Understanding the Root Cause. The troubling problem of uninsured children, like uninsurance in general, has two principal causes. The first is that working families typically receive coverage through the place of work (because of a tax system that is biased against the alternatives). Thus, families do not typically select, own, and control their health coverage, and they are vulnerable to changes in their employer-sponsored coverage-assuming they even have such coverage. When they change jobs, or suffer a spell of unemployment, or decide to work for themselves rather than someone else, their health insurance often is jeopardized, changed, or lost. Not surprisingly, three-quarters of the children who are uninsured live in working families that have suffered some interruption in their employment-based coverage, or in families whose employer-controlled plan does not cover children, or in families that have not enrolled their children in the employer's plan.
Why do most working Americans have employment-based coverage despite the side effects of this lack of control and ownership? Because the tax system excludes employer-sponsored health insurance from the taxable income of a worker, but-except in rare cases-gives families no tax relief if they buy and own their own health plan.
The second, and often related, reason for uninsurance among children is that some families simply do not have enough after-tax money to pay for adequate coverage. Many employers provide coverage for children, but often the employee must shoulder the cost (usually in after-tax dollars). Low-income working families can find the $50 or $100 a month price tag is too much for their budget, and decline the coverage. In cases where there is no employer coverage, the family may find it prohibitively expensive to cover their children by purchasing coverage themselves.
There are only two basic options for dealing with this problem, and Members of Congress must choose between them:
Option 1: Expand government programs and government
Congress could provide an alternative to deficient employment-based coverage for children by expanding government-run programs with standardized benefits, such as Medicaid. Or it could create a new federal grant for states with the requirement that states either set up a Medicaid-type system for children or select private plans to deliver the standardized services under contract. This approach was at the heart of the Clinton health plan that was rejected by the American people in President Clinton's first term.
The final destination down this road is a national health system, as Americans rightly concluded when faced with the Clinton plan in 1994. The legislation introduced by Senators Orrin Hatch (R-UT) and Edward Kennedy (D-MA) would fund an expansion of state-sponsored and standardized health plans, and unfortunately but inevitably would move in the direction of a government-run system. This is not the intention of some of the bill's sponsors, but it is the explicit goal favored by others.
Option 2: Give families the opportunity and the means to
select, control, and own the health plan they want for their
Congress can deal with the deficiencies of employment-based coverage, and the uninsured children problem that results from it, by providing direct assistance to those who need it and allowing families to determine how best to cover their children. Families unable to afford coverage available through their employer might use the assistance to pay for that coverage-so their problem would be solved without having to enroll their children in Medicaid or an expensive state-selected plan. That might easily solve the child's uninsurance problem for a few dollars a month. If they did not wish to do that, or if no employer coverage was available, they could put the assistance toward the cost of a plan with the benefits their children need, or even to "buy in" to Medicaid. The key to this approach is that it would expand family choice and control over health care, not expand government control.
Rather than expanding government-sponsored plans as the solution to uninsurance among children, Congress should focus on designing an assistance program that helps those who need it to obtain the coverage that is right for them. It might do this in various ways, such as through a refundable health tax credit (perhaps in conjunction with a redesign of the Earned Income Tax Credit), widening tax relief generally for non-employment based coverage, or similar means. To reduce the cost of private coverage, Congress should work with the states to reduce the prevalence of mandated benefits and unreasonable malpractice awards. Congress also should give states much greater flexibility in the structure and delivery of Medicaid benefits, under existing Medicaid budgets, so that the states could design programs to use Medicaid dollars more efficiently and to complement private coverage.
Far too often in health care, Congress has taken a small step without considering clearly where that step would lead the health system. America has staggering problems with Medicare because refinements were made in that program over the years without careful thought about their consequences. And the very problem of uninsurance among children and adults is largely the result of ill-considered tax decisions that have locked families into an "employer plan or nothing" system. In addressing the problem of uninsured children, lawmakers must consider the direction in which their action would move the health care system. They should choose the direction that gives greater control, ownership, and choice to families, not to the government.