Universal appeal; Although there’s strong consensus on the need to provide healthcare coverage for all Americans, but that’s where the agreement ends.

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Modern Healthcare

Gov. John Baldacci has set out to insure every man, woman and child in Maine-and he’s not wasting any time.

In January, Baldacci’s first executive act as the Pine Tree State’s new governor was to create a temporary agency to draft a universal healthcare bill by the end of this month. He intends to fast-track the proposal through the state Legislature within the next four months and begin implementing the plan before year-end.

”We’ve reached a point where something has got to be done, and it’s got to be done now,” says Trish Riley, director of the 27-member Health Action Team charged with crafting the bill.

This sense of urgency is being echoed by providers, insurers, employers and patients who collectively have pushed the politically volatile subject of universal healthcare coverage back onto the national agenda.

Almost exactly a decade after the collapse of President Clinton’s universal healthcare plan, the issue is regaining political prominence as medical costs have skyrocketed and states, faced with mounting budget woes, have begun to slash government health programs such as Medicaid.

Already, a number of presidential hopefuls, key members of Congress and policymakers in at least 10 states are drafting detailed initiatives that would extend coverage to everyone who lacks it (See related story, p. 28). California alone has six different proposals before its Legislature, including one being advanced jointly by doctors, hospitals and health plans.

Last month, universal coverage became the rallying cry at dozens of town hall meetings held nationwide during Cover the Uninsured Week–an event hosted by a coalition of curious bedfellows ranging from Families USA, a prime backer of the Clinton plan, to the Health Insurance Association of America, which helped torpedo the proposal in 1993 with its now-famous ”Harry and Louise” TV advertising campaign.

Of course, each constituency has a stake in seeking coverage for all. Hospitals and doctors want to reduce the bad debt they are forced to shoulder when uninsured patients default on their medical bills. Health plans see a profitable opportunity in enrolling the many young, healthy workers now choosing to forgo coverage (Feb. 24, p. 8). And employers are looking desperately for ways to rein in soaring healthcare costs, which have led to years of double-digit premium increases.

Despite this growing momentum, however, healthcare experts say it remains unlikely that any universal coverage plan will be adopted anytime soon. That’s because, beyond a general consensus over the need for more insurance, there is little if any agreement about how that coverage should be provided or who should pay for it.

Health insurers are loath to back single-payer plans that threaten to replace them with a government-run system similar to Canada’s. Employers have decried proposals that would require them to foot the bill for covering all workers. And providers remain divided among a myriad of approaches that involve everything from tax credits and expanded government programs to new purchasing pools and medical savings accounts.

”There is next to no agreement on the key issues of how such a system would be structured or funded,” says Gary Claxton, a vice president for the Kaiser Family Foundation, Washington. ”The philosophical differences run so profoundly deep that things are bound to worsen before we start seeing any real consensus.”

Large leap or small steps?

Some advocates believe the sheer magnitude of the uninsured problem demands a complete overhaul of the current healthcare system. According to a recent study by Families USA, one in three Americans under age 65 had no insurance during at least part of 2001 or 2002, and among these people, 71% were employed.

”We’ve proven that our patchwork system–one that has stitched together private, government- and employer-sponsored coverage–is unworkable,” says David Himmelstein, associate professor of medicine at Harvard University and co-founder of Physicians for a National Health Program, Chicago.

Himmelstein’s organization, which represents some 10,000 members, helped draft a bill introduced in February by Rep. John Conyers Jr. (D-Mich.) that calls for a national, single-payer system akin to a Medicare program for all. The system not only would do away with commercial insurers but also would outlaw for-profit hospitals, which have enjoyed steady growth over the past several years (March 17, p. 52).

Prospects for passage are extremely slim given heated opposition from both payers and providers, and the fact that the founder of HCA, the nation’s largest for-profit hospital chain, is a brother of Senate Majority Leader Bill Frist (R-Tenn.).

”Conyers’ bill is worse than the horse and buggy. It’s completely irrelevant in this day and age,” says Chip Kahn, president of the Federation of American Hospitals, which represents investor-owned chains.

HIAA spokesman Larry Akey adds that while 41 million Americans remain uninsured, ”roughly 170 million others receive coverage through their employers and are happy with it. We need to look for ways to build on that foundation rather than throwing the baby out with the bath water.”

Both the federation and the HIAA say they agree ”conceptually” with a more moderate, market-driven plan such as the one advanced by Sen. John Breaux (D-La.), though neither group has endorsed his plan directly.

”We’re heartened that Senator Breaux recognizes the central role of the private sector in healthcare,” Akey says. ”We believe (his proposal) is worth exploring further.”

