
benefit caps. Limited benefits mean limited access to care for low and
modest income people.
To mitigate these problems, some have proposed allowing credits to
be used in states' high risk pools. However, these measures are
unlikely to be very effective in assuring affordable access to adequate
coverage. Despite more than a decade of experience, nationwide only
about 100,000 people are enrolled in 29 state high risk pools--one
quarter of them in Minnesota. These pools aim to provide access to
coverage at subsidized rates for people unable to gain access to
nongroup market. But rates are well above the standard rate in the non-
group market and vary with age, and enrollment may be capped, limiting
access. In addition, states try to keep costs under control by
excluding coverage for pre-existing conditions and limiting benefits.
Even with a modest tax credit, the costs to individuals of
participation in a high risk pool would remain high and its benefits
limited.
Tax credits typically offer too few dollars to make coverage
affordable. The value of the most frequently proposed tax credit falls
far short of the average cost of health insurance. Offering individuals
a $1000 credit for a policy that costs, on average, $2500 (or offering
a family a $2000 or $3000 credit for a policy that costs $7000) has
been described as extending a 10 foot rope to people trapped in a 40
foot hole. The lower a person's income, the less able that individual
is to make up the difference between the credit and the cost of the
policy. And the difference will likely be greater, the older the
applicant or in the presence of pre-existing conditions. Limited dollar
credits will favor access to insurance not only for people with income
to add to the credits, but also to younger, healthier individuals
(while they are young and healthy). Limited dollars will also be
attractive to individuals who are already purchasing nongroup insurance
(and some who are paying substantial out-of-pocket premiums for
employer-sponsored insurance)--providing them financial relief but not
new coverage.
Some have argued that access to insurance with a credit should not
be measured based on prices in the current market; rather, they argue,
the availability of a tax credit would encourage individuals to seek
lower priced policies, closer to the value of the credit. If that were
true, more people might obtain ``coverage'' with tax credits. But the
benefits associated with that coverage would be substantially more
limited than those now provided. A policy priced at half the premium
now typically charged would entail a $2800, rather than a $300,
deductible; substantially higher cost-sharing on covered services, and
an out-of-pocket maximum set at $5000 rather than $3000. Lower premiums
may enable more people to buy coverage but that coverage will buy them
substantially less health care.
Tax credits are an ineffective mechanism for the low and modest
income uninsured. If we truly wish to provide meaningful health
insurance coverage to uninsured people with low and modest incomes, we
must choose a mechanism that determines eligibility and provides a
subsidy in advance, makes that subsidy sufficient to support the full
(or close to full) cost of insurance, and provides comprehensive
benefits and limited (if any) out-of-pocket costs. Public programs
satisfy these conditions and have a proven track record. Given the
limitations to tax credits and the insurance market, even some
proponents of tax credits for higher income populations recognize that
a public program is better than using the tax system to reach the low
income uninsured.
Public programs provide the appropriate base for coverage
expansions. Medicaid's 35-year history of providing health insurance to
segments of the low income population has established both
administrative and legal structures that protect beneficiaries' rights
to benefits and health care. Perhaps most important, Medicaid extends
an adequate subsidy for an adequate product--that is, a subsidy for the
full cost of comprehensive insurance to people with limited incomes. In
addition, it has an administrative apparatus in place in every state to
determine eligibility for subsidies in advance and to facilitate
enrollment in health insurance plans. Medicaid has contracts in place
with providers and managed care plans (indeed, Medicaid programs are
public managers of private markets) and have established mechanisms for
collecting and matching funds from the federal government.
Although recent attention has focused on barriers to participation
in public programs, a decade ago attention centered on the speed of
Medicaid enrollment expansions in response to changes in federal law--
from 19.2 million people in 1989 to 26.7 million people in 1992. And
this year Medicaid eligibility will extend to poor (and some near-poor)
children in all 50 states, the culmination of policies phased in over a
decade. A decade ago, such an achievement seemed difficult to imagine
and likely to engender powerful resistance in the states. But today,
it's the reality. In addition, in the last few years,states have also
responded to the availability of SCHIP to dramatically expand their
income eligibility standards for children. Recession and fiscal
pressure on states endanger past achievements and make expansions
difficult. Federal dollars and federal standards will be required to
achieve national goals.
Differences in Policy Impacts
Work conducted for the Kaiser Family Foundation Project on
Incremental Reform allows us to examine the likely impact of
alternative mechanisms to expand coverage. That work analyzes a range
of tax policies and public program expansions and models their effects.
The modeling work draws on past experience to develop assumptions about
how behavior will change in response to a new benefit. These
assumptions then guide a simulation of the policy's impact. The
assumptions used in this analysis have been created by researchers at
the Urban Institute (for public program expansions) and the
Massachusetts Institute of Technology and National Bureau of Economic
Research (for tax policies), with actuarial support from the Actuarial
Research Corporation.
A focus on two proposals that closely resemble those most
prominently discussed allows us to compare the way two approaches with
respect to the fundamental goal: the ability to target resources to the
low and modest income uninsured population without disrupting existing
coverage.The two proposals are:
<bullet> A refundable tax credit for non-group coverage, providing
$1000 to individuals and $2000 to families. Full subsidies
would apply to individuals with incomes below $15,000 (families
with incomes below $30,000) and would phase out as income
rises, reaching zero for individuals with incomes of $30,000
(families with incomes of $60,000).
<bullet> A Medicaid/SCHIP expansion to parents (and any currently
ineligible children) with incomes up to 200 percent of the
federal poverty level (about $30,000 for a family of three).
Benefits and cost-sharing would follow SCHIP rules (negligible
for people with incomes up to 150% of the federal poverty
level; capped at 5% of income for families with incomes between
150% and 200% of the federal poverty level). States would be
required to extend eligibility to the maximum allowed under the
policy as a condition for receipt of any federal funds under
Medicaid or SCHIP.
Figures 1-5 illustrate the impacts of these two proposals. Figure 1
presents the bottom line: the number of people who receive benefits
from each proposal and the net number of newly insured under the two
different proposals. The tax credit provides benefits to almost twice
as many people as the public program expansion to parents (10.6 million
vs. 5.4 million). However, the impact of the two policies on the number
of newly insured people is reversed. The public program increases the
number of people who have insurance more than twice as much as the tax
credit (3.8 million vs. 1.6 million). Underneath these ``bottom-line''
differences are considerable differences in the way the two programs
operate.
Who receives benefits under the two approaches? Looking first at
income (Figure 2), about thirty percent of the tax credit benefit
recipients have incomes above twice the federal poverty level. By
contrast, all the public program's benefits are target to people with
incomes below that level. Looking next at insurance coverage (Figure
3), 70 percent of the tax credit recipients already have health
insurance. Only a minority of recipients are uninsured. By contrast, 70
percent of the public program recipients are without health insurance
coverage.
Figure 4 examines targeting from another perspective--the share of
the uninsured population that receives benefits from the new program.
The tax program makes a far larger uninsured population eligible for
benefits than does the public expansion to parents (38.3 million vs.
7.6 million people). (The differences are due both to higher income
eligibility standards in the tax credit and to the public program's
focus on parents and their children.) However, a far larger portion of
the eligible uninsured population participates in the public program
expansion than participates in the tax credit. Over half (58%) of the
parents who are the target of the public program participate, as
compared with 8 percent of those eligible for the tax credit. By
reaching a larger proportion of a smaller pool of eligibles, the public
program expansion benefits a larger number of previously uninsured
individuals (parents and children) than does the tax credit (3.8
million vs. 3.0 million).
However, the impact of a new policy is not limited to those who
benefit from it. At the same time some people gain insurance from a new
policy, others may lose insurance. Experience indicates that tax
policies that reduce the advantage to employer-sponsored over nongroup
insurance lead some employers to discontinue their coverage. Some
employees whose coverage has been dropped will take advantage of the
new tax credit and remain covered. But others will not. By contrast, a
narrowly targeted public program, especially one targeted only to
parents, effects only a small proportion of the workforce and, most
likely, only some workers in a firm. In addition, employers are likely
to be somewhat responsive to employees' reluctance to shift from
private to public insurance. A narrowly targeted public program is
therefore is unlikely to lead employers to drop coverage.
Figure 5 zeroes in on the different ways in which the two policies
affect the insured and uninsured populations. Although the tax credit
provides subsidies to an estimated 3.0 million previously uninsured
people, an estimated 1.4 million people with employer coverage are
likely to lose coverage as employers decide to drop their coverage
offerings. The net increase in the number of people with insurance is
therefore 1.6 million under the tax credit proposal, compared to 3.8
million under the public program expansion.
Finally, as described above, the 1.6 million people newly covered
by the tax credit will likely be different people, receiving different
coverage, than the 3.8 million people covered by the public program
expansion to parents. People newly insured by the tax credit will be
disproportionately young and healthy, and their coverage will not
protect them from significant out-of-pocket costs. Under the public
program expansion, newly covered parents (and their children) will be
covered regardless of their age or health status and, consistent with
existing Medicaid and SCHIP practices, will face little(or at higher
incomes, constrained) out-of-pocket obligations.
Policy Conclusions
Although seemingly addressing the same problem, two different
policy mechanisms can have very different impacts. Tax credits reach a
large number of people, but most of them are not uninsured. Indeed,
only a small proportion of the uninsured population--disproportionately
young and healthy--are likely to participate in the new program and
those who do will receive only modest benefits. And, at the same time
it expands coverage, the pursuit of tax equity actually undermines
coverage already in existence. As a result some of its coverage gains
are offset by coverage offsets. In large part, this outcome reflects
the fact that tax credits are not simply aimed at expanding coverage;
they also aim at greater tax equity--that is, equalizing tax
preferences wherever health insurance is purchased.
The sole purpose of a public program is to expand coverage. It
concentrates a comprehensive benefit on a narrowly defined population,
the vast majority of whom are uninsured. If the nation's primary goal
is to expand meaningful coverage for those who need it the most, the
public program is by far the more effective mechanism.
[GRAPHIC] [TIFF OMITTED] T7994.009
[GRAPHIC] [TIFF OMITTED] T7994.010
[GRAPHIC] [TIFF OMITTED] T7994.011
Mr. Bilirakis. Thank you, Ms. Feder.
Mr. Weil.
STATEMENT OF ALAN WEIL
Mr. Weil. Mr. Chairman, and members of the subcommittee, I
appreciate the opportunity to present testimony to you today.
My name is Alan Weil, and I direct the Assessing the New
federalism project at The Urban Institute.
Despite an emerging consensus that public subsidies must be
provided to assist the almost 40 million Americans who lack
health insurance, disagree remains over the form of this
assistance.
In my testimony, I argue that the evidence suggests that
building upon existing public programs such as the State
Children's Health Insurance Program, S-CHIP, or Medicaid, holds
far more promise for improving health insurance coverage than
tax credits do.
Tax credits suffer from five problems; problems of
availability, adequacy, amount, administration, and
accountability.
The most serious problem with tax credits is that of
availability. Most tax credit proposals are designed to
encourage people to purchase coverage in the individual health
insurance market. Insurers in this market often deny coverage
to those with any identifiable health problems.
When coverage is offered, rates are many times higher for
older adults than for those who are younger. Only a minority of
States have regulations that limit these practices, and thus
regardless of the size of the tax credit, health insurance
simply will not be available to those who most need it.
The second problem with tax credits is adequacy. A tax
credit of $1,000 for an individual, and up to $3,000 for a
family does not cover even half of the cost of the typical
health insurance plan.
Few families of modest means can or will pay the balance
with their own funds. Therefore, tax credit users will
primarily end up in plans with deductibles that run in the
thousands of dollars, with many excluded services, where
significant limitations on coverage.
These limited benefit packages will leave families in
exactly the position they find themselves in today, deferring
needed care because of costs, at risk of bankruptcy if they get
sick, and placing a tremendous financial burden of
uncompensated care on the entire health care system.
The third problem with tax credits is that of the amount.
Tax credits suffer from the Goldilocks fallacy. No amount is
just right. Everyone agrees a tax credit that is too small will
not increase insurance coverage at all.
But a tax credit large enough to help a substantial number
of people obtain health insurance is also going to be large
enough to draw a substantial number of people out of the
employer market.
This will raise premiums for small businesses, and shift
costs from the private sector to the taxpayer. A similar cost
shift much less frequently discussed would occur on the
boundary between tax credits and existing public coverage for
the very poor.
With dramatic regional variation in health insurance prices
around the country, it is impossible to set a single tax credit
amount that strikes a balance between helping no one and
undermining the existing health insurance system.
The fourth problem with tax credits is that of
administration, and at a minimum a tax credit must be
refundable and advanceable if it is to help a working family
purchase coverage.
