Note: This article first appeared in the Wyoming Business Report’s October 2011 edition.
If Congress tackles the thorny issue of entitlement reform this fall, our leaders could move the debate forward with one swift move. They could agree that expanding government-run health programs is not the solution to our health care woes. Allowing Americans to purchase low-cost private health insurance outside their state can be.
Hammering out agreement on entitlement reform is an arduous task in a good economy. In the midst of a national debt crisis, it is grueling. Yet, that is what the so-called “super committee” formed as part of the debt deal in Congress may do as it tries to find $1.5 trillion in additional spending cuts. The committee’s proposals are due to the House and Senate on November 23.
The combination of a desperate economy and states in crisis may speed their decision-making. Certainly it will force members to focus on one cold fact: Americans suffer under a regulated private health insurance market that limits their options.
According to the 2010 U.S. Census, approximately 32 million Americans are without health insurance (42 million if you count 10 million non-citizens). Of these, 20 million live in households earning between $49,777 and $75,000 annually. Many choose not to purchase health insurance because it is simply too expensive.
How did we price ourselves out of our own insurance market? It began during World War II.
Wage and price controls during WWII limited employer’s ability to recruit workers. To solve this problem, employers offered health insurance as a benefit. Then Congress passed the McCarran-Ferguson Act of 1945, which partially exempted insurance companies from the federal antitrust legislation that applies to most businesses. The new law also allowed for state regulation of health insurance and permitted states to establish mandatory licensing requirements.
What Americans ended up with was employer-based policies that exclude millions of people, impose unfair federal tax codes, create small risk pools confined to state populations, and permit industry protectionism. The newly regulated climate also paved the way for inferior plans loaded with service mandates that don’t meet needs, outrageous premiums and limited options.
No wonder Americans are rejecting their health insurance. The product is no longer viable. I
t doesn’t have to stay this way. Our country has a golden opportunity for true health care reform. But true reform must include structural changes to Medicaid, Medicare and the private health insurance market — in addition to changes in the federal funding mechanisms that Congress is currently considering.
True reform can take place if Congress does the following:
First, create low-cost, private health insurance options. Remove the stranglehold of regulations that prevent Americans from purchasing health insurance plans across state lines. Opening health insurance to nationwide competition will create low-cost options and return us to the kind of purchasing power and choices we enjoy with auto, life, and property insurance. Competition between well-managed plans yields products that are age appropriate and consumer-driven. This means states could begin a managed process of transitioning entitlement participants into lower-cost options. Without this, people have nowhere to go.
Second, enable states to pare down Medicaid expenditures and eligibility requirements to serve their most vulnerable citizens. If Congress allows the growth of private insurance options, these structural changes will provide states the power to balance their budgets through attrition as private insurance becomes affordable to those no longer eligible for public programs.
Finally, grant states flexibility to redesign Medicaid to function more like insurance plans and less like government programs. We must reach a healthy mix between private health insurance and government-run health programs if we are to capitalize on the benefits that our health care industry has to offer. States can determine how best to serve their people and take advantage of funding mechanisms such as tax credits and voucher systems. There is no need to expand government health programs.
Low-cost, private health insurance options are a basic key to reforming entitlement programs. And reforming entitlement programs is essential for spending cuts. Spending cuts, in turn, are important to reducing the deficit. Doing so will improve the U.S. credit rating and go a long way toward averting a second downgrade. We need to earn back our AAA rating.
Besides, what member of Congress would vote against a measure that ends the segregation of low income people into poorly run government health programs by creating efficient private health insurance options that they, and all Americans, want and can afford?
As the super committee continues it work, time is not on its side. The window of opportunity is small; it cannot afford to mishandle the opportunity.