Congress can help displaced workers obtain private health
insurance coverage, and make a downpayment on broader health care
reform based on patient choice.
As part of negotiations for an economic stimulus package,
Congress should not overlook the opportunity to implement effective
patient-centered health care policy. An effective policy would give
displaced workers the assistance they need to get or maintain
private health care coverage during this period of temporary
unemployment. Alternative proposals do not offer a simple and
desirable solution. Rather, they complicate the delivery of medical
services through flawed structures and disjointed programs. Worse,
they effectively deny workers and their families choice of the
plans and benefits.
Representative Bill Thomas (R-CA), chairman of the House Ways
and Means Committee, has recently proposed a better idea: a system
of tax credits to help displaced workers buy private coverage of
their choice. Congress should act quickly to help workers and their
families get assistance and use it to secure the type of coverage
policy they find both affordable and best suited to their personal
and family needs.
WHY CONGRESS SHOULD NOT BUILD ON
Most of the leading congressional proposals attempt to offer
displaced workers health care assistance but fail to be effective
because they reflect the decisions of government bureaucrats and
COBRA-only. Proposals to segregate the displaced worker population into categories of those eligible for COBRA coverage (a provision in the Consolidated Omnibus Budget Reconciliation Act of 1986 that allows former employees to maintain their employer-sponsored coverage for a period of time after leaving the job provided they assume payment of the entire premium) and those who are ineligible would create an unfair and complicated system by which workers would receive assistance. Furthermore, COBRA coverage is extremely expensive. Even with a partial subsidy, many families, especially lower-income families, would find it financially prohibitive to participate. Therefore, this approach would be characterized as supplementing COBRA for financially fortunate workers while leaving no similar private coverage alternative for the other workers, forcing them to end up either on a welfare program ( Medicaid) or on the rolls of the uninsured.
Block grants to states. Proposals that offer new block grants to the states to assist displaced workers in obtaining health care coverage have one obvious flaw: They do not offer direct assistance to the worker. Instead, they compensate the states for their efforts to create, find, or otherwise provide health coverage for displaced workers. The block grant approach, to be administered by state officials, is likely to add another layer of complicated bureaucracy and could result in no real choice for the worker. Without specific guidelines directing states as to how to distribute these funds, many states will either have to design new government programs specially for displaced workers or, worse, take the simplest route and enroll these workers in Medicaid, a substandard health care program. These workers do not need to enroll in a new government-controlled program, nor do they need to be forced in Medicaid or some other government program. They need practical financial help that enables them to obtain solid private health care coverage.
Medicaid. Proposals to extend Medicaid to displaced workers do not represent a desirable option, either for workers or the taxpayers. State Medicaid programs are facing large budgetary shortfalls mainly because of exploding Medicaid costs. States are already considering cutting current benefits, reimbursement services, and eligibility. Enticing states to expand Medicaid eligibility for the displaced worker population in return for additional federal funds only postpones, and possibly aggravates , the program's future financial problems. Furthermore, many of these unemployed workers see Medicaid as welfare and simply do not want the stigma of being enrolled in a government welfare program.
Nor is a combination of these different approaches that cobbles
scattered pieces of flawed alternatives together likely to result
in an effective policy. Congress and the Administration should
build on a functional and uniform structure of financing and
delivery that reaches all displaced workers. Displaced workers
should not have to navigate around government restrictions of their
options. Instead, displaced workers should have the freedom, to the
greatest extent possible, to match their personal finances with
their medical needs and determine the best health care coverage for
themselves and their families.
KEY PRINCIPLES FOR EFFECTIVE
A legislative proposal that assists displaced workers' obtain
private health care coverage should be based on three key
1. Simplicity. There should be a simple system by which all displaced workers receive their health care assistance. It would be much easier to administer one system than to create different systems for different eligibility groups. Under one structure, each worker would be eligible for the same form of assistance and would enable the worker to apply it to his or her own choice of private coverage.
2. Directness. The assistance should be assigned to the displaced worker. The worker should determine to which coverage plan they want to assign their assistance. The worker does not need to get tangled in layers of complicated bureaucracy to obtain and utilize their assistance. Additional assistance need not create more administrative hassles.
3. Functionality. The worker should find the assistance useful and helpful. It should be easy to access and easy to apply toward a policy of choice. Workers should be able to chose a plan that meets their families' personal medical and financial needs and easily forward their assistance to that insurer. .
AN ALTERNATIVE: One-Stop Shopping for
Coverage at the Unemployment Office.
Congress should give displaced workers a refundable ("up-front")
tax credit for the purchase of private health insurance. The credit
would give workers the actual financial assistance they need to
help pay for the health care coverage they have chosen.
House Ways and Means Chairman Thomas has proposed adding such a
tax credit proposal to the economic stimulus package. The Thomas
proposal would provide between $8 billion to $10 billion for health
care tax credits that would assist workers in securing affordable
health care coverage for themselves and their families. The credit
would allow the worker to decide whether to use the credit towards
COBRA coverage or towards another more affordable coverage option.
Thomas' proposal, which has elicited favorable comments from both
senior Democrats and Republicans, offers a simple approach that
would deliver timely, practical financial assistance to displaced
Congress should consider utilizing the current structure for distributing federally financed unemployment benefits to distribute refundable tax credits to displaced workers for private health insurance. State unemployment compensation offices are already tasked with verifying worker eligibility for unemployment benefits and could easily qualify these workers for immediate health care assistance. However, as with block grants, Congress must be clear and explicitly require that the credits be used by the worker for the purchase of private health care coverage. The system could even be designed so that the state unemployment office only verified a workers qualification for the credit and allow the worker to assign its credit to the insurer directly through the U.S. Treasury eliminating additional paperwork burdens on the worker or the states.
Most temporary displaced workers do not need extensive or
expensive health care benefits while transitioning between jobs.
Instead, they need quick, easily accessible, and affordable
coverage options that meet their immediate medical needs. Some
workers may find that a catastrophic plan meets their medical
needs, while others may still choose to apply their credit toward a
comprehensive health plan or toward COBRA coverage through their
former employers. That should be the worker's choice. In either
case, a refundable tax credit would encourage workers to obtain
coverage and provide health care security for many displaced
A recent Kaiser Family Foundation publication report s that for
every percentage point increase in the unemployment rate, 860,000
people will become uninsured. Establishing a common-sense approach
for displaced workers today will achieve the short-term goal of
giving displaced workers a "helping hand" while also moving the
larger national health care debate in a new direction: patient
choice. The best health care future is one in which individuals and
families control their own health care decisions.
Nina Owcharenko is a Policy Analyst for health care at The Heritage Foundation.