Unfortunately, even with these provisions, many families
will be unable of the credit, failure to take advantage of it,
or not take it in advance when they need it because they will
worry that they have to pay the government back at the end of
the year.
The fifth problem with tax credits is that of
accountability. People in the individual insurance market are
on their own if their coverage is cut, their premiums rise, or
there is a dispute over their benefits.
Consumer outcry among those denied coverage or who feel
that they have been mistreated by their health plan, will
create immense pressure for the Federal Government to act. But
Federal action in the individual health insurance market will
intrude upon existing State control, prompting a destructive
battle over principles of federalism.
Now existing public programs do have their limitations, and
I am familiar with them as I used to direct the Colorado
Medicaid Agency. But these programs also have a track record.
They provide real comprehensive, cost effective, stable
coverage.
They target spending on those most in need, and they
minimize incentives for the private sector to drop coverage. At
a time when the Nation faces tight fiscal constraints and
growing numbers of uninsured, it is essential that limited
resources be spent where they will be most effective.
Tax credits are unlikely to improve the availability of
meaningful health insurance. They run a substantial risk of
damaging existing coverage. I think it is very important to
note that all of the arguments about what tax credits can do
come out of models and assumptions, some of them very well
constructed, very defensible.
But this is a test, and this is an experiment, and this is
a gamble, and is not building on systems that we already know
how they work, and what their weaknesses are, and how to
improve them.
By contrast, just last year States were posed to make
substantial progress on the issue of health insurance until
fiscal circumstances took a sharp turn for the worse. Federal
assistance that revives the State and local creativity that we
observed just a year ago would have a real immediate payoff in
how many Americans have health insurance.
It seems to me that this is the more productive and more
targeted direction to go. So I thank you for your interest in
this issue, and I welcome any questions that you may have.
[The prepared statement of Alan Weil follows:]
Prepared Statement of Alan Weil, Director, Assessing the New
Federalism, The Urban Institute
Mr. Chairman, members of the committee, I appreciate the
opportunity to appear before you today to discuss ways to expand health
insurance coverage. My name is Alan Weil and I direct the Assessing the
New Federalism project at the Urban Institute, a 36-year-old non-
profit, non-partisan research institute here in Washington, D.C. Before
coming to the Urban Institute I was executive director of the Colorado
Department of Health Care Policy and Financing, which is the state
Medicaid agency.
There is an emerging consensus that public subsidies must be
provided to assist the 40 million Americans who lack health insurance.
The disagreement that remains centers around the form of those
subsidies. Some advocate tax credits, while others advocate expanding
existing public programs such as the State Children's Health Insurance
Program (SCHIP) or Medicaid.
In my testimony today I will argue that the latter approach--
building upon existing public programs--holds far more promise for
improving health insurance coverage. The case for tax credits rests
entirely on theory and ignores the practical difficulties of providing
meaningful coverage in a complex, varied health care system. Existing
public programs also have limitations, but they have a 35 year track
record of providing comprehensive, cost-effective and stable coverage
to those in need.
Tax credits suffer from five problems--problems of availability,
adequacy, amount, administration and accountability.
The most serious problem with tax credits is that of availability.
Most tax credit proposals are designed to encourage people to purchase
coverage in the individual health insurance market. Insurers in this
market routinely deny coverage to those with any identifiable health
problems. When coverage is offered, rates are many times higher for
older adults than for those who are younger. Administrative costs
routinely exceed 30 percent. These insurance practices are
understandable--they are the only way companies can make money
operating in a market where they take on the substantial risk
associated with enrolling people with high health care needs. Yet, only
a minority of states have adopted regulations to limit these and other
practices. Thus, regardless of the size of the tax credit, health
insurance simply will not be available to those who most need it.
The second problem with tax credits is that of adequacy. The size
of the credit--$1000 for an individual and $2000 or $3000 for a family
in most proposals--does not even cover half the cost of the typical
health insurance plan. Analysts agree that few families of modest means
can or will pay the balance with their own funds. Tax credit users will
primarily end up in plans with deductibles that run in the thousands of
dollars, with many excluded services, or significant limitations on
coverage. These limited benefit packages will leave families in exactly
the position they find themselves today: deferring needed care because
of cost, at risk of bankruptcy if they get sick, and placing a
tremendous financial burden of uncompensated care on the entire health
care system. In addition, all experiments attempted to date show the
same thing: most Americans, and particularly those of limited financial
means, are simply not interested in bare bones coverage.
The third problem with tax credits is that of the amount. Tax
credits suffer from the Goldilocks fallacy: no tax credit amount is
just right. Everyone agrees a tax credit that is too small will not
increase insurance coverage at all. However, a tax credit large enough
to help a substantial number of people obtain health insurance is also
large enough to draw a substantial number of people out of the employer
market, thereby raising premiums for small businesses and shifting
costs from the private sector to the taxpayer. A similar cost shift
would occur on the boundary between tax credits and public coverage for
the very poor. Since a fixed dollar tax credit has health insurance
purchasing power that varies by a factor of more than five to one
depending upon where a person lives, it is impossible to set a credit
amount that strikes some theoretically correct balance between helping
no one and undermining the existing health insurance system.
Models that estimate how many people will take advantage of a tax
credit, how many will drop existing coverage, and how many previously
uninsured will gain coverage are very sensitive to the assumptions they
use. It is very risky to use positive results from one model to justify
a multi-billion dollar expenditure on tax credits.
The fourth problem with tax credits is that of administration. At a
minimum, a tax credit must be refundable and paid in advance if it is
to help a working family purchase coverage. Unfortunately, even with
these provisions many families will be unaware of the credit, fail to
take advantage of it, or not take it in advance because they will worry
they will have to pay the government back if they receive a small wage
increase during the year. The existing Earned Income Tax Credit
provides important evidence. Very few families claim the credit in
advance even though it is available. In addition, low-income Hispanic
parents--a group disproportionately likely to be uninsured--are less
likely to know about the EITC than other low-income parents, and, even
those who do know about it are less likely to have received the credit.
The fifth problem with tax credits is that of accountability. Most
people rely upon their employer or a public agency to provide them
information about their health plan, assist with problems, and monitor
the quality of coverage. But people in the individual market are on
their own. If their coverage is cut, their premiums rise, or there is a
dispute over their benefits, they must fend for themselves. If the
federal government is providing financial incentives to purchase
coverage, they will expect plans to be available. Consumer outcry among
those who are denied coverage or who feel mistreated by their health
plan will create immense pressure for the federal government to act,
but if it does so it will step into an area of long-standing state
control, prompting a destructive battle over federalism.
Existing public programs have their limitations, but they also have
a 35 year track record. They provide real, comprehensive, cost-
effective stable coverage. They target spending on those most in need,
and they minimize incentives for the private sector to drop coverage.
Public programs have gone through a positive transformation in recent
years. They have simplified applications and enrollment processes,
crafted new market-based benefit packages, improved education about
coverage options, and have been tackling old problems like how to
assure access to critical services like dental and mental health care.
At a time when the nation faces tight fiscal constraints and
growing numbers of uninsured, it is essential that limited resources be
spent where they will be most effective. If the goal is to reduce the
number of people without health insurance, spending money on tax
credits is a huge gamble paid for with taxpayer funds. By contrast,
states were poised to make substantial progress on the issue of health
insurance until fiscal circumstances recently took a sharp turn for the
worse. Even a modest expenditure of federal funds could revive the
state and local creativity we observed just a year ago. This would be
an expenditure based upon a track record, not a theory and a computer
model.
Mr. Bilirakis. Thank you, Mr. Weil. Well, there is great
interest in this issue, and you all have worked awfully,
awfully hard.
And I am not up here to defend the President's proposal. I
would like to say that I feel that I am open-minded, and I
think new and good ideas are always something that we should
not attack before we have had a real good analysis of them.
We should study most anything to see if it will work. But
it is important that we have our facts right. Ms. Feder, taking
a look at your charts, they tell a story, and I guess I want to
make sure that we are comparing apples with apples. On one
hand, you have a tax credit, and I hate like hell to keep
referring to a tax credit, and so I would rather say vouchers.
Because that is really what it comes down to, all right?
But I will go ahead and use it because the question is worded
that way. A tax credit proposal and then on the one side you
would mandate coverage for parents of children up to 200
percent of the Federal poverty level.
So you are making comparisons, but are those comparisons
taking into consideration the same dollars, the same costs?
Ms. Feder. I am glad you raised that, Mr. Bilirakis,
because the comparison that we do show, shows you that you
essentially get what you pay for in coverage, and if you cover
more people, you essentially spend more money.
And the analysis therefore shows to cover the 3.8 million
that the public program reaches, costs significantly more than
to cover the 1.6 million that is in the tax----
Mr. Bilirakis. But you don't reflect that in your charts or
anywhere in here?
Ms. Feder. We do it in the overall analysis. I apologize. I
would be happy to include it.
Mr. Bilirakis. What does it cost?
Ms. Feder. My recollection is that roughly the Federal cost
or the total cost, Federal and State, for the expansion to 200
percent of poverty, was in the neighborhood of $11 billion, and
the cost of the tax credit reaching the 1.6 million people was
in the neighborhood of between $4 and $5 billion on an annual
basis.
Mr. Bilirakis. So you are talking about 2 to 3 times
higher?
Ms. Feder. But the cost per individual was essentially the
same. So it is all a question of how much coverage you wish to
provide. In addition to that, you would want to look at what
you were buying with the coverage, and under the public program
expansion, you are buying the uninsured individuals a
comprehensive benefit.
Under the tax credit the analysis shows that the lion's
share of what you are spending is going to the already insured,
and you provide the uninsured the minority, or uninsured, a
very modest benefit.
Mr. Bilirakis. Well, so you keep emphasizing that you would
be making it available to the already insured. So what you
are--are you basically saying that the employer would then drop
coverage?
Ms. Feder. I am saying two things. The recipients who
already have insurance are two kinds. Many of them are people
who already have the non-group insurance, and who get financial
relief when you give them a credit, but not new insurance
coverage.
An additional portion of them are people who moved from the
employer coverage and take advantage of the tax credit outside.
In addition to those are people who lose coverage because their
employer drops and they find themselves unable or offsetting
those, and are people who actually lose coverage as a result of
the change.
Mr. Bilirakis. Ms. Turner, I think you are chomping at the
bit to respond to all of that.
Ms. Turner. Well, Mr. Chairman, there was a conference
yesterday to give a lot of economists and health policy experts
an opportunity to look into detail at the paper that Ms. Feder
and her colleagues have produced.
And there was a great deal of discussion about the
assumptions that are behind the cost estimates that they have
created, and Mark McConna from the White House used an analogy
that if you are in fact--that if you have two economists in a
whole, and they both try to figure out how to get out, and one
of them assumes a shovel and the other assumes a ladder.
So assumptions are of their own creation, but there was
some concern about some of the assumptions that would perhaps
put tax credits in a different light than the Medicaid
expansion.
For example, their model estimates that a family of four
would face a premium of $10,000 for health insurance, and not
surprisingly they do assume then that you only have an 8
percent of the people who would be eligible for a tax credit
actually taking up the policy.
So that is one way you could look at the world, but the
Council of Economic Advisors has done a separate study and
shown that a family could get a policy for $3,300. You could
assume $5,000. You could assume $7,000. Another issue that they
assumed----
Mr. Bilirakis. Mr. de Posada, I think you mention--and
forgive me for interrupting you--that you have done some
research, and you have determined that there are policies. Are
these good policies, or are they policies?
Mr. Posada. Well, these are policies that do not have the
$10,000 deductible that we are talking about here or the
premium costs. And we are talking about $1,000 deductibles,
PPOs.
I mean, obviously they are not going to be Cadillac plans.
They are not going to be offering enormous amounts of benefits.
But at least there is something there, and one of the big
things that we have seen in our community is that concern that
you are going to have an accident, and you are going to be
financially ruined for the rest of your live because of that.
And I think this is a great opportunity to at least take
care of that concern.
Mr. Bilirakis. Ms. Turner, I cut you off. Please, would you
finish up whatever it is that you want.
Ms. Turner. Just briefly, Mr. Chairman. I think it is also
important to note that the model of the tax credit that was put
into this model is not the President's plan. It is a $2,000 per
family and not $3,000 for a family.
And also they assume, and I am just very interested in this
assumption, that with a tax credit that employers would drop--3
million people would lose their current employment-based
coverage that already have it.
And they assume that with a Medicaid expansion that no one
loses employment based coverage, and that really changes the
bottom line arithmetic of who is going to get coverage, versus
various plans.
