A Policy Prescription for 2014

Regardless of what you think about the Affordable Care Act, and regardless of whether or not you are hoping for its ultimate failure or success, even under optimal conditions, it will fall far short of the goal the Institute of Medicine established a decade ago to provide health coverage to all Americans. In essence, when examining any potential modification to our current health system it is critical to remember that “health care coverage should be universal.”

As we move into a new year, it is our custom to provide a perspective on the most important policy options to pursue in the coming year. Unfortunately, as in years past, political gridlock in Washington, DC, will likely lead to a tremendously low ability to accomplish any grand changes to our current system. However, there are a few which should garner bipartisan support.

Of course, the first priority of any change to our currently evolving health care system is to increase access to health care via increased health insurance coverage. While some may argue that health insurance itself is not the be all, end all goal of health reform, insurance is at least a means to an end. That end being the receipt of health care services and ensuring that no one goes bankrupt due to sickness. Within the construct of our current health care system and considering the impact of the Affordable Care Act, the most important challenge for 2014 remains advocacy for the Medicaid expansion authorized by the President’s health reform law.

Medicaid, albeit an imperfect vehicle for the delivery of care, does accomplish some important tasks. It provides access to services for those without the means to otherwise access health care. Medicaid is also vital in protecting poor families from financial ruin due to health care costs. Both of these accomplishments are valid uses of health insurance.

Over the past year we have seen some states adopt the Medicaid expansion as-is, merely folding more of their citizens into the current program. Other states such as Arkansas and Iowa will use a hybrid public-private model where Medicaid dollars will get funneled through private insurers to provide coverage for their states’ low income populations. Whatever the mechanism, the crucial goal is to increase coverage by any means necessary. The Medicaid expansion, whether in a traditional format or a premium-support model, accomplishes this goal.

Much work remains to ensure that those Americans eligible in the states still reluctant to expand Medicaid have access to this valuable form of coverage. Advocates from Florida, the Carolinas, Texas, and many of the Southern, Plains, and Mountain states have an important role to play in 2014 to encourage their legislators and governors to expand their states’ Medicaid programs.

A second area of potential agreement for decision makers across the political spectrum should be the regressive and arbitrary tax treatment of employer sponsored health insurance. As  in the past, the tax exclusion for employer-sponsored health insurance contributes to the federal government’s budget deficit and the financial benefits largely accrue to more affluent families. The current tax treatment of employer-sponsored health insurance creates economic distortions that promote excessive purchase of health insurance and ultimately health care services.

The Cadillac Tax, the  Affordable Care Act’s attempted remedy to these distortions, does not go to the root of the problem. It merely imposes a 40% surcharge on insurance plans costing more than a certain level. It does nothing to address the inequality between health insurance purchased by employers with pre-tax money versus that purchased by individuals with after-tax money. Fairness would suggest that all Americans should be able to purchase their health insurance on the same (tax) playing field.

The employer-sponsored health insurance tax loophole should be replaced with a tax credit, the amount of which can be capped to an appropriate level of per-capita health care spending. This health care tax credit must be refundable, so that low-income individuals without tax burden can use the funds to cover the cost of any health insurance plan they might purchase on their own. This credit must, of course, require proof of insurance. Additionally, this plan would work in conjunction with the tax penalties imposed upon Americans who opt to skip health insurance.

The benefits of such a change would be that any excess amounts spent on health insurance would subsequently be taxed at a level consistent with the individual’s (or family’s) level of income. No more would a as a high wage worker. Another benefit is that it would encourage individuals and families to purchase less costly insurance plans because any savings would be refunded to them. Perhaps by fixing this WWII-era policy we could shore up the federal deficit, induce some sanity to the overconsumption of health care services, and eliminate an area of regressive tax policy.

Lastly, the profit motive must be driven out of health care. Physicians, nurses, and other people that actually provide direct services to patients do so out of a strong sense of duty. These individuals are not in the business of health care to get rich. However, many other entities involved in the delivery of health care – hospitals, nursing homes, health insurers, and pharmaceutical companies –  do so out of a desire to make money. Shareholders should not have priority over patients.

The Affordable Care Act has dictated that all Americans must obtain health insurance. The next step following that mandate is to promise that no one will be taken advantage of by the health insurance industry strictly for the sake of increasing share prices or providing dividends to shareholders. Insurance companies do require a certain amount of revenue to operate. Profiting off of another person’s illness – at least for basic health care – is not required.

In other countries such as Switzerland – which some praise for having universal health care and others for being market oriented – health insurance is mandated, coverage is universal, coverage is portable, costs are lower, and health outcomes are better. Most importantly, insurance operates as a non-profit.

As 2014 begins, Americans serious about health reform must demand these three changes. Medicaid must expand. The tax treatment of health care must be made fair and equitable. And profit must be driven from the mindset of those seeking to care for (and not prey on) the sick.

by

Cedric Dark, MD, MPH