Ensuring Access to Affordable Health Insurance: A Memo to President-elect Obama
On health care reform, the American people are too often
offered two extremes--government-run health care with higher taxes
or letting the insurance companies operate without rules. Barack
Obama and Joe Biden believe both of these extremes are wrong, and
that's why they've proposed a plan that strengthens employer
coverage, makes insurance companies accountable and ensures patient
choice of doctor and care without government interference.
--Barack Obama, "Plan for a Healthy
America: Barack Obama and Joe Biden's Plan" from
If you already have insurance, the only thing that will
change under my plan is that we will lower premiums. If you don't
have health insurance, you'll be able to get the same kind of
health insurance Members of Congress get for themselves.
--Barack Obama, "Closing Argument"
speech, Canton, Ohio, October 26, 2008
President-elect Obama, during the campaign you pledged to build
a health care system in which Americans can be assured of access to
affordable health insurance. You guaranteed Americans who already
have insurance that nothing would change except that their coverage
would be less expensive. You pointed to the health system that
Members of Congress have as your model for expanding coverage. And
you agreed that choice of doctor and care is a basic principle.
These laudable themes struck a chord with Americans.
Achieving this widely supported vision will be challenging in
these difficult economic and budget times. It will be politically
difficult. It is just 15 years since another Democrat with strong
public support for health care reform--Bill Clinton--saw that
support quickly evaporate when he crafted a partisan legislative
proposal that departed from what Americans thought they had voted
In order to succeed, then, the legislation upon which you and
Congress agree must be consistent with the principles of health
reform that Americans believe they heard in your speeches. This
means that your legislation should include the following important
- Use the consumer-choice system available to Members of
Congress as a true model, not as a façade for government-run
health care. The system you and other federal employees
have enjoyed, the Federal Employees Health Benefits Program
(FEHBP), is not like Medicare or Medicaid. It is an
employment-based system with important characteristics. Its "health
insurance exchange" functions like a shopping mall for plans,
making it easy for families to shop each year for plans and to have
portable coverage. Plans range from managed care to health savings
accounts. There is no standard, congressionally mandated benefits
package, and there is no national health board, so Members of
Congress can choose the benefits that are right for them.
The FEHBP consists of truly competing private plans, with no
"public plan" enjoying a sweetheart deal. And it has private
options available throughout the nation that even the sickest
employees can afford. You are to be applauded for citing this as a
model of choice and competition, but you must make sure that
Congress does not play bait-and-switch, talking about the FEHBP but
enacting something quite different.
- Create a level playing field of competing private plans
and real choice, and do not allow a "public plan" to undermine your
other commitments to Americans. You spoke of including a
government-sponsored "public plan" as one of the competing plans in
your proposed health exchange, but there is no public plan in the
FEHBP--and for good reason. There can be little doubt that if the
government sets the rules for competition in an exchange and also
runs one of the plans, the rules will be rigged to favor the public
Moreover, employers who currently offer coverage could switch
their workers to this plan, and millions of Americans would
discover that their employers had ended their existing private
coverage. That would be an unacceptable violation of your "no
change" commitment. Indeed, recent estimates from the Lewin Group,
a leading health econometrics firm, suggest that more than 22
million Americans would experience an unexpected change in coverage
with a public plan in place.
- Reform the tax treatment of health insurance to make it
more equitable and efficient for taxpaying families. There
is wide and bipartisan agreement that the current tax relief for
health insurance is poorly designed and exacerbates uninsurance.
Today's unlimited tax relief for employer-organized health
insurance gives large breaks to executives and other highly paid
employees but little or no relief for families without
employment-based insurance or with only limited coverage at the
place of work. The value of this "tax exclusion" is over $200
billion, or about 10 percent of all the nation's spending on health
Policy analysts across the spectrum would limit the tax exclusion
and use the revenue to provide tax relief for those without tax
help to make coverage more affordable. A sweeping proposal came
from one of your top advisers, Jason Furman. Senate Finance
Committee Chairman Max Baucus (D-MT) recently discussed tax reform
in his "white paper" on health coverage. Even Senator Hillary Clinton
(D-NY) proposed a tax cap during the primaries. Converting part of
the tax exclusion to a tax credit or similar tax relief for
taxpayers without adequate insurance is a critical element of
reform and is similar to the FEHBP's subsidy for premiums.
- Use incentives and perhaps automatic enrollment in
private plans, not government mandates, to foster wider
coverage. You spoke eloquently during the primaries of the
unfairness of forcing families to purchase coverage they couldn't
afford. You also challenged your primary opponents to say which
police powers they would use to enforce a mandate. As you
explained, the main reason why working Americans are uninsured is
that they cannot afford coverage.
But inertia leads some other Americans who can afford coverage not
to acquire it, in many cases because they know they can rely on the
taxpayer-supported emergency room. For those Americans, you should
explore the idea of "auto-enrollment" in private plans, in which
the default is that working families are automatically signed up
and must actively decline coverage if they don't want it. It turns
out that default enrollment sharply increases sign-ups for pension
plans, and you supported legislation to make it easier and
affordable for firms to institute such enrollment procedures.