So one of the suggestions at this coverage was that we need
to integrate into one better set of assumptions how you get a
better comparison.
Mr. Bilirakis. Yes, thank you. My time is up. I just hope
that we don't--we want to do something to help people who need
some help, and if what we are looking for is perfection, we
just are not going to get it, and that is what we have done
with the Patient's Bill of Rights business, and that sort of
thing.
I mean, would it not be better to have if in fact the need
was there, and some people question that. But the point is that
if the need was there, wouldn't it be better to have something
that is less perfect, but at least something that is a force?
We had a bill a few years ago that had so many co-sponsors
that we cutoff the co-sponsorship if you will recall. I hate to
put it this way because my name is on it, but the Roll and
Bilirakis bill, and how many people would have been helped now?
I am talking about quite a few years ago, and who would
have been helped now if that plan had gone into effect, and the
majority of the Congress was all for it. We had to cutoff co-
sponsorships, but the leadership would not allow it to come on
to the floor.
But let's be a little sensible here, and let's do
something, even though it isn't perfect. Mr. Brown to inquire.
Mr. Brown. Thank you, Mr. Chairman. In my 9 years in this
committee, I have found Dr. Feder's assumptions, and her logic,
and her intellectual honesty to always be unblemished.
So you seemed a bit impatient as two other witnesses were
talking. So go to it, Dr. Feder.
Ms. Feder. Thank you, Mr. Brown. I would indeed prefer to
state the assumptions myself rather than have them stated for
me. Ms. Turner is quite correct that there was a conference
that we had yesterday, because we are interested in getting
input in the analysis we have done.
There was a lot of discussion about the assumptions, and
the White House economist from the CEA was quite challenging of
the assumptions, and raised a number of questions.
And the analyst who developed the assumptions and did the
modeling from MIT and the Urban Institute responded, and the
assumptions were not quite as Ms. Turner described them.
The assumptions are based when we talk about the premium
that people look at to go shopping with their tax credit, and
the assumption is that the price of the policy is what the
price is in the current market for non-group insurance.
We also looked at what behavior would be if people shopped
for a policy that cost half that, but provided half the value
in benefits. So there was not an assumption of looking at a
$10,000 policy except to the extent that a $10,000 premium
would apply in the market.
The model really looks at the prices that actually exist in
the marketplace today. And I am sure that you will want to
discuss further those prices are far higher for many people
than the low price that we sometimes hear quoted, and it is
available on the internet for that rare healthy young
individual.
So the assumptions are really quite consistent with the
literature, the economics literature, and indeed that was
acknowledged by participants from other institutions, other
recognized institutions, and indeed as someone else observed,
the underlying assumptions are very similar in the work that
has been done in some areas by the Council of Economic Advisors
and by us.
And as I said, the numbers actually are not very far off
when you present them in a consistent fashion.
Mr. Brown. Okay. Thank you. Let me ask a little about the
private insurance market. Do insurers require the private
insurance market in most States to offer any specific set of
benefits?
Ms. Feder. No, insurers typically offer--well, there are
actually mandates in terms of--in some States as to what
insurance has to offer, and that applies in some cases. But the
insurance, the nature of the policy that any individual can get
can vary tremendously.
Insurers have tremendous freedom in terms of what kinds of
benefits they will cover.
Mr. Brown. Are they required to cover all conditions?
Ms. Feder. No, they are not required to cover all
conditions, and indeed, many policies actually explicitly
exclude conditions, and body parts, and body systems, from
coverage.
Mr. Brown. They clearly are not required to charge the same
price?
Ms. Feder. Absolutely not.
Mr. Brown. Are insurers in the individual market required
to offer a policy to anyone who wants one?
Ms. Feder. No, indeed they are not. There are very few
States or some States that have guaranteed issue requirements,
but because they can charge people any premium they wish to
charge, that really does not make it in Dr. Weil's view that it
really does not make it accessible or available.
Mr. Brown. So describe to me what types of people who are
eligible for the President's tax credit? What types of people
who are eligible would have difficulty in the individual
insurance market?
Ms. Feder. It is very interesting to ask that because
colleagues of mine did a study recently on the kinds or the
people who shop for coverage in the non-group market and have
some difficulties or they found difficulties in getting it.
A 24 year old waitress with hay fever; a family with two 36
year old parents, a 10 year old daughter, and a 12 year old son
with asthma, and recurring ear infections; a 48 year old who
had breast cancer 7 years ago; and a 62 year old man who
smoked, in addition to a couple of other sample applicants.
And they found that the waitress with hay fever was faced
with or did receive offers, but most of those offers excluded
her coverage for hay fever, and some of those offers excluded
coverage for her entire respiratory system.
And with the young boy with asthma, there were policies
that refused to cover the child altogether, and I am
particularly sensitive to this one because I have a son with
asthma.
And if you had not covered his respiratory system in his
insurance, and you did not have the income that I am fortunate
to have, he would have been in an emergency room or without
treatment on numerous occasions.
These are examples, and I can go on with these cases, but
we find that we are not just talking about people with serious
high risk conditions, who find themselves unable to find
affordable and adequate coverage in the non-group market.
Indeed, I would not want myself or my son to have to go
shopping in that market giving health existing conditions.
Mr. Brown. Okay. We have two entitlements here. We have the
tax credit if enacted that entitlement, or we have the Medicaid
entitlement. The tax credit provides various kinds of
insurance, various levels of coverage, various prices, is not
available to many.
Medicaid provides for a standard set of broad coverage.
Where does the government get its best bang for the buck here?
Ms. Feder. Well, I don't think there is a moment's
question. I think the priority in new dollars has got to go to
people who don't have insurance, and to the people who are
least able to buy it on their own.
And to be spending money on people who already have
insurance, rather than those who don't seems to me an
inefficient and inexcusable use of our current resources. We
can celebrate this year the accomplishment that all over the
Nation, in 50 States, all poor children are covered as a result
of Medicaid requirements that were enacted over a decade ago.
And at that time there was a lot of concern that this was
not possible, and that it was beyond the resources of States,
and that we would never reach that goal. Now, it did take us
better than a decade to achieve it, and that is unfortunate.
But all those poor children can count on a federally
guaranteed entitlement program to provide them a comprehensive
set of benefits, and as someone said earlier, god bless
Medicaid.
Mr. Brown. Thank you.
Mr. Bilirakis. I was a little concerned. I used the word
staggering facts that Dr. Kellermann shared with us regarding
Medicaid, and the movement in and out of Medicaid, the
revolving nature of Medicaid and what not, and for what seemed
to be a lack of stability.
And we have to ask these questions of ourselves, but would
not something, whether it be--whatever you might want to call
it, but some sort of tax certificate to help people to get out
there and choose whatever it is that they would want and result
in more stability.
But on the other hand, you also raised the point of the
uninsurability of some people; the child with asthma and that
sort of thing. So that is what makes this job almost
impossible.
Well, I think it is a little easier as a result of your
testimony. But anyway, we appreciate your time here, and again
as you know, and many of you have testified--Dr. Feder and
others have testified here before--you know that we will have
written questions of you, and we would hope that you would
respond in a timely fashion.
We are going to do the best that we can. We are tousling
with prescription drugs for Medicare recipients right now that
is kind of a top priority, but uninsured is also up there, and
in an election hear like this, particularly with the war on
terrorism taking place, it places additional burdens on us, but
we are going to do the best that we can. Thank you very much.
Also, here are members who would wish to submit their
opening statements, and without objection, that will always be
the case. Thank you very much, and in addition to materials.
[Whereupon, at 1:24 p.m., the subcommittee was adjourned.]
[Additional material submitted for the record follows:]
May 10, 2002
The Honorable Michael Bilirakis
Chairman
Committee on Energy and Commerce
Subcommittee on Health
Washington, DC 20515
Dear Mr. Chairman: Thank you for your letter of April 30, 2002 and
for the opportunity to testify before the Subcommittee on Health on
February 28, 2002.
Per your request, I have prepared answers to the follow-up
questions submitted by Members on the problems to access affordable
health care coverage. Again, thank you for this opportunity and if I
can be of any further assistance, please do not hesitate to contact me.
Sincerely,
Thomas R. Donnelly, Jr.
Member of the Board
Responses from The Honorable Thomas R. Donnelly, Jr.
1) Some states have repealed guaranteed issue requirements and put
in high-risk pools instead. For example, Kentucky, Washington, Idaho
and New Hampshire previously had guaranteed issue but have since
repealed the mandate and provide (or plan to provide) access to health
insurance for the ``hard to insure'' individuals through high-risk
pools.
Kentucky's 1995 reforms that included guaranteed issue laws led to
an exodus of 40 private insurance carriers from the state, leaving only
one plan behind. In 1998, the state revised its reforms and established
a new guaranteed access program in attempt to lure companies back to
the individual market. The attempt proved to be insufficient in
encouraging market competition so additional changes were made in April
2000 to allow medical underwriting in the individual market and the
establishment of Kentucky Access, a new high-risk pool.
In the case of Washington, individual market reforms in 1993 that
included guarantee issue, standardized plans and rating restrictions
resulted in such a high level of losses that by 1999, all individual
health insurance carriers in the state left the market. Major reform
legislation was passed in March 2000 to restore competition and
participation by insurers and to establish a high-risk pool for those
who are ``hard to insure.''
Both Idaho and New Hampshire faced similar results from their
guarantee issue regulations that led state legislature in 2000 and
2001, respectively, to revise their laws and establish high risk pools.
2) The Health Insurance Flexibility and Accountability (HIFA)
demonstration initiative strongly encourages states to think creatively
about how Medicaid and Children's Health Insurance Program funding can
be used to maintain and encourage coverage in the group health plan
market. The new options available under this waiver will allow working
families to be insured together. Employees will be able to take
advantage of employer sponsored coverage and use dollars available
through the HIFA waivers to help them pay for family coverage in their
employer's plan. Many families who previously shunned Medicaid and CHIP
programs due to the stigma associated with the Medicaid program will be
more receptive to participating in coverage in an employer setting.
A summary of specific state options under the HIFA program produced
by the National Association of Health Underwriters is attached.
3) In response to Ms. Feders' study and overall analysis in
comparison with the tax credit proposal, the choice is clearly between
consumer choice and government control. Ultimately, the tax credit
proposal, rather than state expansion of public programs, empowers
individuals to select their own place of purchase rather than having
that place of purchase imposed on them by the government. Hewitt
Associates LLC consumer study reports that 87% of participating
employees felt they understood ``fairly or very well'' how to choose
the best health plans for their needs (although employers speculated
only 61% employees had confidence in such a decision). The data
suggests that consumers are more capable of making their own decisions
about their health care needs that employers assume.
Ms. Feder's analysis is based on numerous assumptions including:
e) Substantial employer dropping of coverage is assumed for the tax
credits.
f) A higher cost of insurance than is estimated by the Council of
Economic Advisors or currently provided by groups like e-
HealthInsurance.
g) Very low take-up rate for the tax credit and high take-up rate for
the Medicaid expansion
In response to these assumptions, I would highlight the following:
a) In his testimony before the House Ways and Means Committee on
February 13, Mark McClellan stated: ``The impact of tax credits on
employer health insurance coverage would be minimal, and the majority
of individuals taking up the proposed health credit would be those who
were either previously uninsured or previously covered in the non-
employer insurance market.'' In addition, no empirical data suggests
that tax credits for individuals will inevitably lead to drastic
reduction of participation in employer-sponsored plans. The reality
remains that 1) About 80% of uninsured workers are not offered health
insurance by their employers; 2) Only 36% of people under age 65 with
income below 200% of FPL have employer-sponsored insurance, while 77%
of those above do. Also, it should be noted that of all employees
offered employer-sponsored coverage, 5% don't accept and that 5% make
up the 20% of uninsured population. Twenty percent of the uninsured
have access to employer-sponsored coverage but are unable to afford
their share of employer-sponsored premiums.
b) Higher cost quotes of private insurance often result from
looking at the smaller segments of the uninsured population, the
elderly and the unhealthy. U.S. Census Bureau reports that 12.6% of the
uninsured population are between the ages of 45 to 64. Stated another
way, 88% of the uninsured are 44 years of age or younger. Not that this
segment of the population is any less significant but focusing on the
exceptions will paralyze any progress on the issue.
The same can be said for the unhealthy uninsured or those unable to
receive coverage in the individual market due to preexisting health
conditions. Although several estimates have been made on the size of
this population, only 5% of uninsured population (1.5% of U.S.
population) is chronically ``uninsurable'' according to Communicating
for Agriculture's ``Comprehensive Health Insurance for High-Risk
Individuals'' and other studies.
