It's called the Healthy Americans Act (the HAA). It has been fully vetted for years, written in legislative language, scored by the CBO and has substantial bipartisan support. In my Sept. 21 and Sept. 28 columns in this space, I explained the two basic, simple concepts of the HAA:
• Universal coverage, attracting liberal support — i.e., all Americans are required to purchase health insurance just like auto drivers are required to purchase car insurance.
• More consumer choice and private-market competition, attracting conservative support — permitting everyone to purchase their own insurance policies in open, competitive "state exchange" marketplaces, each of which must include the Blue Cross/Blue Shield "Basic" policy, the lowest-tier option available to all federal employees and members of Congress or its functional equivalent.
Under all current Senate and House bills, more than 150 million non-elderly Americans are left with no choice — no access to a "public option," if there is one — since they would be stuck with the employer-provided insurance policy, which they lose as soon as they get laid off.
But under the HAA, all Americans would have a choice — stay with an employer's policy or choose another they consider better. And all would own their own policies, which travel with them wherever they go, whether employed or unemployed. Every individual American, including all poor people, would have access to their state's public exchanges, giving them the purchasing power of huge pools of customers, just like federal employees and members of Congress have, with guaranteed coverage, better rates and expanded choice (not just the health insurance the boss picks).
Private insurance companies will have to sharpen their pencils and offer better benefits and services or lose customers and even go out of business — the power of competition and the private market applied to the insurance industry.
So how is it possible the HAA is deficit-neutral in the first two years and reduces deficits thereafter? Mr. Orszag wrote the following in a May 2008 CBO letter on the HAA proposal: "Overall, our preliminary analysis indicates that [the HAA] would be roughly budget-neutral in 2014 [the first full year of operation after a two-year phase-in]. That is, our analysis suggests that your proposal would be essentially self-financing in the first year that it was fully implemented. That net result reflects large gross changes in the Federal Revenues [increased outlays minus increased savings] that would roughly offset each other."
He offered three reasons.
First, there are the increased revenues from a new payment, called "Employer Responsibility Payments." (OK, I am going to call a spade a spade: It's a new tax.) Those employers who currently are insuring their employees would be exempt from this new tax for the first two years. This is because, under the HAA, during the first two transition years, these employers must give each employee an annual salary increase equal to the cost the employer pays for the employee's health care.
But all other employers who did not provide health insurance for their employees would begin immediately to pay the modest tax. It is not an income tax or a flat excise tax. Rather, is a progressive tax — ranging from 3 percent to 26 percent — based on the average national health insurance premium costs, but tied to revenue generated per employee.
Second, the federal government under the HAA would receive increased tax revenues owing to the conversion of the current $250 billion-per-year tax exemption on employee health insurance premiums to the proposal's standard deduction or tax credit. This is simple math: The exemption of $250 billion worth of income costs the federal government more because higher income-tax brackets are using it, rather than shifting these premium payments, now regarded as income, to the lower standard tax deduction or credit provided for under the HAA.
Third, Uncle Sam will save from $150 billion to $200 billion by exchanging paying for Medicaid and SCHIP to allowing poor people to purchase their own private insurance programs at least as good as the Blue Cross basic federal employee/congressional plan.
However, federal and state governments would still provide any benefits currently under Medicaid/SCHIP not currently provided under such Blue Cross basic plans, so no poor person under Medicaid or SCHIP will receive anything less under the HAA. But they will be treated the same as rich people when they seek medical care — a revolutionary concept that both liberals and conservatives are embracing.
So how does the HAA produce a net surplus of revenues, and thus, reduce the federal deficit, after the first two years?
First, Uncle Sam gets more revenues under the HAA because the amount of the new health insurance "standard" deduction under the HAA would grow at the rate of the general consumer price index (CPI) price inflation, and not at the higher medical inflation rate that increases the cost to the federal government of the current non-taxed insurance premiums paid on behalf of employees.
Second, the value of covered benefits under the minimal requirement of the Blue Cross federal employee/congressional plan would be increased only as does the rise in the per capita gross domestic product, rather than the higher level of health care inflation. Minimally, estimates say that would slow the growth of health spending by 1 percent to 2 percent per year. Remember, Mr. Obama said even if we reduced the inflation in health care costs by "one-tenth of 1 percent per year," that could result in trillions of dollars of savings.
Finally, additional savings for Uncle Sam and the rest of us in health care costs would come from significant structural reforms under the HAA. These include requiring insurance for wellness and chronic-disease management; incentives for cheaper high-deductible policies combined with variants of today's health savings accounts; requiring all insurance companies to maintain electronic medical records; transparent state market exchanges, with customer-friendly "help" agencies in each state.
If it is too late to adopt the full HAA because none of the House or Senate committees gave it serious consideration (for reasons that utterly escape me), then the full Senate should consider the "Free Choice" amendment from Sen. Ron Wyden, Oregon Democrat.
Mr. Wyden's amendment is quite simple: It would allow the 150 million employees who are stuck with the plan offered by their employers to opt out, get a cash payment or voucher, and go shopping, knowing that, at the very least, they can purchase a federal employee/ congressional-type plan.
My question to all House and Senate members and specifically, to Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi: Why not let this Free Choice amendment be debated and voted on?
Everyone reading this column should ask their members of Congress that question.
October 05, 2009, 12:53 pm