You should therefore urge your staff and Congress to explore the
effectiveness of a combination of automatic enrollment and
financial incentives to widen private coverage, and not to draw up
plans for more mandates or expansions of Medicaid or other public
- Refocus employment-based coverage to promote family
control and choice rather than mandating employers to offer
government-defined coverage. There are large gaps in the
system of employer-sponsored coverage. Many smaller firms do not
offer coverage at all, and others offer coverage that many of their
workers don't want or can't afford. The solution to this is not to
mandate that firms offer an expensive, comprehensive plan
determined by Congress or else pay a tax. That would mean
one-size-fits-all coverage while changing coverage that many
workers are happy with--which you pledged not to do. Moreover,
employer mandates and taxes hide the cost for employees because
firms just cut back on cash income.
You should instead take steps to enable families to choose and
retain their health coverage from job to job, with the employer
facilitating this through such things as arranging payroll
deductions, much like their role in arranging 401(k) retirement
plans. You could foster this with health tax breaks for employees
who opt for plans with benefits they like that are offered through
health exchanges, just as Members of Congress do.
- Say "no" to the Daschle Federal Health Board.
Even worse than congressionally mandated benefits would be
mandatory coverage designed by the powerful Federal Health Board
proposed by your nominee for Secretary of Health and Human
Services, former Senator Tom Daschle (D-SD). Daschle envisions a
remote board of "experts," perhaps modeled on the Federal Reserve
Board. This board, he says, would be "insulated from politics.
Congress and the White House would relinquish some of their
health-policy decisions to it." Shielded from public opinion and
from representative government, it would have "teeth," says
Daschle, potentially deciding such things as premiums and
appropriate services, and "all federal programs would have to abide
by [its recommendations]." He also imagines that the board would
"link the tax exclusion for health insurance to insurance that
complies with the Board's recommendations."
Tom Daschle's Federal Health Board would have enormous power over
medical decisions affecting every American. This is unacceptable,
and would break your pledge to give Americans choice. You should
reject his idea.
- Take bold action to allow states to experiment with
better ways of reaching the nation's health coverage goals rather
than imposing a national plan on states and families. Our
system of federalism is intended to allow states to determine the
best ways to achieve objectives we share as a nation, thereby
appropriately limiting the role of the central government and
fostering creative diversity. We value that principle of federalism
in such areas as education and welfare. It is important to utilize
it fully in health care. Thus, rather than try to create a
Washington-designed system with a national health exchange and
impose it on states, businesses, and families, you should instead
make greater use of the power of federalism.
The better course would be for Washington to clarify the broad
goals of a health system and to encourage states to devise the best
ways to achieve those goals. That can be done in a bold way by
making it possible for states to obtain approval from Congress for
significant changes in existing laws and programs--by granting the
states waivers from laws, not just regulations--so that they can
restructure programs and try creative ways of expanding affordable
coverage. Bipartisan bills have already been introduced in both
houses of Congress to accomplish this. Supporting the federalism
approach would give real meaning to the commitment in your campaign
proposal to give states the flexibility to experiment with better
ways to accomplish national goals for health care.
- Be bipartisan when working with Congress.
President Bill Clinton made a critical mistake in failing to draw
ideas and support from both sides of the aisle. Working only with
his own party and relying on only a narrow range of outside
experts, he rejected sensible ideas, and his final proposals were
out of sync with the public. You must not repeat that mistake. In
such areas as the tax treatment of health care, federal-state
cooperation, insurance reform, and other critical pieces of health
reform, there are well-developed bills already before Congress,
several of them bipartisan. Outside of Congress, there has been an
unusually thoughtful, bipartisan discussion on coverage. And there
has been important state experimentation in both red and blue
states. You should build on these important developments, not
While Americans express frustration with our current health
system and want action to make coverage more dependable and
affordable, they also want the nation's health system to retain
important principles and features. Americans demand choice, for
instance, and if they are content with the coverage they have, they
do not want it disrupted. Moreover, they resist the idea of a
standardized system being imposed on them from Washington.
Millions of Americans voted for you because they believed your
words meant that you shared these principles. You now have the
opportunity to craft health legislation that abides by these
principles and is compatible with your pledge.
Stuart M. Butler,
Ph.D., is Vice President for Domestic and Economic Policy
Studies, and Nina Owcharenko is Senior Policy Analyst in the Center
for Health Policy Studies, at The Heritage Foundation.
Show references in this report
Lewin Group, McCain and Obama Health Care Policies: Costs and
Coverage Compared, 2008, Appendices B-10 and B-11, at http://www.lewin.com.
Daschle, with Scott S. Greenberger and Jeanne M. Lambrew,
Critical: What We Can Do About the Health-Care Crisis (New
York: Thomas Dunne, 2008), pp. xii, 179.
These bills include H.R. 506, co-sponsored by Representatives Tammy
Baldwin (D-WI) and Tom Price (R-GA); S. 325, co-sponsored by
Senators Jeff Bingaman (D-NM) and George Voinovich (R-OH); and S.
1169, co-sponsored by Senators Russell Feingold (D-WI) and Lindsey