Meanwhile, the American Association of Health Plans intends to unveil its own, ”multifaceted” approach to universal coverage later this month. The initiative aims to tailor solutions to each segment of the uninsured population–those who are temporarily unemployed, those who work for companies that don’t provide coverage, those who have fallen through the cracks in

Medicaid, and those who are uninsured by choice, for instance.

”The uninsured population is extremely diverse,” AAHP President Karen Ignagni says. ”So any one strategy alone isn’t going to address the complexity of the problem.”

Other alternatives are likely to emerge in coming months as the 2004 presidential election landscape continues to take shape. For now, however, most of the nation’s largest healthcare lobbying groups remain wary of package proposals. Instead, they’re putting their weight behind incremental reforms designed to plug holes in the current healthcare system–namely President Bush‘s recent tax credit and Medicare-expansion proposals (Feb. 17, p. 6).

”Our experience with the 1994 healthcare debate has led us down the path toward (supporting) incremental reforms,” says Molly Collins, senior associate director of policy for the American Hospital Association. ”On the whole, we see this as the more realistic way to go.”

”Sometimes,” Kahn says, ”you have to make progress in yards rather than in football fields.”

States lead the way

Some of the largest leaps to date have been made on the state level. California, Illinois, Maryland, Massachusetts and Wisconsin all have universal coverage bills before their respective legislatures. Several others have established commissions to study how a universal healthcare system could be established.

“It’s easier to gain traction at the state level,” says Ken Frisof, national director for the Universal Health Care Action Network, a Cleveland-based grass-roots advocacy group. ”And people feel that the political stalemate is so great on the national level that any comprehensive reform there

is unlikely.”

Frisof says the states have been emboldened by an Institute of Medicine report released in November 2002, which advised the Bush administration to test-drive universal coverage in a handful of states. The recommendation, he says, likely will lead to pilot projects or legislation that offers federal financial support to states establishing universal health plans meeting key

standards of affordability, coverage, cost containment and accountability.

In California, where 6.2 million people are uninsured, providers have given their support to a universal coverage plan first proposed in December 2002 by Bruce Bodaken, chairman, president and chief executive officer of Blue Shield of California (See commentary, p. 23).

Bodaken’s plan, hailed by many as a ”middle ground” solution, would require all but the smallest employers to provide a basic benefits package to their workers or pay into a pool that would provide coverage. Outreach strategies would be developed to enroll every eligible resident in the state’s Medicaid or State Children’s Health Insurance Program. Residents who remain uninsured would be required to buy private insurance, with the state subsidizing those who could

not afford the full cost. Some type of broad-based tax would help pay for it all.

”Universal coverage requires universal responsibility,” Bodaken says. ”All of us are going to have to make some sacrifices if this is going to work.”

The California Healthcare Association, the California Medical Association and managed-care giant Kaiser Permanente are working with Blue Shield to hash out details of the proposal, introduced in a bill by state Assemblywoman Rebecca Cohn, a Democrat.

”If we don’t solve the fundamental problem of the uninsured, we’re not going to be able to solve any of the other problems facing the healthcare industry,” says CHA spokeswoman Jan Emerson.

Critics, however, call Bodaken’s proposal self-serving because insurers would be guaranteed new customers but would not be subjected to cost controls. ”It’s a money grab by HMOs,” says Jerry Flanagan, a healthcare advocate with the Foundation for Taxpayer and Consumer Rights, Santa Monica, Calif. ”Basically, it’s like saying, ‘Everyone has to buy a car, but we get to sell them to you at whatever price we like.’ ”

The Pacific Business Group on Health declined comment. But if history is any indication, the proposal is likely to face strong opposition from employers who don’t want their health insurance costs to increase. Indeed, business interests helped derail a somewhat similar effort in Washington state less than a decade ago.

In 1993, Washington enacted the Health Services Act, a sweeping reform package aimed at insuring every state resident by 1999. The law would have required all employers to cover half the cost of a basic coverage plan for their workers, while the poor and unemployed would have been covered through state-subsidized insurance plans, financed in part by a tax increase on

cigarettes, alcohol, hospitals and insurers.

But in early 1995–just three months before the first phase of the program was set to go into effect–90% of the law was repealed amid opposition from small businesses, insurers and a new Republican-led Legislature. The state also failed to secure a key exemption from the federal Employee Retirement Income Security Act of 1974, which prohibits states from directly governing employee benefit plans. Without it, the state law was severely diluted.

”The rug was pulled out from under us,” says Randy Revelle, who was executive director of the commissions charged with developing and implementing the plan under the Health Services Act.

