February 3, 2006

February 3, 2006 | Commentary on Health Care

A "Futile and Stupid" Health Care Gesture

AFL-CIO President John Sweeney's reaction to the plight of those without health insurance reminds one of a line from "Animal House": "I think this situation absolutely requires that a really futile and stupid gesture be done on somebody's part."

That's the message for state lawmakers in Sweeney's announcement that unions are pushing to replicate Maryland's Fair Share Health Fund Act in 33 other states this year.

"Fair Share" legislation would require employers with 10,000 or more workers in a state to spend at least 8 percent of payroll on employee health benefits or pay the difference in a tax. It passed the Maryland General Assembly last year, but Gov. Robert Ehrlich vetoed it. At the start of this year's session, the legislature overrode the governor's veto.

The bill was originally cooked up by Andy Stern's Service Employees International Union (SEIU) as part of its larger effort to unionize Wal-Mart. That transparent ploy lead to it being quickly dubbed the "Wal-Mart Bill."

Then, SEIU and the Teamsters bolted the AFL-CIO last summer. Sweeney is now grabbing the anti-Wal-Mart banner in a bid to put his AFL-CIO back at the head of the union parade.

But Fair Share is nothing more than symbolic politics. The unions want legislators nationwide to replicate this futile and stupid gesture in lieu of serious health reform. It's an opportunity they should decline.

To start with, if employers are forced to pay more for health insurance, they'll adjust cash wages to keep overall compensation costs from rising. Future raises likely will be smaller, with money that would otherwise go into worker paychecks diverted to health insurance instead. That's effectively a hidden payroll tax, and taxing workers to pay for their own coverage doesn't make them better off.

But Fair Share is actually so ineffectual that it may not even come to that. Non-compliant employers must pay the new tax or face a $250,000 fine. You can bet employers will pick the cheaper option.

Furthermore, nothing in the law requires employers to cover their uninsured workers. A firm can simply spend more on health benefits for its already-insured workers and achieve full compliance.

Finally, any new taxes or fines a state may eventually collect are simply dumped into its Medicaid program. Nothing in the legislation requires a state to use those funds to cover more of the uninsured.

In offering no prospects for extending coverage to even a single uninsured individual, Fair Share attains near perfect futility. Only a cynical genius could devise a tax-and-spend policy so utterly devoid of measurable effects.

The fraud and hypocrisy of the whole exercise becomes even clearer when one considers that the bill exempts state and local governments. According to Census Bureau data, Maryland's state and local governments have 20,000 uninsured workers. That collection of uninsured government employees is larger than the entire workforce of any single private employer in the state. The same is likely the case in many other states.

What's really going on is apparent from a report in the St. Louis Post-Dispatch, which noted that, "After listening for weeks to the pros and cons, [Delegate Sue] Kullen declared a few days ago that she intended to vote for the override even though she doubted that the bill would have a big impact on health care. 'This is a kick in the pants for Wal-Mart,' she said."

And this is from a Democratic legislator with a Wal-Mart store slap bang in the geographic center of her increasingly suburbanized and Republican-tilting district.

Lawmakers in other states would be well advised to skip the futile and stupid gesture of a Wal-Mart bill and proceed directly to real health reforms.

Back in Maryland, State Sen. E. J. Pipkin proposes restructuring his state's health-insurance markets to create personal, portable coverage for all citizens through a state-wide "health insurance exchange," and then redirecting $300 million of state and federal money now spent on hospital uncompensated care into subsidies to expand coverage. The exchange would mean a two-earner couple could combine their employer contributions to buy and keep the plan they want, while a worker with two part-time jobs could combine pro-rated contributions from each employer to buy coverage, and the government would have a single place to send subsidies for those who need extra help.

The response from Pipkin's colleagues, in Maryland as well as in other states, will reveal just how serious they are about covering the uninsured.

Edmund F. Haislmaier is a visiting research fellow in the Center for Health Policy Studies at The Heritage Foundation.

About the Author

Edmund F. Haislmaier Senior Research Fellow, Health Policy Studies
Center for Health Policy Studies

Distributed nationally on the Knight-Ridder Tribune wire