Byline: Don Colburn
Model for a nation, or muddle for a state?
The nation's first universal health insurance plan, signed into law last week by Massachusetts Gov. Michael S. Dukakis, the Democratic presidential front-runner, will be closely watched in Washington and across the country.
'We had calls from about 40 hospital associations around the country trying to get a copy of the law the day it passed,' said Stephen Hegarty, president of the Massachusetts Hospital Association, which supported the Dukakis measure in its final version.
'It's a very interesting model for the nation as a whole,' said Karen Davis, who was deputy assistant secretary of health and human services under President Jimmy Carter and heads the department of health policy and management at the Johns Hopkins University School of Hygiene and Public Health.
'All states are grappling with what to do about indigent care and care of the uninsured,' Davis said.
The Massachusetts law, which takes full effect in 1992, is a far cry from the sweeping, cradle-to-grave national health insurance proposals of the 1960s and 1970s - and those already in place in most other industrialized nations. It relies on tax incentives and a 'play or pay' approach to get employers to offer insurance to full-time workers and sets up a state fund financed by a payroll tax to help those who are unemployed buy health insurance for themselves.
'Given the political realities, it's probably the best and most imaginative law you can get,' said Uwe E. Reinhardt, a leading health economist at Princeton University.
Nearly pronounced dead at several points over the last year, the Massachusetts measure was watered down considerably from its original version to preserve a fragile coalition of supporters, including hospitals, insurers, business leaders and citizen groups.
Not least among the factors enabling passage of universal health insurance in Massachusetts was a governor who championed the issue and made it part of his surging campaign for the Democratic presidential nomination.
'As an American I don't want my country to stand alone with South Africa as the only two industrialized nations that do not provide basic health security,' Dukakis said last week.
In its emphasis on employee health insurance, the Dukakis plan follows the same basic approach as a bill introduced last May in Congress by Sen. Edward M. Kennedy, D-Mass., and Rep. Henry A. Waxman, D-Calif. The Kennedy-Waxman bill, which would cover employees who work at least 17 hours a week, does not address the problem of the unemployed.
The Kennedy-Waxman bill was approved by the Senate Labor and Human Resources Committee in February. Supporters give it only a 'fighting chance' of passage this session but say its prospects would brighten with a Democrat - particularly Dukakis - in the White House.
The only state to take a comparable step is Hawaii, where employers have been required since 1974 to provide health insurance to workers. But the Hawaii law applies neither to students nor to the unemployed.
Both the Dukakis law and the Kennedy-Waxman bill signal a recent trend away from sweeping national health insurance proposals and toward a more limited approach politically suited to the budget-conscious 1980s. Rather than expand and reform government insurance programs such as Medicare and Medicaid, they build on the employer- provided health insurance system that has traditionally provided the bulk of coverage to non-poor Americans under 65.
'We said to ourselves, 'Look, we've got this huge problem of the uninsured. National health insurance isn't in the cards. What's the most ambitious thing we can do now?'' said David Nexon, staff director of the health office of the Senate Labor and Human Resources Committee, which is headed by Kennedy.
Kennedy decided to focus on one portion of the uninsured population - those employed in the private sector, including the working poor. That portion is large - more than two-thirds of the uninsured are either employed or dependents of the employed - and growing.
Of the 211 million Americans under 65 last year, 18 percent - or more than one out of six - had no health coverage at all, according to the Congressional Budget Office. The uninsured group has grown by one-quarter since 1980.
Nearly half of the uninsured Americans under 65 are employed, a survey by the Employee Benefit Research Institute found. About one-third are children under 18. Only 19 percent are unemployed adults.
'Each of these uninsured and underinsured Americans is a potential tragedy waiting to happen,' Kennedy has warned.
Surveys have shown that lack of insurance keeps people from getting needed medical care except on an emergency basis.
Uninsured Americans are almost twice as likely as the insured to be without a regular source of health care, according to a 1986 national survey of access to medical care by the Robert Wood Johnson Foundation. They make 27 percent fewer walk-in visits to doctors and hospitals and have a higher rate of medical emergencies.
'People without health insurance use much less health care than those with insurance, even when health status or medical conditions are similar,' concluded an Employee Benefit Research Institute report last May. 'Non-coverage has been linked with higher mortality rates in general and higher rates of infant mortality in particular.'
The rising number of uninsured Americans indirectly affects even insured people by raising hospital charges, insurance premiums and taxes to cover the costs of uncompensated care and public insurance programs such as Medicaid.
Focusing on the working uninsured - with the private sector bearing much of the cost - makes efforts to expand access to health care more politically palatable.
'The appeal of this approach, politically, is that it is 'off budget,'' said Jack A. Meyer, a health economist and president of New Directions for Policy, a consulting firm. 'That doesn't mean it doesn't cost anything. It means it passes at least the first laugh test' for any new legislative proposal in the 1980s.
