Just when it seemed the number of Americans lacking health insurance at any given time -- roughly 44 million -- couldn't get any worse, along came Sept. 11.

Now, with many victims' families losing coverage, the problem of how to reduce this number has assumed greater urgency on Capitol Hill. Add in the folks who've been fleeced by Enron, and the scope of the problem becomes clear.

Some members of Congress want to have the uninsured join Medicaid or some other government program. Others say give them financial help to keep the coverage they had from their former employer. Still others say help them without limiting their choice of coverage -- let them enroll in any plan they want. Which approach would work best?

The first proposal is a real non-starter. Having the uninsured join Medicaid effectively means telling them to line up at the welfare office and sign up for a program that's already in bad shape. States are trying to cut their Medicaid costs as their budgets plunge into the red, so adding to the program's rolls hardly seems advisable. Besides, the states tightly restrict what's covered and how people get care, making Medicaid increasingly like a giant, government-run HMO.

Then there's the notion of subsidizing so-called "COBRA" coverage. COBRA is a law that lets the unemployed remain covered under their former employer's plan for up to 18 months -- but only if they pay the premiums (and a small administrative fee) themselves. There's usually severe sticker shock when a family gets the full price tag for the premium, since most of it has usually been paid by an employer. Many families can't afford to continue their coverage under COBRA, so some in Congress say Washington should foot much of the bill.

Sounds attractive, but there are some problems. For one thing, more than 40 million workers are ineligible for COBRA coverage if they become unemployed. Many in small business don't have an employer-sponsored plan. They would have nothing to sign up for.

Second, those who do qualify for COBRA, and would like to shop around for more affordable coverage, would be out of luck. Say your former employer's plan costs $600 a month. Many of those who advocate subsidizing COBRA say the government should cover 75 percent of what you pay, so you would have to come up with $150 a month. But say you're a young, married non-smoker who could get a good basic plan for $200. You're stuck shelling out $150 a month for coverage you may not even want, rather than paying $50 (after the government's share) for one you do.

Third, you'd be telling people to trust their family's health to the company that's responsible for them being unemployed. Imagine telling those fired by Enron, "We'll help you pay for insurance, but only if you get it from the same people who just destroyed your retirement and threw you out onto the street." Besides, if you were laid off, the firm probably isn't in great financial shape and is looking for savings. Cutbacks in generous health plans are an attractive option. And most workers would lose their coverage altogether if their former company goes out of business.

Here's a better approach: Take the same financial help that would go to extending COBRA and give it to uninsured Americans in the form of a tax credit. That way, they can buy the coverage they want from a source they trust. That's what President Bush has proposed. It was in a stimulus bill that was passed twice by the House of Representatives. But Sen. Thomas Daschle, the Senate's majority leader, refuses to let it even come up for a vote.

Under the tax-credit approach, laid-off workers could use the subsidy to stick with a company plan if they wished. But they wouldn't have to. They could use the money instead to buy coverage that was more in line with their needs -- perhaps something more affordable or a plan from an insurer recommended by their own doctor.

There are plenty of Enron workers, along with quite a few who have seen their health coverage evaporate post-Sept. 11, who would be very grateful for that option today. And there are plenty of employed workers who would appreciate having such a choice available to them if they ever need it. Otherwise, we risk making a bad situation far worse.

Stuart M. Butler, Ph.D. is vice president for domestic and economic policy studies at The Heritage Foundation (www.heritage.org), a Washington-based public policy research institute.

04/05/02