Journal Issue: The Next Generation of Antipoverty Policies Volume 17 Number 2 Fall 2007
My proposal is designed to make health insurance a viable option for all Americans with low or moderate income. It builds on existing public programs and private sector coverage.
The proposal is designed with an implicit affordability calculation in mind. That is, it begins with the notion that it is reasonable to expect individuals and families at a certain income level to pay a modest share of their income toward health insurance coverage. The EIHC provides the subsidy that brings the net cost for the family down from the market price to the affordable price. The implicit affordability calculation is rough— some people will still view coverage as unaffordable at these subsidized prices; others would have purchased coverage anyway, even if it had cost them more. Those who still find insurance unaffordable even after the subsidies are applied and those who value other priorities more than they value having insurance coverage will remain uninsured. A more generous EIHC could be offered that would help more people at a greater cost to taxpayers. The EIHC could also be calibrated more closely to other factors that might influence a family’s ability to afford coverage. Public programs routinely do this through income disregards—for example, by deducting child care or transportation costs from family income when determining program eligibility. However, the information collected on the tax return does not lend itself to such calibration.
While seeking to build a solid floor of public coverage, the proposal does not smooth out the major differences in how states regulate the health insurance market. In states with limited regulation, individuals and firms with employees with certain health conditions may find that they cannot obtain coverage at anything near the average prices used to develop the EIHC. Rather than seeking to standardize state insurance regulation, the plan requires every state to operate a plan that is available to everyone. Such a plan will cost states with limited regulation more than it will cost states with tighter regulation because the state program is more likely to attract sicker people when the private market charges higher rates to sicker people.
Ultimately, this proposal is not designed to reduce or control the rate of growth of health care or health insurance costs, nor is it designed to improve the quality of health care. In fact, it is reasonable to expect the proposal to raise overall health care spending because people without health insurance use about 60 percent as many services as those with insurance. Cost containment and quality improvement are critical issues for the health care system as a whole and they warrant far more attention than can be given in a brief paper focused on insurance coverage.
The proposal made here would not solve all that ails the American health care system. It would, however, make coverage more nearly affordable and accessible to all, especially poor families. It would ease the concerns of lower-income families about health insurance and access to health care services. It would enable these families to focus on advancing their careers and taking care of their children, rather than on trying to navigate a system that falls short in so many ways. And finally, it would reduce the disincentives for poor families to work and thereby increase the odds that they could earn their way out of poverty.