'It still leaves open the question of Medicaid reform, and it's limited to people in the employment sector,' Meyer said, 'but you have to start somewhere.'
'It's attractive,' said Robert Reischauer, an economist and senior fellow at the Brookings Institution. 'It meets a need and does it without spending a great deal of money or increasing the deficit. That's what matters these days.'
But some say Massachusetts, with a relatively low unemployment rate and relatively generous Medicaid benefits, may not be the best model for reforming the nation's health insurance system. The Massachusetts law leaves essentially untouched the federal-state Medicaid program of health insurance for the poor.
'It's an exciting move forward, but it's not a solution,' said Dr. Sidney Wolfe, director of the Public Citizen Health Research Group.
Applied nationwide, Wolfe said, it would leave millions of poor people, while technically 'insured' by Medicaid, still at the mercy of a safety net full of holes.
'Massachusetts happens to have one of the better Medicaid programs,' Wolfe said, 'but if you leave Medicaid in place in most states, the benefits package and access to care are terrible.'
A state-by-state survey by Wolfe's Health Research Group last year found that Medicaid excludes between one-third and one-half of all poor Americans and that coverage for the 23 million included is spotty and highly variable. Total annual Medicaid spending per poor person, including both federal and state funds, ranges from $400 in Mississippi to $3,200 in New York, the report found.
Health coverage has been declining in the 1980s because much of the job growth has occurred in small companies and the service industries, where health insurance is less likely to be offered as an employee benefit, said Chuck Betley, a research analyst at the Employee Benefit Research Institute.
Getting more employers to offer health insurance 'can make a big dent in the problem of the uninsured,' Betley said. 'The problem is, we don't know how employers will respond to the mandate. Will they respond by hiring fewer people?
'It's the same argument people make about raising the minimum wage. It's a trade-off.' Though the Dukakis plan exempts companies with five or fewer employees and establishes a hardship fund for companies with 50 or fewer employees, many small businesses opposed it.
And some economists worry that some small companies will lay off workers or cut back on hiring because of the added cost of providing health coverage to employees. The main impact could fall on minimum-wage or part-time workers.
Raising the cost of hiring a worker by $1,680 a year - the maximum payroll surcharge a company would pay when the Massachusetts law takes full effect in 1992 - adds more than 80 cents an hour to the minimum wage of $3.35, pointed out Frank Sloan, chairman of economics at Vanderbilt University.
'You'd expect some layoffs,' said Sloan, who directs the health policy center at Vanderbilt's Institute for Public Policy Studies. 'On the other hand, it's a way to get some medical coverage out there.'
Johns Hopkins' Davis said the additional employment stimulated in the health care sector by the expanded coverage and compensation to hospitals would numerically offset the loss of jobs from increased labor costs, but she acknowledged that 'it's a different set of jobs.'
She also said the payroll tax surcharge that will fund the Dukakis plan is 'fairly regressive' when compared with the income tax. Others criticize the Dukakis plan for its lack of cost controls and for financial concessions to the state's hospitals. The new law is expected to pump about $1 billion into the hospital system over the next five years while forcing a half-dozen underused hospitals to close.
'What the governor refers to as 'an unusual and related opportunity' is nothing less than an amazing surrender to the demands of the hospitals for hundreds of millions of dollars of public handouts and for the dismantling of cost-containment rules,' wrote former Massachusetts Insurance Commissioner Peter Hiam in a column in the Boston Globe.
'Short-term gain and long-term pain, that's how I'd describe the bill,' said Steven Pierce, a Republican state representative who battled the measure in the legislature.
'We need a national program, not a state-by-state program. We're skeptical about these piecemeal efforts,' said Susan Abrams, coordinator of the Committee for a National Health Program, which advocates national health insurance and a restructuring of the health care system along the lines of the Canadian system.
'We support Dukakis' efforts to expand access to health care,' Abrams said. 'We just don't think he's gone about it in the best way. While it will extend access, it's not going to control costs.'
She also said the law would not live up to the rhetoric of its proponents, including Dukakis, who signed the measure into law April 21, declaring, 'We have good reason to rejoice today, as we once again become the nation's laboratory, the nation's pathfinder, blazing a trail that leads to affordable, quality health care for every man, woman and child.'
It's unlikely that many states will follow Massachusetts' lead and enact universal health coverage, said economist Sloan.
Not only are poorer states with high unemployment rates hesitant to take on the added public costs, but all states are reluctant to raise labor costs for fear of driving businesses to neighboring states.
'The states are never going to solve this on their own,' he said.
But federal legislation incorporating some type of national health insurance also faces political obstacles.
'It's a serious public policy issue, but it's hard to get people interested in it. It just doesn't grab people,' Sloan said. 'We find that the 37 million figure is a total 'non-grabber.''
One reason is that the uninsured as a group tend to be politically unorganized, he said: 'It's a movement sort of made up of left-out people.'
Colburn writes for the Washington Post.
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