June 4, 2001

June 4, 2001 | News Releases on Health Care

"Common Ground" Health-Care Proposal the Wrong Prescription, Analyst Says

WASHINGTON, June 4, 2001-Some federal lawmakers, anxious to cut the number of Americans without health insurance, may be tempted to adopt "Common Ground," a proposal from Families USA and the Health Insurance Association of America. But a new Heritage Foundation paper explains why this would be a costly mistake.

"Common Ground" recommends the federal government expand the State Children's Health Insurance Program (S-CHIP) and Medicaid to include lower-income working adults and their families and extend new tax breaks to encourage employers to cover lower-income workers in their health plans. Heritage Director of Domestic Policy Robert Moffit lists some problems with this approach.

For one, it would require employers to snoop into their workers' affairs, he says. Any employer who wants the tax credit would have to investigate and verify an employee's family income, which is the only way to ensure those with incomes low enough to qualify are covered. But this would essentially force employers to shoulder more paperwork and assume new administrative costs, and it raises a host of troubling concerns about privacy.

In addition, Common Ground's eligibility criteria for Medicaid would provide an incentive for employers to drop coverage for a workforce with a large number of low-income workers, Moffit says. This would dump workers into Medicaid, where soaring program costs and low reimbursement rates are preventing too many patients from obtaining quality care.

The Common Ground proposal is unlikely to work because of the reluctance of small businesses to take on the added responsibility of administering it, Moffit says. And if liberals in Congress find the Common Ground approach unworkable, their next step probably would be even more generous federal government subsidies to employers and a federal mandate that they provide insurance.

This, Moffit adds, would lead to health benefits being "standardized" by the federal government, with officials in Washington determining which treatments or procedures insurers must cover. "This would further undermine patient choice," he says.

"It's hard to see how the political dynamics set in motion by this proposal would lead to anything resembling a free market, greater patient choice or competition," Moffit says. "Families don't want to have to prove their net income to employers, and employers overwhelmingly don't want a business tax credit that increases their paperwork and administrative burdens."

Moreover, for all its good intentions, the notion of subsidizing employer-sponsored insurance for small businesses to expand coverage for children under S-CHIP at the state level has been plagued with practical problems, Moffit says. States that have tried it report "a high degree of cooperation and enthusiasm among employers," according to a report by the Academy for Health Services Research and Health Policy, but the "bottom-line results of these efforts to reduce the number of uninsured children … have been discouraging."

Instead of "Common Ground," Congress should model an ambitious health-care reform plan on President Bush's proposal to extend tax credits and vouchers directly to families so they can choose their own plans, benefits and doctors, Moffit says. This would lower significantly the numbers of uninsured Americans-now at 43 million-encourage competition and keep employers out of the business of certifying their employees' household incomes.

"A good health policy would promote patient choice and competition and get more Americans out of Medicaid and into superior private health insurance," Moffit says. "Common Ground should be rejected because it would do just the opposite."

In a related new Heritage paper, health-care expert James Frogue touts tax credits as a way to "empower Americans to make their own health-care decisions." He urges lawmakers to offer credits of $500 per individual and $1,000 per family.

Moffit's paper is available online at www.heritage.org/library/backgrounder/bg1445es.html. Frogue's is at www.heritage.org/library/execmemo/em750.html.

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