Journal Issue: Health Care Reform Volume 3 Number 2 Summer/Fall 1993
Putting Burdens in a Broader Context
Thus far, the discussion has centered on the burdens on individuals from assessing new taxes or adding employer mandates to achieve broader health care coverage in the United States. But this is only half of the story. To assess whether the overall burdens are worthwhile and to measure the full impact of health care reform, it is necessary also to consider the distribution of benefits. Focusing only on the financing side of the equation helps identify the "losers" from reform; the "winners" also need to be counted.
When the benefits of a program are highly progressive (aiding low-income families and individuals disproportionately), less stringent standards for the financing mechanism may be acceptable. That is, a relatively proportional tax, such as the Social Security payroll tax, that provides progressive benefits may meet standards of fairness.44
Particularly for children, the benefits of most reforms would likely be quite progressive. More than half of all uninsured children reside in families with incomes of less than 150% of the poverty line, and two-thirds are in families with incomes of less than twice poverty thresholds.45 Because the uninsured would be the major beneficiaries of new spending on health care, even regressive taxes such as the payroll tax might result in a combined tax-and-benefit structure that would be progressive. This would also be true for the combined impact of an employer mandate and a benefit expansion.4 Further, uninsured children are more concentrated among the poor than are all uninsured persons under the age of 65.45
Just as the final incidence of taxation may differ from the initial impact, benefits do not always accrue only to those who receive expanded health care coverage. Because such a large share of health care spending for the under-65 population is covered by employer-based insurance, any shift away from that system to more reliance on taxation would relieve employers—and, hence, their employees—of current burdens. Higher taxes would be offset in the aggregate by higher wages and benefits; complications arise because there is not a one-to-one trade-off.
There would also probably be offsets in terms of the costs of health care premiums per capita if everyone had insurance coverage. No longer would we see the hidden subsidies that are built into the costs of care for the uninsured to help cover the costs that arise in helping those who cannot pay. The burdens of uncompensated care are generally argued to have been shifted onto those who are well insured. Under a system that eliminates the problem of uncompensated care, health care premiums could more closely reflect the actual per capita costs of providing care. In recent years, some of this cost shifting from government to the private sector has declined. Medicaid is now paying providers more and is making substantial contributions for uncompensated care through disproportionate share payments.46 On the other hand, employers or other groups with market power may have been getting discounts at others' expense.
Few studies have examined all of these issues and described who would bear the burdens of health care reforms. The most comprehensive work in this area has attempted to estimate the distributional impacts of several generic reform options for families as ranked by their levels of income. While the findings from this study are focused on full-population reform, the findings that both single-payer public health care options and employer-based approaches should result in substantially lower burdens for households with low and modest incomes should also apply to children-only programs (see Table 7).
The findings further indicate that employer-based reforms are less progressive in their impact than are single-payer options.4 That is, burdens on those with lower incomes are reduced more under a single-payer system financed with progressive taxes. Obviously the type of taxes used to finance these reforms also matters. The more progressive the taxes, the more the burdens are shifted to those with higher incomes. But even the least progressive of these reforms would result in increased progressivity as compared with the present system.
Extrapolating these findings for children is not formally possible, but because they are more likely to be in families that are at the bottom of the income scale, a children-only program would certainly improve the situation for American families, shifting burdens away from those in the lowest income groups.
In placing the distributional impacts of health care reform in broader contexts, another issue arises as well. Should we look only at the net effects of change, that is, those new costs and benefits to the system, or should we look at the overall distributional burdens as a way of assessing whether the whole health care system is in reasonable balance? An argument could be made for either. Politically, much of the discussion is likely to center on the new benefits and costs created by change, for such a measure will capture the winners and losers. In particular, much of the emphasis will be on the burdens of new taxes and which children receive better access to care. But it is also crucial to consider the system as a whole, especially when comparing alternatives, some of which would reshuffle all the financing (such as Canadian-style public programs) and others that would rely on retaining much of our current employer-based system. Change should be evaluated in the context of the entire health care system, including both financing and other features of reform. This latter approach takes into account systemwide measures rather than focusing solely on new government costs and benefits, and it can be analyzed with distributional studies such as those presented in Table 7.4
When viewed systemwide, there will likely be an increase in average burdens from spending more on health care that may also be somewhat misleading, however. In some instances, the costs of providing care are easier to measure than are the benefits of that care which will accrue to society. For example, an inclusive accounting of benefits from greater investments in children would be expected to show benefits—over a long time horizon—across the population from a healthier, more productive work force. In this broader view, benefits could substantially exceed costs and there would be fewer "losers" in society as a whole. Such benefits, however, often do not get counted because they will not be realized for some time and cannot be readily linked to the costs of providing better access to health care. In addition, other less tangible benefits in the form of improved quality of life could never be measured for this type of analysis. The costs of these improvements will be measured, but there will be no offsets for the benefits built into the accounting.
For health reforms directed specifically at children, this last set of measurement issues is particularly crucial. Some of the greatest payoffs from improved access to health care may occur for children's services-prevention and basic primary care. When examining financing issues, it is essential to remember that these benefits are not figured into the calculations which people can readily make concerning whether society will be "better off" in response to a policy change. It is incumbent on those who provide the hard numbers on the distributional impacts to point out this limitation in the data and include these intangible factors in their analysis.