National Association of Health Underwriters offered its own
analysis of what is available in the individual market for the
unhealthy or those who are ``hard to insure'' in response to a study
conducted by Kaiser Family Foundation (see attached). For the six
hypothetical cases who represented ``less than perfect health,'' All 6
out of 6 unhealthy individuals (not including the individual diagnosed
with AIDS), were able to obtain health insurance in every one of 8
geographic markets tested (health insurance companies approved 75% of
these total submitted applications).
c) Ms. Feder claims that tax credits are inefficient since they
extend to all people in an eligible income category regardless of their
current insurance status. We would agree that it is true that there
will be some individuals who will be eligible for the tax credit who
are currently insured. These individuals have exercised personal
responsibility and made sacrifices in order to provide health insurance
for their families, in spite of their low incomes. Regardless of the
``inefficiency'' of extending a tax credit to these already insured
individuals, it would seem quite unfair to penalize them for doing the
right thing if they are otherwise eligible for the credit.
Ms. Feder claims that public programs have a higher take-up rate
among previously uninsured individuals, and are therefore more
efficient. However, this take-up rate is based on a smaller eligibility
category that only includes those who were previously uninsured, versus
the tax credit where eligibility is based on income level and not
insurance status. In reality, the tax credit reaches more people,
including those who are already struggling to provide coverage to their
families. It helps people who need help the most, based on their income
level.
Contrary to Ms. Feder's assertions, the odds of employers
discontinuing their coverage if a tax credit program were enacted are
small. The tax credit is after all a means tested proposal. It is
highly unlikely that all of an employers employees would be eligible
for the tax credit, and although employers are allowed to discriminate
in their financial contributions by class, a class made up only of
those employees eligible for the tax credit would not fit within
allowable guidelines. Employers offer health insurance to recruit and
retain good employees, and they will continue to do so. A properly
structured tax credit can help an employer's low income employees pay
for their share of coverage, particularly family coverage, and this
greater participation by employees would actually improve employer
health plan loss ratios. Ms. Feder's presumptions do not reflect market
realities, current law, or typical actions by employers.
cost and availability of health insurance for people with chronic
health conditions
Considerable misunderstandings exist about the cost and
availability of health insurance for those with chronic health
conditions. While available evidence is limited and should be improved,
those with chronic conditions by and large do have access to affordable
health insurance coverage.
The vast majority of Americans receive their health coverage
through their employer, and the Health Insurance Portability and
Accountability Act of 1996 (HIPAA) provides that all employer groups
guarantee access to health insurance coverage without regard to health
status. For individuals who obtain coverage through the individual
health insurance market, a wide variety of options have been
implemented at the state level to ensure access to coverage.
Background on Chronic Conditions and Health Insurance
<bullet> The term ``chronic condition'' can be interpreted widely or
narrowly. Many studies label anyone who takes medication
regularly (such as allergy medicine or anti-depressants) as
chronically ill, regardless of how those conditions affect
insurance availability, premiums, or the expected cost of
health care. About 60 million working-age people have a chronic
condition under the broadest definition, which includes just
about any condition that may influence medical care use in any
way <SUP>1</SUP>. Yet this does not mean that they cannot get
health insurance or that their health insurance or their total
health care costs will always be significantly higher as a
result.
---------------------------------------------------------------------------
\1\ Community Tracking Study Household Survey
---------------------------------------------------------------------------
<bullet> Many programs exist to help those who have serious chronic
conditions get affordable health insurance in the individual
market. For example, many states have high-risk pools for
people who don't qualify for coverage in the regular individual
health insurance market. These pools have caps set on premiums
averaging about 150% of the individual market average rate. In
addition to the premiums paid by pool participants, these pools
are normally subsidized by assessments to insurance carriers
and state funds from a variety of sources.<SUP>2</SUP>
---------------------------------------------------------------------------
\2\ Comparison of State Level High Risk Pools, National Association
of Health Underwriters, January 2002.
---------------------------------------------------------------------------
In June of 2001, Kaiser Family Foundation issued a report on the
availability of coverage for people in less than perfect health. NAHU
participated in the research for this project and can vouch for the
accuracy of the objective data included in the study.
NAHU would not, however, have reached the same conclusions based on
the analysis of the underwriting and pricing information collected.
Kaiser Study <SUP>3</SUP>
---------------------------------------------------------------------------
\3\ Pollitz, Sorian, and Thomas, How Accessible is Individual
Health Insurance for Consumers in Less than perfect Health?, Kaiser
Family Foundation, June, 2001.
---------------------------------------------------------------------------
Data
<bullet> Seven fictional applicants sought individual health insurance
policies in eight different geographic areas. The applicants
had different ages, family structures, health conditions, etc.
<bullet> Quotes for $500 deductible, $20 office visit co-pay plans were
solicited. Offers, prices, and restrictions were recorded.
Kaiser's Interpretation
<bullet> The Kaiser report emphasized that applicants with chronic
conditions were often rejected by at least one insurance
company in the region, and often received offers with
surcharges (``rate-ups'') or exclusion of certain conditions
(``riders''). The HIV positive applicant failed to receive
offers in any market.
On further analysis . . .
<bullet> The conclusion that affordable health care is not available to
persons with chronic conditions is not a complete picture of
the way health care coverage works. In the Kaiser study, all
but one of the fictitious applicants (with the exception of the
HIV positive patient) received at least one offer in each
market, and the vast majority of offers were affordable and not
restrictive. These offers are shown in more detail in the
appendix.
<bullet> The ``rate-up'' seen in many offers was often only 25%, and
was often applied to a lower base premium than the premium
offered to healthy persons in the market. For example, the
applicant who had situational depression received a clean offer
with a $276 premium, but an offer with a 20% premium increase
(and no benefit limits) that was $279--only $3 higher. Both of
these offers without exclusions were less costly than some of
the offers that included benefit limitations.
<bullet> Not all applicants who had ``riders'' would face much higher
costs. For example, in Florida, the allergy sufferer received
only offers with limits on coverage for her allergies. But her
lowest offer was a monthly premium of $111, and the monthly
cost of the specific medications and shots that were excluded
would average only $31, for an effective maximum monthly cost
of $142--much lower than the average premium reported of $257.
In Arizona, she received no offers without restrictions, but
received an offer excluding her allergy treatment for only $66.
Again, with an estimated cost for medications and allergy shots
averaging $31 per month, her total monthly outlay would have
been $97.
<bullet> In the relatively rare cases where coverage exclusions or
rate-ups are substantial, high-risk pools and state ``insurers
of last resort'' provide an alternate source of coverage. The
California and Florida high-risk pools cited in the original
Kaiser analysis are two of the worst-performing pools, due to
lack of adequate funding for many years. As a result, these two
pools are much less functional than their counterparts in other
states. High- risk pools in states that use an insurance
carrier assessment mechanism to offset losses of the pool are
able to provide affordable coverage for many otherwise
uninsurable individuals. In addition, other state mechanisms to
guarantee access, such as ``carriers of last resort'' provide
additional options. For example, the individual who suffered
from allergies in the Kaiser study received no ``clean'' offers
in Virginia, and had an average monthly premium (with riders)
of $118. But the same individual could have elected a policy
with no riders through the guaranteed issuer of last resort in
Virginia (Trigon) for $104. Furthermore, the HIV positive
applicant could receive insurance through a high-risk pool or
carrier of last resort (with no benefit restrictions) in 6 of
the 8 states examined, 4 of which had premiums under $300. The
clear conclusion is that adequately-funded high-risk pools can
and do provide affordable coverage for persons with even the
most serious chronic conditions.
<bullet> It should be noted that individuals and families who lose
employer coverage with at least 18 months of creditable
coverage have a guaranteed right to purchase coverage in the
individual market in all 50 states, providing they meet HIPAA
eligibility provisions. In addition, employees leaving groups
of more than 20 employees have the right to continue coverage
under the federal COBRA law, and many states provide state
continuation options for individuals leaving employers with
less than 20 employees.
<bullet> An examination of states that do not use underwriting but
instead have imposed guaranteed-issue and community rating
requirements in their non-group insurance markets, show that
almost all of the applicants would have faced vastly higher
health insurance costs. For example, the applicant with high
blood pressure could get monthly premiums without benefit
restrictions that ranged from $244 to $805 in the 8 different
markets studied. But in New Jersey, a state with guaranteed
issue and community rating, his monthly premium would be
$1,801.
Finally, a very important purchasing consideration for low-income
individuals who purchase in the individual market is affordability of
any size premium. Individuals and families who purchase in the
individual health insurance market do not have the luxury of a
financial contribution by an employer. Regardless of their income or
health status, these individuals must purchase individual health
insurance coverage entirely on their own. For this reason, NAHU
strongly supports refundable tax credits to make the cost of coverage
more affordable, especially for low-income individuals.
appendix: details on health insurance offers received by all
hypothetical applicants in all markets
The Kaiser study examined the insurance offers received by six
hypothetical applicants in eight geographic areas (IL, TX, IA, CA, FL,
VA, AZ, IN). (Costs are expressed below as the best offer for monthly
premiums.)
<bullet> For comparison, each of the single applicants would have faced
the following (higher) rates in three guaranteed issue and
community rated states: in NJ, $1,801; in NY $364; in ME, $516.
Alice: 24 years old, allergies
<bullet> Received offers with no restrictions in 5/8 markets (IL, TX,
IA, CA, and IN), with an average monthly premium of $100.
<bullet> Received an offer with an exclusion for certain allergy
treatments of $111 in FL. Adding her estimated monthly out of
pocket costs for Allegra and allergy shots yields an effective
monthly cost of $142.
<bullet> Virginia's guaranteed issuer Trigon would have issued a policy
of $104 with only a $300 deductible (or $93 with a $750
deductible) and no benefit restrictions.
Bob: 36 years old, previous knee surgery
<bullet> Received offers with no restrictions in 8/8 markets, averaging
$134.
<bullet> Received significantly cheaper offers that excluded the knee
in several states (for example, $69 instead of $154 in VA, $111
instead of $335 in FL). Given that no further treatment on the
knee is anticipated, these offers might be preferable.
Crane Family: Family of 4, son with asthma
<bullet> Received offers of family coverage without restriction in 4/8
markets (IL, CA, AZ, and IN), averaging $352.
<bullet> In 3 of the remaining states (IA, TX, and VA), if the family
purchased coverage except for the son (without restrictions)
and added coverage for the son through either the state high
risk pool or carrier of last resort, the family's total average
premium would be $512.
<bullet> The premium for the family was $497 in FL, but it excluded the
son's asthma. The FL high-risk pool is one of the few high-risk
pools that are currently closed.
<bullet> These rates generally compare very favorably to the coverage
available in guaranteed-issue states: monthly premium in NJ,
$3273; in NY $947; in ME, $1,900.
Denise: 48 years old, previous breast cancer
<bullet> Received offers with no restrictions in 8/8 markets, averaging
$226.
Emily: 56 years old, situational depression
<bullet> Received offers with no restrictions in 8/8 markets, averaging
$253.
Frank: 62 years old, high blood pressure, smoker, overweight
<bullet> Received offers with no restrictions in all 8/8 markets,
averaging $514.
Greg: 36 years old, HIV positive
<bullet> Received no offers in individual market.
<bullet> Virtually all individual market insurers in the United States
consider HIV+ status to be an uninsurable medical condition.
<bullet> Would be able to purchase insurance through high-risk pools or
a carrier of last resort in all states except FL and AZ, with
an average cost of $330. (The VA plan had a higher deductible,
although a lower deductible plan was also available. The CA
policy had annual and lifetime limits, and has a waiting list.)
private sector health insurance options using public funding
Background
The Bush Administration has developed a new initiative to provide
health insurance to low income individuals and families. The Health
Insurance Flexibility and Accountability (HIFA) demonstration
initiative strongly encourages private health insurance options
targeted to people with incomes below 200 percent of the federal
poverty level (FPL). Private health insurance options include both
group health plan coverage and individual health insurance coverage.
The HIFA initiative uses current Medicaid and SCHIP resources under a
Section 1115 waiver, and therefore does not require new budget
allocations.
Eligibility, Benefits and Cost Sharing
The new initiative does not limit the upper income eligibility
level, but does focus on individuals with family incomes below 200
percent of the federal poverty level. States requesting eligibility
above 200 percent of the federal poverty level must demonstrate that
their state already has high coverage rates in this range and that
covering individuals above 200 percent of the federal poverty level
will not induce those who already have private health insurance
coverage to drop it. States are encouraged to think creatively about
how Medicaid and Children's Health Insurance Program funding can be
used to maintain and encourage coverage in the group health plan
market.
