April 28, 2007
The Wyden Plan
I'm on vacation until May 7th. This will be last posting for a week.
Ron Wyden (D-OR) knows health care, knows health insurance, and knows the history of health care reform. He also knows politics. So the carefully considered calculations he put into his universal health insurance bill (S. 334, the Healthy Americans Act) are worth reviewing.
First, he believes the time is right to end the employer based system. He rejects the poll-driven concept that this would scare the bejeezus out of most Americans. His bill would tell employers to end their plans, give their employees a dollar-for-dollar increase in wages with the money (this makes the cost still tax deductible to employers, but taxable to employees), and have those workers go out in a revamped insurance marketplace to buy individual or family plans. Oh, and for individuals and families, buying insurance would be mandatory – like getting a driver’s license.
Consumers will like it, he told the Wall Street Journal-sponsored World Health Care conference last week, because “if they can buy insurance for less than what the employers give them, they keep the money.” Employers will like it because they are freed from all future health care cost increases.
Wyden said insurance executives have told him that they can “thrive and prosper” in this revolutionized environment. That’s interesting because his plan calls for throwing a national regulatory blanket over the entire field, something that has never happened before because of fierce opposition by the industry. When it comes to insurance, regulation remains a state-by-state affair.
He would have the federal government outlaw companies’ ability to discriminate against people in poor health or choose to insure only younger, healthier people (the adverse selection problem). He would impose a community rating system and create a minimum set of services that must be provided by every plan. “The days of cherry picking are over,” he said. “You don’t get to just choose healthy people and send the sickest people over to public programs.”
He also challenged the conventional wisdom that health insurance reform must await the next president. He believes it’s possible to get some traction this year. He has ten senators – Republicans and Democrats – signed onto his bill and he expects something similar to be introduced in the House.
Is this politically feasible? He mentioned in passing that there would be no new taxes and no new health care expenditures under his bill. The Lewin group has projected it would save $1.45 trillion over the first ten years, money that could be redirected to covering those who get either inadequate benefits or no benefits at all now. He would distribute the savings by subsidizing those who can’t afford to buy insurance in the private marketplace.
Sounds pretty good, but let’s get hypothetical. How will this affect the upper middle-class voter who currently has one of those eroding employer plans? These are the folks with the most political clout in this society. They’ll get more money in their paycheck, but probably about the same or less than what it will cost them to buy comparable insurance in the private marketplace. So there’s no benefit there.
However, they’ll also face a higher tax bill because they fell above the line getting subsidy and their privately-purchased plan will probably exceed the standard government deduction. So for many middle class voters, this will look, smell and feel like a tax increase because it will be one. Given all the corporate executives lining up behind the Wyden plan, the chance that someone will point out that his plan relieves employers of their burdens while taxing the "hard-working middle class" has to be rated a better than 50-50 possibility.
And will insurance companies really line up for national regulation of their industry? Perhaps. Why not test that proposition? The current individual insurance market, which will become central under this plan, is usually described as dysfunctional. As an earlier speaker said, “If you’re in the small group or individual market in this country, you’re toast.”
Instead of testing his bill’s overall strengths in this Congressional session, Wyden should introduce as separate legislation the part of the Healthy Americans Act that would impose community rating and forbid cherry-picking on health insurance carriers selling individual and small-group plans.
The President's signature on that legislation would be convincing evidence that the insurance industry is ready for reform.