Hospitals were among the greatest advocates of the measure, agreeing to pay a 0.75% tax on their annual income–roughly totaling $14.6 million in 1993–to help fill funding gaps, says Revelle, now vice president of policy and public affairs for the Washington State Hospital Association. The state’s hospitals had hoped the plan would slash their charity-care spending, which in 1993 totaled $117 million or 2% of their total revenue, according to the Washington State Department of Health. But employers resented bearing the onus for coverage and

insurers spurned the increased regulation, which would have included a state-determined cap on premiums.

Radical redesign

Still, some policymakers insist a more radical solution is in order.

Democratic California Sen. Sheila Kuehl, for instance, has introduced a state bill that would establish a single-payer system to cover medical, dental and vision care, prescription drugs, mental health services and long-term care for every state resident. The system would be funded by taxes on payroll, investment income, tobacco and alcohol, and run by a new state agency controlled by an elected commission. The agency would set fees and pay claims.

Wisconsin Rep. Mark Miller, a Democrat, has a similar proposal before the state’s Legislature that would create a state-run healthcare system financed by an individual income tax and an employer payroll tax. And in Maine, the Legislature has authorized a bipartisan task force to explore a single-payer system in that state.

Backers of these efforts say single-payer plans stand to save states billions of dollars largely by streamlining the claims process and cutting out the private insurance middleman. They point to a number of studies, including one released last April by the Lewin Group, which concluded that a state-run system could save California $7.6 billion per year.

Michael Lighty, director of public policy for the California Nurses Association, a key supporter of Kuehl’s bill, says the bulk of savings would come from drastically reducing insurance companies’ bloated overhead costs, which, according to a recent study by Milliman USA, now average 15.3% (March 3, p. 15).

“If you’re not investing in marketing, taking profits, paying large executive salaries and funding shareholder gains, there’s a lot more money left for patient care,” Lighty says, adding that Medicare’s overhead is just 3%.

Still, single-payer plans have garnered little support within the healthcare industry.

Last November, a coalition of providers, insurers and employers helped trounce an Oregon ballot initiative that would have created one of the nation’s first state-run health plans (Nov. 11, 2002, p. 8). The measure was defeated in the polls by a 79-to-21 margin following a $1.3 million media blitz by the opposition, which deemed the plan a death blow to the state’s already faltering

economy. Doctors and hospitals also feared the new system–which would have covered everything from prescription drugs and nursing home care to acupuncture, aromatherapy and marriage counseling–would have created an untenable reimbursement environment.

”Unlimited access to unlimited services creates unlimited demand. It’s a recipe for financial disaster,” says Ken Rutledge, president of the Oregon Association of Hospitals and Health Systems, adding that the state’s ”first strategy to make ends meet would be to crack down on rates.”

Critics of the state-run approach also point to the failures of the Canadian system. According to the Fraser Institute, a Vancouver, British Columbia-based think tank with an admittedly free-market bent, Canadian patients had to wait an average of 16.5 weeks for medical treatment in 2001, 77% longer than 9.3-week average in 1993.

”Just because every person has insurance, that doesn’t mean that they are going to get the care they need,” says Yank Coble Jr., president of the Chicago-based American Medical Association.

No easy solution

At this point, even the most market-driven approaches to universal healthcare face considerable obstacles at the state level. Industry observers point out that any proposal that provides coverage for more people–by expanding Medicaid or offering subsidies to buy insurance–is sure to be expensive. And the states, already straining under budget deficits totaling a projected $82 billion this year, may not have the financial wherewithal to pull it off.

”The states have more of an appetite” to solve the uninsured problem, says Claxton of the Kaiser Family Foundation. ”But they may not have the money to fill that appetite.”

In addition, the states continue to be largely hamstrung by ERISA, which employers and HMOs routinely have invoked to challenge laws that interfere with the way they do business. One possible boost to state policymakers in this area could come from the success of Gov. Baldacci’s proposal, which Riley says is being designed to somehow ”circumvent” ERISA, presumably through waivers and legal loopholes.

Others continue to argue that healthcare coverage is ultimately a national issue, one that should be addressed in Washington rather than in piecemeal fashion by the states. Steven Michaud, president of the Maine Hospital Association, points out that the states are already seeking billions of dollars in extra federal funding just to prevent further cuts to existing services, such as Medicaid.

”It may be nice to imagine states serving as laboratories and paving the wayfor national reform, but the reality is the states are broke,” Michaud says. ”It’s a pipe dream to think states can tackle (universal coverage) on their own when many are barely able to preserve the services they already have.”

What do you think?

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or by fax: 312-280-3183.

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