Benefit requirements differ depending on the population to be
covered. The benefits are targeted at the following populations:
<bullet> (Mandatory populations: groups which must be covered by
Medicaid, such as children under age six and pregnant women up
to 133 percent of the federal poverty level.
<bullet> (Optional populations: groups that could be covered under
Medicaid or the Children's Health Insurance Program, whether or
not the state has actually elected to do this. Family income
eligibility for these groups is greater than the mandatory
population income levels. They include children already
enrolled in the Children's Health Insurance Program, children
who are or could be covered by Medicaid at incomes greater than
the mandatory income levels, and parents covered by Medicaid.
<bullet> (Expansion populations: groups not eligible for Medicaid or
SCHIP unless provided coverage through a section 1115 waiver
authority, such as non-disabled adults without children.
The HIFA waiver does not allow reduction of benefits for mandatory
populations, or vulnerable populations such as pregnant mothers or
children with special needs. States will have new flexibility under the
HIFA initiative to modify current benefit packages for optional
populations under both Medicaid and SCHIP to allow all optional
populations to be covered by one of the benefit packages available
under the Children's Health Insurance Program, including:
<bullet> The benefit package for the HMO that has the largest
commercial enrollment in the state, or;
<bullet> The Blue Cross/Blue Shield PPO option for federal employees,
or;
<bullet> A health benefits coverage plan that is offered and available
to state employees, or;
<bullet> A benefit package that is actuarily equivalent to one of those
above, or;
<bullet> A package approved by the Secretary.
Benefits packages for optional populations must include inpatient
and outpatient hospital services, physicians surgical and medical
services, lab and x-ray services, well-baby and well-child care,
including age appropriate immunizations.
States will have even greater flexibility in designing the benefit
package for expansion populations. The benefit package for expansion
populations must include a basic primary care package, which means
health care services customarily provided by or through a general
practitioner, family physician, internal medicine physician,
obstetrician/gynecologist, or pediatrician. States may establish limits
on the types of providers and the types of services, subject to
approval by the Secretary of Health and Human Services. Benefits must
be comprehensive enough to be consistent with the HIFA goal of
increasing the number of individuals in the state with health insurance
coverage. The Secretary will permit flexibility in both the definitions
of benefits and cost sharing for optional and expansion populations in
support of increased use of private group health plan assistance
programs, and will not be required to meet a specific cost
effectiveness test for premium assistance programs that promise to
decrease the number of uninsured under 200 percent of the federal
poverty level.
Cost sharing for mandatory populations will continue to be limited
to nominal amounts. States will be provided new flexibility to define
cost sharing for optional Medicaid populations and expansion
populations; however, cost sharing for optional children may not exceed
5% of the family's income. In cases where the entire family is covered,
this 5% guideline does not need to apply to cost sharing that can't be
attributed to individual family members, such as a family premium.
However, the 5 percent limit does apply to cost sharing attributable to
children, such as copayments for children's visits to physicians.
NAHUs Position
The new HIFA waiver is an opportunity for states to develop private
sector health insurance options using currently available public
funding. The new flexibility in benefits, cost sharing and the use of
private plans is unprecedented. We strongly support the use of this
waiver to decrease the number of uninsured individuals and families in
the United States.
______
Responses for the Record of Judith Feder, Ph.D., Dean of Public Policy,
Georgetown University
Question 1: In your written testimony, are you using the
President's refundable tax credit proposal as a basis for comparison or
a proposal created by researchers at the Urban Institute? Have the
researchers at the Urban Institute specifically researched a refundable
, advanceable tax credit?
Answer 1: The tax credit proposal in my testimony is similar,
though not identical to the President's proposal. As noted in the
testimony, it is a refundable tax credit for non-group-coverage,
providing $1000 to individuals and $2000 to families. Full subsidies
would apply to individuals with incomes below $15,000 (families with
incomes below $30,000) and would phase out as income rises, reaching
zero for individuals with incomes of $30,000 (families with incomes of
$60,000). The likely impact of this proposal was estimated by Jonathon
Gruber of the Massachusetts Institute of Technology and National Bureau
of Economic Research, with actuarial support from the Actuarial
Research Corporation. The estimates did assume that the tax credit was
advanceable.
Question 2: Is it correct that you assume that 1.4 million people
will drop employer provided coverage to receive a tax credit to be used
in the individual market, but you also assume zero people will drop
employer coverage to receive virtually free insurance under an
expansion of SCHIP?
Answer 2: No. Looking first at tax credits, 3.9 million people are
estimated to lose employer coverage--a combination of people who
themselves choose to shift from employer coverage to purchasing
coverage in the individual market and of people whose employers drop
coverage. Among those whose employers drop coverage, an estimated 1.4
million people are estimated as not likely to purchase insurance on
their own, even in the presence of the credit. Hence, they lose
insurance. (Figure 3 in my testimony shows the 2.5 million people who
previously had employer coverage and are estimated to be using the
credit to purchase in the individual market. Figure 5 shows the 1.4
million people whose employers drop coverage and who lose insurance
altogether because they are estimated as unlikely to take up the tax
credit to purchase insurance in the individual market.)
Looking at the public program expansion to parents, 1.1 million
people are estimated to lose employer coverage (Figure 3 in my
testimony). However, all of these people are individuals who themselves
choose to shift from employer coverage to the individual market when
offered the tax credit. Employers are estimated as unlikely to drop
coverage under a policy that targets a new benefit to so narrow a
segment of workers as low income parents. Since employers are unlikely
to drop, no individuals lose coverage without shifting to an
alternative. (Hence the 0 losing insurance in Figure 5.)
Question 3: In your testimony, you assume a take-up rate of 8
percent for the tax credit program but a 58 percent take-up rate for
the Medicaid expansion. Can you please elaborate on this?
Answer 3: Estimates of take-up are not arbitrarily assumed. Rather
they are a function of differences in subsidy structure and people's
likely responses to those structures, based on experience. As shown in
Figure 3 in my testimony, an estimated 38.3 million previously
uninsured individuals would be eligible for the tax credit. For the
vast majority of these individuals, the tax credit is structured to
provide only a partial subsidy for the cost of insurance. The
literature on individuals' responses to subsidies indicates that
limited subsidies lead to limited participation. Our analysis--which
reflects experience with the way people's financial circumstances, the
price of insurance, and the value of a subsidy affect choices--finds
that 3 million people (8 percent of eligible uninsured people) would
take up the tax credit.
The public program expansion is structured as a full subsidy for
the cost of insurance for people with incomes under 150 percent of the
federal poverty level (limited premiums are charged for people with
higher incomes up to 200 percent of the federal poverty level). In
other words, the expansion makes insurance free for people in this
income category, where most of the estimated participation occurs.
Participation estimates reflect past experience with take-up for
Medicaid.
Question 4: Could state budgets afford the Medicaid expansion as
set out in the study? Do any Governors support the proposal you are
presenting? How much would the proposal cost States?
Answer 4: The proposal our study examined was similar to a
legislative proposal that would extend Medicaid or SCHIP coverage to
parents (and any currently ineligible children) with incomes up to 200
percent of the federal poverty level. We estimated its total annual
costs, federal and state, as $11.3 billion. Our analysis assumed that
states would be required to extend eligibility to the maximum, as a
condition for receipt of any Medicaid and SCHIP funds. But we did not
assume a distribution of state and federal obligations; that split
would be up to policymakers and, indeed, the costs could be borne fully
by the federal government. If split at the current SCHIP matching rate,
the federal share would be $7.9 billion and the state share, $3.4
billion.
The public expansion's total cost of $11.3 billion would increase
the number of people with insurance by 3.8 million, at a cost per net
newly insured individual of $2974. That compares to an estimate of $4.5
billion to increase the number of people with insurance by 1.6 under
the tax credit--a cost per net newly insured individual of $2757. The
difference in the two proposals' total costs is almost entirely a
function of how much they accomplish in expanding coverage.
Question 5: Your proposal does not appear to cover childless
individuals or couples. Is this correct and do you know how many people
fall into this category?
Answer 5: My testimony focused on options similar to the most
prominent legislative proposals. That meant comparing a broadly
targeted tax credit proposal, for which take-up is found to be modest,
to a narrowly targeted proposal, for which take-up is likely to be
substantial. When the disruption of employer coverage associated with
the broader proposal is taken into account, the broadly-targeted tax
credit is found to increase coverage less than the public expansion
that is narrowly targeted to parents.
In the Kaiser Family Foundation study on which my testimony is
based, however, we analyzed two broader public proposals--specifically,
a mandatory expansion of Medicaid or SCHIP to cover all individuals
with incomes below 100 percent and 200 percent of the federal poverty
level. Our estimates indicated that the first proposal would increase
the number of insured individuals by 5 million people; the second, by
10 million people. The annual total costs (federal and state) are
estimated at $16.2 billion and $34.1 billion, respectively.
Speaking for myself, I would welcome legislative action to
eliminate the current restrictions in our public programs that leave
adults other than parents of dependent children without an insurance
safety net in most of the country. I advocate a change in policy to
make public insurance available to all low income individuals, whether
or not they are parents of dependent children.
______
Healthcare Leadership Council
May 10, 2002
The Honorable Michael Bilirakis
Chairman
House Committee on Energy and Commerce
Subcommittee on Health
United States House of Representatives
Washington, D.C. 20515
Dear Mr. Chairman: As requested in your April 30, 2002 letter,
attached are my responses to the questions submitted for the record,
following the February 28th hearing on access to affordable health care
coverage.
Thank you for the opportunity to testify before the Subcommittee.
Please do not hesitate to contact me or my staff if you need additional
information.
Sincerely,
Mary R. Grealy
President
attachment
Questions and Answers for the Hearing Record
Question 1. In your written testimony, you mention that a large
percentage of the uninsured are dependents of workers--and while the
workers may be able to afford coverage for themselves, they cannot
afford the higher premium for family coverage. Can you elaborate on
this portion of the uninsured and perhaps suggest some solutions?
HLC Answer: Small and medium sized businesses offering health
insurance to their employees contribute, on average, 48 percent of the
premium amount for employees, but only 24 percent for their dependents.
As a result, children in these families are uninsured more often than
the actual worker is.
Some of these uninsured dependents are eligible for, but not
enrolled in, the State Children's Health Insurance Program (S-CHIP).
States are working hard to find ways to reach out to these un-enrolled
eligible children through schools, clinics, etc. Including employers of
low-income workers in these outreach activities could be very useful.
Special tax incentives for dependent coverage could be a wise
choice for targeting federal funds toward this population of the
uninsured. A potential solution is for states or the federal government
to design a refundable tax subsidy targeted toward making up the
difference between this 24% and 48% employer contribution.
Another cost-effective option to reduce the number of uninsured
among the employed population is allowing S-CHIP funds to be used by
parents of eligible children to purchase coverage for them through
their employer. One reason employers with mostly low-wage workers often
do not offer employee health insurance is because their employees
cannot afford to pay a share of the premium. Aid from the S-CHIP
program could encourage more employers to offer family coverage as well
as more employees to buy into employer insurance. Currently, due to
displacement concerns, some states are reluctant to allow the funding
to be used in this way. However, recent studies have demonstrated that
this concern is unwarranted. Nonetheless, appropriate safeguards could
be implemented to avoid significantly replacing private dollars with
public dollars.
Question 2. HLC has recognized several state and local programs
that have found ways to help small employers and individuals obtain
coverage and care. What can we learn from these programs and do you
think these programs can be built upon to eventually cover a
significant number of the uninsured?
HLC Answer: There are a number of things we can learn from these
programs. Designing tax subsidies to attract both employer and employee
purchase of insurance requires careful study of subsidy level,
administrative complexity and other factors necessary to reach a
threshold that would result in the choice to participate. We have found
that community-sponsored programs around the country that are expanding
insurance coverage in their local areas can serve as models of
reference for these thresholds.
An insurance program developed in Wayne County, Michigan, for small
businesses found that it was difficult to entice these businesses to
participate by subsidizing less than one-third of the premium. The
premium formula that eventually got this program off the ground was
one-third paid by the employer, one-third paid by the employee, and
one-third subsidized by the county.
The stability of the subsidy also appeared to be important to the
success of the program--indicating that the subsidy should operate as a
guaranteed percentage of the premium rather than a fixed dollar.
Applying observations such as these in designing a tax incentive plan
to reduce the number of uninsured could greatly increase that plan's
potential for success. With added federal support that leverages
funding from private and other public sources, substantial opportunity
exists to replicate these experiences around the country.
Several of these local programs have found that marketing methods
were key to successful enrollment. They found that education outreach
for small businesses and individuals, not unlike the S-CHIP program,
was a very necessary component that needed to be part of the original
planning process of the program. They also found that it was important
that any marketing efforts did not have the appearance of government
intervention.
In any case, tax incentives would give more small employers the
proper incentive to provide coverage and the incentive for employees to
accept coverage for themselves and their dependents. This would result
in more Americans being insured, lower overall health care costs, and
ultimately more affordable coverage for small businesses.
Question 3. Many consider the S-CHIP program to be very successful
in helping the uninsured--why not just expand it to cover the low-
income uninsured children and adults who are not already eligible?
HLC Answer: The HLC believes the S-CHIP program is very valuable
for its intended purpose--children of low income families. We do,
however, believe that increased flexibility in the S-CHIP program would
help increase it's intended enrollment. Tax incentives would be more
desirable for as much of the population as possible because they would
offer choice and flexibility and would instill competition and
innovation in the health system.
Furthermore, evidence suggests that we are reaching the limits of
effectiveness in reducing the number of uninsured through the S-CHIP
and Medicaid programs. Only about half of individuals currently
eligible for Medicaid and S-CHIP actually participate. A number of
reasons have been cited for low participation rates including the fact
that participation rates of means-tested public insurance programs
decline as incomes rise. A large number of those not participating are
those with incomes too high for Medicaid eligibility, but low enough to
qualify for S-CHIP. Families with incomes just above the poverty level
are often working full time and are more reluctant to receive their
health care through a public program. This pattern of lower
participation among higher income persons is also evident in other
government health care subsidy programs, including the Qualified
Medicare Beneficiaries (QMBS) and Specified Low-Income Medicare
Beneficiaries (SLMBs) programs. Researchers have concluded that
substantial outreach is necessary to overcome barriers to
participation, such as the possible stigma associated with public
programs.
These data suggest that eligibility alone, without considerable
investment to remove existing barriers to participation, will not
efficiently increase insurance coverage. Many eligible individuals in
the higher income categories of Medicaid and S-CHIP, as well as income
categories under consideration for Medicaid and S-CHIP expansions, are
connected to the workforce. Therefore, solutions involving employer
insurance may be more effective in increasing coverage rates for these
populations.
Question 4: After having an opportunity to review Ms. Feder's
written testimony in which she compares a basic tax credit proposal to
Medicaid expansion could you please comment on her study and overall
analysis?
HLC Answer: HLC takes issue with Ms. Feder's characterization of
both the tax credit proposals under consideration as well as the impact
of further expansion of public health programs to address the problem
of the uninsured.
Specifically, Ms. Feder's criticism of tax credit proposals makes
apples to oranges comparisons that do not reflect the facts of the
proposals under consideration in Congress. She states in her testimony
that a significant problem with tax credits is that low income
uninsured persons need funds available in advance of purchasing
insurance and cannot wait until they file a tax return to receive the
funds. However, the tax credit proposal put forth by the Bush
Administration, like others introduced in Congress, is advanceable to
beneficiaries because it is based on their previous year's tax return.
This allows beneficiaries to receive the value of the credit in real
time and also ensures that they will not be held accountable for any
overpayment made by the government at the end of the year due to
changing tax circumstances.
Ms. Feder claims that tax credits will not be of significant value
to entice persons to purchase private health coverage. She then cites
studies that compare the impact of expansions of public programs versus
tax credits to make her point that expanding Medicaid and S-CHIP have a
greater impact on reaching the uninsured. Again, this comparison is not
relevant to tax credit proposals being considered today.
In the hypothetical example presented in Ms. Feder's written
testimony, she compares a nonrefundable tax credit with Medicaid and S-
CHIP expansion. Most tax credit proposals under consideration in
Congress, as well as the Administration's proposal, promote refundable
tax credits--that is, those who have no tax liability due to their low
income, will still receive the full benefit of the credit in the form
of an insurance voucher. Thus, the conclusions she draws regarding the
impact of this proposal on the number of uninsured completely ignores
the significant number of uninsured who have no income tax liability
and therefore would benefit from a refundable tax credit.
Question 5: The analysis Ms. Feder presented at the hearing is
based on numerous assumptions. This includes: Substantial employer
dropping of coverage is assumed for the tax credits. Ms. Feder assumes
a higher cost of insurance than is estimated by the Council of Economic
Advisors or currently provided by groups like e-Health. The study
assumes a very low take-up rate for the tax credit and a high take-up
rate for the Medicaid expansion. Could you please comment on Ms.
Feder's assumptions?
HLC Answer: The criticism that employers may drop health coverage
if you provide subsidies to the uninsured applies regardless of whether
you provide these subsidies through tax credits or through expansions
in public programs. The key issue is how you design the program. The
amount of ``crowd-out,'' as it is called, of employer-provided coverage
is minimized if the subsidy provided by the government is less generous
than the subsidy provided by the employer. If a low-income individual
was offered job-based health insurance and was also eligible to receive
a tax credit, the value of that tax credit would have to be greater
than the employer contribution to that employees health coverage,
including the tax benefits associated with that coverage, as well as
the additional tax the employee would pay on the salary they may
receive in lieu of health coverage. In addition, most tax credit
proposals are capped at a certain amount whereas the tax exclusion for
employer-provided coverage is open-ended, and therefore potentially
more generous.
An additional design feature that will reduce employers dropping
coverage is means-testing tax credits. An employer is not likely to
drop coverage only for low-income workers eligible for the credit,
while maintaining coverage for higher income employees.
The second assumption made by Ms. Feder related to the cost of
individual health insurance policies includes many variables she does
not address in her written testimony. Individual health insurance
premiums can vary significantly based on the state in which you live in
and the type of policy purchased. States with numerous mandated benefit
laws and onerous insurance regulations have higher cost insurance. In
addition, there is wide variance in premiums depending on the level and
type of coverage an individual chooses. First-dollar indemnity coverage
can cost significantly more than a plan with a high deductible and
managed care features. Recently, the National Association of Health
Insurance Underwriters (NAHU) challenged a Kaiser Family Foundation
report by researching and publishing affordable insurance rates for
comprehensive health insurance policies for a set of hypothetical
insurance customers seeking insurance in the individual market. Several
of these hypothetical customers had pre-existing, chronic health
conditions.
Finally, the assumption that take-up rates for Medicaid coverage
would be greater than tax credits is questionable. As already noted,
the hypothetical example given by Ms. Feder does not match current tax
credit proposals under consideration. In addition, the spending level
for her Medicaid expansion proposal is much higher than the spending
level for her tax credit example. If her hypothetical example were to
compare advanceable, refundable tax credits of equal value as her
Medicaid expansions, we believe her example would yield different
results.
Because health insurance tax credits are largely untested, it is
hard to estimate their true impact on meeting the needs of the
uninsured. The values of the tax credit approach are that they offer
beneficiaries choice and flexibility in benefits and levels of
coverage; they provide beneficiaries access to the quality and
efficiencies of the private sector health delivery system; they do not
carry the same stigma that public programs often have for working
families; and they provide a means of offering tax equity to low-income
Americans who do not receive tax-favored employer-based health
insurance.
Contrast this with public programs such as Medicaid and S-CHIP.
Only about half of the individuals currently eligible for Medicaid and
S-CHIP actually participate in the programs, suggesting that
eligibility alone--without considerable investment to remove existing
barriers to participation--does not and will not efficiently increase
the number of people receiving coverage. In addition, expansions of
these programs require legislative action by all 50 states, many of
which are currently experiencing severe funding shortfalls in their
Medicaid budgets.
______
Committee on the Consequences of Uninsurance
May 9, 2002
The Honorable Michael Bilirakis
Chairman
Subcommittee on Health
Committee on Energy and Commerce
U.S. House of Representatives
Washington, DC 20515-6115
Dear Chairman Bilirakis: Thank you for the opportunity to provide
additional information to the Subcommittee. This responds to your
letter of April 30, in which you asked the following:
1. In your written testimony, you state that employers' willingness
to subsidize coverage is strongly influenced by the scarcity or
availability of workers, the cost of health care, and the patchwork of
public policies that encourage (or discourage) firms to offer insurance
as a benefit. Does the IOM plan on reviewing the regulatory burdens on
access to private health insurance and evaluate how this impacts the
cost of premiums?
2. According to your written testimony, you state that the
combination of strict eligibility requirements and enrollment
procedures make public coverage difficult to obtain and even harder to
keep. You note that the median length of time that someone under the
age of 65 keeps Medicaid coverage is about 5 months. At the end of any
given year, about two-thirds of the people who were insured by Medicaid
at the start of the year have lost their coverage for any number of
reasons. These are staggering facts. Can you please elaborate on this
situation? Furthermore, Diane Rowland stated that recent legislation
may have made improvements to this situation. Does IOM have any facts
indicating changes in the status of this problem?
In response to the first question, the IOM Committee on the
Consequences of Uninsurance is charged with assessing and documenting
personal and societal health and economic effects of the lack of health
insurance in a series of six reports. The Committee's first report,
Coverage Matters, which was the basis of my testimony to the
Subcommittee on Health, surveyed a variety of factors that affect
employers' willingness to offer health insurance. The final report that
the Committee will issue in the fall of 2003 will identify strategies
and models for addressing the problems of uninsurance and, in preparing
this final report, will give further consideration to the obstacles to
and potential for expanding employment-based health insurance. Although
the work on this final report is not very far along at this point, I
doubt that our Committee will be able to quantify with sufficient
precision the impact of current federal and state health insurance
regulations on premium costs. I expect that we will, however, be able
to identify some regulatory policies that are more conducive to
employment-sponsored plans than others.
In response to the second question, regarding the short tenure and
instability of Medicaid coverage for many enrollees, Coverage Matters
and my testimony relied on several analyses of the Census Bureau's
Survey of Income and Program Participation (SIPP) panel data between
1990 and 1995, which followed participants over 28- to 33-month
periods. These studies include:
``Dynamics of Economic Well-Being: Program Participation, 1993 to
1995. Who Gets Assistance?'' Jan Tin and Charita Castro. Current
Population Reports P70-77, issued September 2001. Washington, DC: U.S.
Census Bureau. Median duration on Medicaid, <18 years = 4.3 months; 18-
64 years = 5.2 months.
``Single Women and the Dynamics of Medicaid.'' Pamela Farley Short
and Vicki A. Freedman. HSR:Health Services Research 33:5 (December
1998, Part 1); pp. 1309-1336. 1990-1992, single women 19-44 newly
covered by Medicaid, duration on Medicaid: <1 year = 54%; <2 years =
69%.
``Can Medicaid Managed Care Provide Continuity of Care to New
Medicaid Enrollees? An Analysis of Tenure on Medicaid.'' Olveen
Carrasquillo, David U. Himmelstein, Steffie Woolhandler, and David Bor.
American Journal of Public Health 88:3 (March 1998); pp. 464-466. 1991-
1993, new Medicaid enrollees of all ages, duration on Medicaid: < 1
year =62%; < 28 months = 74%.
One recent additional source of information about the stability and
change in health insurance status that the Committee did not have
available earlier is based on the 1996 Medical Expenditure Panel Survey
(MEPS). Because the MEPS analysis is not limited to Medicaid enrollees
and because the SIPP reports on Medicaid participants enrolled only
after the survey began, it is difficult to know the extent to which
this later MEPS analysis represents a lengthening of the average
Medicaid enrollment period, although it does appear to be lengthening
somewhat.
MEPS Research Findings #18, AHRQ Publication No. 02-0006 (December
2001), reports the percentage of persons under age 65 with some form of
public health insurance (including both Medicare and Medicaid) during
1996 who had that coverage for the entire year. Overall, 75 percent of
public program enrollees were enrolled the entire year. Seventy-five
percent of children under 18 enrolled in public programs (largely
Medicaid) remained covered for the entire year. Among adults, however,
the fraction of those maintaining coverage for the full year ranged
from 62 percent for adults 18-24 to 85 percent for adults 55-64.
Although the proportions covered by Medicare and Medicaid,
respectively, are not given in this report, a larger proportion of
publicly insured older adults have Medicare coverage (due to permanent
disability) than is the case for younger publicly insured adults who
are much less likely to be disabled.
Dr. Rowland is correct, that federal Medicaid and SCHIP policy
encourages states to simplify program enrollment and re-enrollment
procedures and lengthen enrollment periods from one or three months to
initial enrollment periods as long as a year. Many states have done
this. However, as several witnesses at the hearing pointed out, states
are also facing budget shortfalls that mitigate against expansive
Medicaid and SCHIP policies, and it remains to be seen whether states
will sustain the enrollment reforms that they initiated following the
enactment of SCHIP. Our IOM Committee continues to follow and will
report on the latest information available about the duration of public
program coverage.
Once again, thank you for the opportunity to testify and to expand
upon my remarks here. Please do not hesitate to contact me if you would
like further information.
Sincerely,
Arthur L. Kellermann, M.D., M.P.H.
IOM Committee Co-Chair
cc: Mary Sue Coleman, Ph.D.
IOM Committee Co-Chair
______
The Henry J. Kaiser Family Foundation
May 10, 2002
Hon. Michael Bilirakis
Chairman
Subcommittee on Health
Committee on Energy and Commerce
United States House of Representatives
Room 2125, Rayburn House Office Building
Washington, DC 20515-6115
Dear Chairman Bilirakis: Thank you again for the opportunity to
testify before the Subcommittee on Health on February 28, 2002
regarding ``The Uninsured and Affordable Health Care Coverage.'' I
received the follow-up questions and am submitting the following
information for the record.
1. Premium Increases: In your written testimony, you discuss the
impact of a weakening economy and rising health care costs. You note
that from 2000 to 2001, premium costs increased on average 11%. Do you
know what the premium increase has been for premiums sold to small
businesses and on the individual market respectively?
As stated in my testimony, health insurance premiums are beginning
to rise more rapidly than in previous years: according to our 2001
annual survey of Employer Health Benefits, from 2000 to 2001, they rose
on average 11%, the highest increase since 1992. The greatest increase
in premium costs was among small firms. All small firms (those with
between 3 and 199 workers) experienced increases of 12.5%, and the
smallest firms (those with between 3 and 9 workers) saw premiums
increase 16.5%. Differences between premium increases among small and
large firms were consistent across plan type (conventional, HMO, PPO,
and POS).
While firms faced a wide range of premium increases around the
average increase, firms with fewer than 200 workers experienced
disproportionately high increases. More than a third (35%) of these
small firms saw premiums increase more than 15%, compared to only 17%
of larger firms. For nearly a fifth of small firms, premiums rose more
than 20%.
In our recent National Survey of Small Businesses, which surveyed
employers with between 3 and 24 workers, we were able to obtain
additional information on the impact of rising premiums for small
firms. Sixty-six percent of small business owners say they are
dissatisfied with the cost of health care and health insurance. Many
small businesses also indicate that future premium increases of 10% may
lead them to reduce the scope of benefits offered (36%), increase the
amount that employees pay for insurance (50%), or drop coverage
altogether (17%).
The March 2002 survey of small and independent business owners by
the National Federation of Independent Business (NFIB) Education
Foundation (Monthly Report, April 2002) also indicates that small
businesses are concerned about the cost of health insurance premiums.
This survey reports that the cost and availability of health insurance
is now tied with taxes as the single most important problem facing
small businesses. Nineteen percent of owners cited this issue as the
major problem, up from 8% one year ago.
Additional detail on health care costs faced by employers and small
businesses' views on rising costs can be found in our 2001 Kaiser/HRET
Annual Survey of Employer Health Benefits and our April 2002 National
Survey of Small Businesses, respectively. Both of these publications
can be found on our website, www.kff.org.
We unfortunately do not have information on premium trends in the
individual market. In general, policies in this market are highly
variable and depend on an individual's circumstance and location, and
we have not attempted to collect aggregate data on premium costs or
their changes over time.
2. Length of Time with Medicaid Coverage. According to Dr.
Kellerman's written testimony, he states that the combination of strict
eligibility requirements and enrollment procedures make public coverage
difficult to obtain and even harder to keep. He notes that the median
length of time that someone under the age of 65 keeps Medicaid coverage
is about 5 months. At the end of any given year, about two-thirds of
the people who were insured by Medicaid at the start of the year have
lost their coverage for any number of reasons. What information do you
have concerning the median length of time someone keeps Medicaid
coverage?
While it is likely that some beneficiaries now served by the
Medicaid program gain and lose coverage over a short period of time,
the data on Medicaid tenure cited in Dr. Kellerman's testimony does not
reflect the current configuration and operation of the Medicaid
program, especially in its role as a health insurer for low-income
children.
The statistics cited above rely on studies of transitions on and
off Medicaid that draw from data collected in the early 1990s.
Specifically, the main study I believe Dr. Kellermann cites in his
testimony (Carrasquillo, et al.) used a longitudinal survey conducted
from 1991 to 1993. While informative of the experience of beneficiaries
in the early 1990s, it is misleading to extrapolate these findings to
describe current dynamics of Medicaid coverage.
As I stated at the hearing, the most significant reason such
findings are no longer accurate is because the Medicaid eligibility and
re-certification processes have changed significantly in recent years,
particularly for children. Following welfare reform in 1996 and the
implementation of the State Children's Health Insurance Program (CHIP)
in 1997, states began to reach out to families eligible for Medicaid
coverage and ease barriers to enrollment and re-determination for both
CHIP and Medicaid. Several states have raised income eligibility levels
and/or begun to disregard certain types of income in determining
eligibility. This helps promote stability of coverage, as minor
fluctuations in income are not as likely to result in lost eligibility.
Furthermore, states have also implemented 12-month continuous
eligibility (17 states), which allows beneficiaries to be covered
despite small income fluctuations; lengthened periods between re-
certification (42 states); and simplified the re-certification process
by eliminating the need for interviews and documentation (48 states).
While studies have not yet specifically examined their effect, these
improvements in the re-certification process are likely to have
positively impacted the length of time that families retain their
coverage.
Another reason for caution in interpreting studies of Medicaid
tenure stems from the fact that the different populations that Medicaid
serves move on and off coverage in very different ways. For example,
the experience of women--who, at the time many studies of this topic
were conducted, largely qualified based on pregnancy or receipt of cash
assistance--is likely to be very different from that of other
populations covered by the program. Medicaid coverage of pregnant
women, which ends 60 days postpartum, is by design short-term coverage;
pregnant women who reported being covered by Medicaid at one point in a
survey were likely ineligible for coverage at consecutive points in a
survey that examines several years of coverage. Further, income
eligibility levels for non-pregnant women are most often based on the
exceedingly low income standards for cash assistance. As a result,
small fluctuations in earnings undermine Medicaid eligibility for this
population. As one study points out, in states with higher income
eligibility levels, single women retained Medicaid coverage longer
(Short and Freedman, 1998).
In contrast, Medicaid coverage of other groups is more stable.
Children on Medicaid are covered at higher income levels and are less
likely to lose coverage due to fluctuations in family earnings. In
addition, the elderly and disabled on Medicaid (who account for over a
quarter of all beneficiaries) are unlikely to experience changes in
income or categorical eligibility (that is, they will not cease to be
aged or disabled) and corresponding changes in Medicaid coverage.
Elderly and disabled beneficiaries who live on fixed incomes and
receive institutional care are least likely to experience disruptions
in their Medicaid coverage. These important differences in the dynamics
of coverage are lost when all groups are examined together in a single
median value.
Finally, though the potential of beneficiaries ``churning'' on and
off Medicaid is an important policy issue, it is important to recognize
that this problem is largely related to the nature of the program.
Coverage under means tested programs--particularly those with low
income thresholds--will by design fluctuate as people's incomes rise
and fall and change their eligibility status. For low-income
individuals, especially those who work in the service industry (as many
do), income often varies from month to month or season to season. For
many of these people, Medicaid serves as a safety net when they
temporarily find themselves with no other source of coverage.
Especially in a weak economy, Medicaid fills in gaps in health
insurance for those who lose employment and look to public programs for
assistance until they return to the workforce; as we would hope, these
transitions, and the corresponding Medicaid spells, are often short. As
income eligibility levels are increased, however, Medicaid coverage can
develop from a temporary safety net to a reliable source of insurance
for low-income Americans.
In essence, your question--and the difficulty in answering it--
points out a significant gap in the data we have on health coverage of
the low-income population: we do not have current, accurate information
on the median length of time that someone keeps Medicaid coverage. Most
recent sources of information use point-in-time estimates of coverage,
rather than longitudinal examinations of coverage dynamics over time.
Urban Institute analysis of one year of data showed that in a given
year (1998), beneficiaries were enrolled for an average of almost 9+
months; however, aged and disabled beneficiaries were covered for an
average of 11 months in a year. Given its limited one-year time frame,
this data underestimates the duration of coverage, as many will have
enrollment that commenced before the year began or continues beyond the
year end. A new statistical reporting system that is being implemented
by the Centers for Medicare & Medicaid Services (the Medicaid
Statistical Information System, or MSIS) may help provide better
information on Medicaid tenure in the future, but data from this system
has only recently become available and analyses are not yet complete.
I hope that this information is useful to the Committee as it
considers options for extending health insurance coverage to the
nations 39 million uninsured. Please do not hesitate to contact me if
you need any additional follow-up information. Thank you.
Sincerely,
Diane Rowland
Executive Vice President, The Henry J. Kaiser Family Foundation
Executive Director, The Kaiser Commission on Medicaid and the
Uninsured
______
Responses for the Record of Robert G. de Posada, President, The Latino
Coalition
Ms. Feder states in her testimony that tax credits typically offer
too few dollars to make coverage affordable. Could you comment on this?
In most states, the tax credit would be sufficient. According to
ehealth
insurance.com (the nation's largest internet health insurance agency),
out of 20,000 approved single and family applications 15,000 fall
within 75-100% of proposed tax credit. Of course, even federal workers
have to contribute something to the cost of their health insurance.
But with this kind of support from the Federal Government, insurers
that have ignored this market will have a strong incentive to design
programs to meet this new group of potential customers. Currently,
there is no reason why health insurance companies would target the
individual market of low-income workers, simply because they do not
have the income to purchase a health insurance plan. However, when they
figure out that millions of households will have access to $3,000 a
year, you can rest sure that plans, similar to what Aetna and other
health insurance companies designed two years ago for this market, but
were not able to find enough consumers, will find many new customers.
However, we strongly recommend that additional efforts to help
reduce the cost of health insurance be included in legislation dealing
with tax credits. For example, individual association plans, as
proposed by Congressman Lipinski (D-IL) to allow community based
organizations and churches to offer a variety of health insurance plans
to its members, of which at least one would bypass burdensome state
regulations, would clearly help reduce the cost of health insurance.
This would also serve as a great vehicle to reach out to underserved
communities. We also support Association Health plans to help our small
business owners get access to more affordable health insurance for
their employees.
Why do you think that the uninsured rate is so high among the U.S.
Hispanic population?
It's mostly a matter of the source of employment. Most Hispanics
work for small businesses and in the service industry. These employers,
in most cases do not or cannot afford to offer health insurance to
their workers. There is also the fact that in many cases there is very
a very high mobility in the workforce. We have interviewed many
employers in the service industry who indicate that many of their
workers move from job to job quite frequently, therefore it does not
make sense for them to offer insurance to workers that will be with
them for a couple of months. Also, in the last few years, the effects
of guaranteed issue and community rating/modified community rating have
made health insurance more unaffordable for small employers and for
individuals.
It is an economic obstacle combined with the fact that most
insurers have not targeted the low-income workers market. So if you
cannot afford health insurance and you do not have easy access to it,
you will most likely be uninsured. Also, you cannot ignore the cultural
behavior. In many cases, low-income and undereducated immigrant workers
who are not used to a health insurance system in their country of
origin, are used to going to hospitals or clinics when they get sick.
As you know, the President's tax credit proposal provides a
refundable tax credit of up to $3,000 for a family with two or more
children. Please comment on the utility of such an approach.
Currently, employer-provided health insurance is tax-free, and that
amounts to about a $133 billion tax break for employer-provided
insurance. Meanwhile, individuals who don't have access to employer-
provided health insurance get no tax break if they buy health
insurance.
These workers, in most cases low-income workers, have to pay for
insurance with after-tax dollars. This discrimination forces many
individuals to go without coverage. Providing uninsured families $3,000
each year tax-free to buy health insurance levels the playing field and
would provide an opportunity for many individuals to buy health
insurance. Why should the government provide a tax-break for Bill
Gates, and then ignore a waitress, or the guy painting your house, or
the young men picking grapes on the fields? It's a matter or fairness
and treating people equally.
According to Fiscal Associates, 60% of the eligible population
would buy health insurance if they were given this opportunity. And
this refundable tax credits will help low income workers get health
insurance for their families. Our survey data show overwhelming support
in the Hispanic community for this approach.
After having an opportunity to review Ms. Feder's written
testimony, in which she compares a basic tax credit proposal to
Medicaid expansion, could you please comment on her study and overall
analysis?
I think her model is flawed. Ms. Feder is clearly committed to a
single payer system, government-run health system, and has a very
negative opinion of the private-system. If I were to focus a testimony
on the most radical and far-fetched possibilities and assumptions, I
would also come to the same conclusions. I do however, find interesting
that most of those who want to expand the Medicaid program for
everyone, have a good private plan taking care of them and their
families.
Ms. Feder works under the assumption that it will be impossible for
a family to buy health insurance under $8,000 a year. She uses a
national average for a full-fledge insurance plan to base her
conclusions. However, the fact is that states with guaranteed issue and
community ratings have such high premiums that drive the national
average to unthinkable levels. You cannot tell me with a straight face
that a basic health insurance plan in Albuquerque, New Mexico and one
in New York City are comparable.
Our research shows this is not accurate. According to
ehealthinsurance.com (the nation's largest internet health insurance
agency), out of 20,000 approved single and family applications 15,000
fall within 75-100% of proposed tax credit.
The purpose of the refundable tax credit proposal is to have a
basic plan that would help these families have the peace of mind that
they will be covered in case they need it. If she wants to offer these
families a full-range ``Cadillac'' plan, the price will obviously
increase dramatically. She also argues that families will be required
to pay a deductible and this will not encourage parents to seek
preventive care for their children. This is completely absurd. Even
federal workers have a deductible in their plan, and yet these parents
do not sacrifice the health of their children. Why would low-income
workers be any different?
She also argues that employers will drop their coverage and the
only ones who would benefit from this proposal would be employees who
are currently employed. The fact is that there should be provisions
attached to this legislation to make sure this doesn't happen and to
penalize any employer who drops health insurance coverage in order to
qualify for this kind of proposal. Congressman Lipinski has offered
legislation which could serve as a model to make sure that employers do
not drop their insurance.
From a financial point of view, anyone analyzing the current
financial chaos that Medicaid has created in most state budgets, would
realize that doubling or tripling the number of people covered by the
Medicaid program would create havoc in most states. Currently, most
states are severely restricting access to services and medications in
order to control costs. Can you imagine the consequences of
significantly expanding this mess?
Finally, if Ms. Feder is such a fan of Medicaid, we should invite
her to drop her employer-provided health insurance plan, go to the
welfare office, sign up for Medicaid, tell her friends she is on
Medicaid, and then describe Medicaid for us. My guess is that she will
not be happy, so why is she advocating that others join Medicaid.
The analysis Ms. Feder presented at the hearing is based on
numerous assumptions. This includes: 1) substantial employer dropping
of coverage is assumed for the tax credits; 2) Ms. Feder assumes a
higher cost of insurance than is estimate by the Council of Economic
Advisors or currently provided by groups like e-health; 3) the study
assumes a very low take-up rate for the tax credit nd a high take-up
rate for the Medicaid expansion. Could you please comment on Ms.
Feder's assumptions?
(See answer to question number 4.)
We have conducted forums in seven states focusing on improving
access to affordable health insurance and quality health care. We have
found that across the board, Hispanic leaders and their organizations
feel that the expansion of Medicaid and ChIP programs are not the best
solution. A wide range of groups like the League of United Latin
American Citizens, the Hispanic Business Roundtable, the Mexican
Benefits Committee, Carrolla Medical Management, the Interamerican
College of Physicians and Surgeons, and AZTEC Resources, among many
others, have come to the conclusion that tax credits will be more
effective to reduce the number of uninsured than the expansion of
Medicaid.
Even most liberal-leaning Hispanic health organizations have
actively criticized the expansion proposals. These programs have very
low rates of enrollment among Hispanic families. So why should we
believe that there will be a high take-up rate among Hispanics? Also,
according to a nationwide survey of U.S. Hispanics conducted in May
2001, Hispanics prefer private health insurance over a government
program by 65 to 24%.
At the same time, we strongly believe that Federal and state
authorities should work diligently to simplify the process to qualify
and enroll in Medicaid and ChIP. This would also be an important part
of addressing the uninsured crisis in our community. We are convinced
that the tax credits, the increase of community health centers, the
simplification of the application process for Medicaid and ChIP, and
the enactment of key legislation to promote pooling and bypass
excessive regulations, will go a long way to significantly reducing the
uninsured crisis.
______
Galen Institute
May 15, 2002
The Honorable Michael Bilirakis
Chairman, Health Subcommittee
Committee on Energy and Commerce
2125 Rayburn House Office Building
Washington, DC 20015
Dear Mr. Chairman: Thank you for your letter regarding my testimony
before your committee on February 28, 2002, on ``The Uninsured and
Affordable Health Coverage.'' I also appreciate the opportunity to
provide answers to the follow-up questions you asked in your April 30,
2002, letter, as follows:
1. After having an opportunity to review Ms. Feder's written
testimony, in which she compares a basic tax credit proposal to
Medicaid expansion, could you please comment on her study and overall
analysis?
Dr. Feder presented findings from a preliminary study she co-
authored for the Kaiser Family Foundation that showed that tax credits
would be much less efficient in reaching the uninsured than targeted
Medicaid expansion.
During the questioning session, I pointed out that a number of
economists have questioned the assumptions upon which the Kaiser study
was based and from which its conclusions are derived, thereby raising
questions about the validity of the comparison. For example, when
analyzing the tax credit proposal, the study's authors made these and
other key assumptions that influenced the study's findings:
Cost of insurance: The Kaiser study assumed that ``for the
typical uninsured family the cost of a nongroup policy is
estimated to be roughly $10,000.''
Crowd out: The authors assume that there would be little if
any net crowd out of employment-based coverage with the
targeted Medicaid expansion, but much more crowd out of
employment-based coverage with a tax credit.
I feel the assumptions made and the conclusions drawn in the Kaiser
study unfairly represented the impact of refundable tax credit
proposals for the uninsured. The assumptions, which I describe below in
greater detail, are not a fair characterization of how tax credits
would work in the real world. Only with a fair comparison of tax
credits vs. Medicaid expansion can policy-makers determine which is the
best course of action. I believe that such an analysis would show tax
credits to be the most effective and efficient way to address the
problem of the uninsured in America.
2. The analysis Ms. Feder presented at the hearing is based on
numerous assumptions. This includes:
<bullet> Substantial employer dropping of coverage is assumed for the
tax credits.
<bullet> Ms. Feder assumes a higher cost of insurance than is estimated
by the Council of Economic Advisors or currently provided by
groups like e-Health.
<bullet> The study assumes a very low take-up rate for the tax credit
and a high take-up rate for the Medicaid expansion.
Could you please comment on Ms. Feder's assumptions?
Regarding the likelihood of employers dropping coverage if tax
credits were enacted, also referred to as ``crowd out'': The study
described by Dr. Feder (Attachment 1, Fig. 11) concludes that there
would be significantly more crowd out with tax credits and little or no
net crowd out under Medicaid.
A co-author of the paper with Dr. Feder, Professor Jonathan Gruber
of the Massachusetts Institute of Technology, has done important
published work on crowd out in the past that seems to dispute the
conclusions in this latest paper. For example, he wrote with David
Cutler a paper for the Quarterly Journal of Economics in May of 1996
entitled ``Does Public Insurance Crowd Out Private Insurance?'' The
abstract says: ``We estimated that between 48 percent and 75 percent of
the increase in Medicaid coverage was associated with a reduction in
private insurance coverage.'' That would be significantly more crowd
out than the current paper reflects. And this was for expansion of
Medicaid for children and pregnant women with lower incomes, who would
be much less likely to have any private health insurance to crowd out
than in the current study.
And also regarding their estimates of the loss of employment-based
coverage under the tax credit proposal: In an article, ``Tax Subsidies
for Health Insurance: Costs and Benefits,'' in Health Affairs in
January/February, 2000, Gruber and Larry Levitt analyzed a health
insurance tax credit that phased out at much higher income levels than
the one currently being proposed--at income levels up to $100,000 for
families and $60,000 for individuals--where people are much more likely
to have health insurance. Yet in that paper, Gruber assumed that only
5.4 million people would lose employer coverage--just one million more
than in the current study which has much lower income thresholds. And
only 0.2 million became uninsured as a result of firms dropping company
coverage--far fewer than in their current Kaiser study.
It is useful to ask what an employer likely would do if a
refundable tax credit were enacted. If an employer decides that his or
her employees would be better or at least as well off with the credit
and therefore decides to drop the existing company coverage, the
employees would need to be assured that their costs under the tax
credit plan would be about the same as the costs under the old employer
plan. Otherwise, the employer would find it very difficult to drop
coverage without risking harming employee morale and eventually losing
workers to other companies that do provide health insurance.
And if the net costs to the employee were the same, wouldn't they
be just about as likely to take up coverage under the new proposal?
Regarding the assumption about the cost of a policy: In testimony
prepared by Professor Gruber for Ways and Means Committee hearings on
February 13, 2002, he wrote, ``For a 40 year old male in excellent
health, the average cost of nongroup insurance is roughly $2000 per
year. But these costs rise dramatically with age and poor health
status. Indeed, in my data, for the typical uninsured family the cost
of a nongroup policy is estimated to be roughly $10,000. My estimates
assume that individuals and families who purchase nongroup insurance
will pay these average market prices for that insurance.'' (Attachment
2)
Dr. Gruber did calculate the cost and uptake for less expensive
policies as part of the study but did not use these calculations in
reaching conclusions about the relative value of tax credits in
comparison with Medicaid expansion.
According to Professor Mark Pauly of the Wharton School, most
uninsured people are in good to excellent health, and for them the
premium for quite comprehensive coverage would be in the neighborhood
of $6,000-$7,000. However, when one includes the minority of the
uninsured who are in poor or fair health who would be quoted a higher
premium and calculates the average premium for them, it could be about
$10,000. Still, the great majority of the uninsured would face the much
lower premium.
A study by the President's Council of Economic Advisors showed
health insurance to be much more affordable than Kaiser assumed. The
average price in their survey for a policy for a family of four was
$3,287 for comprehensive coverage. The CEA survey used a higher
deductible, which many people would choose in order to have affordable
coverage, especially to provide protection against major medical
expenses.
Interestingly, Kaiser itself concluded (depicted in Attachment 1,
Fig. 13) that individuals who are ``healthier than average'' and
``disproportionately young'' are most likely to participate in the tax
credit plan. While I would disagree with this theory, it further
suggests that Kaiser's $10,000 estimated average cost of a family
policy is too high and therefore skews the results of the study by
putting tax credits at a disadvantage.
Numerous other studies have shown health insurance to be much more
affordable than the Kaiser study represents. For example,
eHealthInsurance, the on-line health insurance brokerage, says that at
least 84 percent of the policies it sells not only are comprehensive
but affordable, averaging $1,200 to $1,500 per person per year.
Much of the discussion during the hearing centered on the cost of
health insurance and whether or not a $1,000/$3,000 credit (as in the
Bush administration's tax credit plan) would be sufficient for
individuals and families to purchase at least some form of health
insurance. eHealth Insurance's study found the tax credits proposed by
President Bush would have covered the full cost of the policy for more
than half of the 20,000 policies randomly selected for its study
sample.
I am also including a chart produced by Dr. Robert Helms of the
American Enterprise Institute that shows the actual range in a study by
the White House Council of Economic Advisors of the cost of health
insurance (Attachment 3). The vertical lines show the highest and
lowest cost of health insurance in each category, and the diamond
points shows the median cost. I believe that this shows that the cost
of health insurance can be much more affordable than the high cost used
in the Kaiser study.
Regarding take-up rate: The Kaiser study also concluded that only 8
percent of the eligible uninsured population would participate in the
tax credit program (Attachment 4). That would not be surprising if all
of the uninsured were faced with a $10,000 a year family policy. But a
less expensive--and more realistically priced policy--likely would draw
much more participation.
In his own research, Dr. Pauly found that 48 to 66 percent of the
uninsured would buy insurance if they were to receive a tax credit
worth half of the value of the policy, while three-quarters would buy
coverage if they received a credit worth 75 percent of the premium
cost.
If the cost of the policy were assumed to be less than $10,000, the
uptake would have been larger and tax credits would have fared better
in the comparison.
Thank you for giving me the opportunity to provide additional
information. Please let me know any way I can be of help to you or to
the committee in the future.
Sincerely,
Grace-Marie Turner
President
Attachments:
1. Excerpts from the Kaiser Family Foundation study, Expanding Coverage
for the Uninsured: What Difference Do Different Strategies
Make?
2. Excerpt from testimony by Dr. Jonathan Gruber presented to the Ways
and Means Committee February 13, 2002.
3. Chart produced by Dr. Robert Helms of the American Enterprise
Institute showing the range and median costs of health
insurance based upon data from the Council of Economic
Advisers.
4. Excerpt from testimony by Dr. Judith Feder presented to the House
Energy and Commerce Subcommittee on Health February 28, 2002.
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