Center for American Progress

Unanswered Questions on Proposals to Cover Uninsured

Unanswered Questions on Proposals to Cover Uninsured

Memorandum On:

From: Terri Shaw
RE: Unanswered Questions on the President’s Proposals to Cover the Uninsured

The Institute of Medicine has issued a challenge to the President and Congress – ensure that every person in this country has health insurance by 2010. Will President Bush meet this challenge? His record to date suggests not.

In the first two years of President Bush’s term, nearly 4 million Americans lost their health insurance coverage, bringing the total number of uninsured to 43.6 million in 2002. These losses wiped out the historic gains of 1999 and 2000, in which the trend in rising numbers of uninsured was reversed and an additional 2.3 million Americans were newly insured. In his 2003 State of the Union address, the President called for “high quality, affordable health care for all Americans” and argued that “we must work toward a system in which all Americans have a good insurance policy.” He neither pushed for nor saw enacted any policies that would move us toward that goal.

If the President again takes the opportunity to raise the uninsured problem in his State of the Union address this year, as is expected, there are several important questions that should be answered.

  • How many uninsured people would the President’s plan help?

In each of his budgets to date, the President has proposed to spend $89 billion over ten years on a $1,000 tax credit toward the purchase of health insurance on the individual market. Despite his claims to want to cover “all Americans,” the President’s plan would reduce the number of uninsured by just 4 million under the Administration’s rosy assumptions or 1.9 million under more realistic assumptions. Even taking the Administration’s estimate, the tax credit would only return coverage to its 2000 level – not expand it. Nine out of ten uninsured would get no help.

Other policies lead to even less impressive gains. The President may claim that his support for Medicaid and State Children’s Health Insurance Program (SCHIP) waivers has enabled states to expand coverage to 2.27 million people. However, a recent analysis by the Kaiser Commission on Medicaid and the Uninsured found that these waivers have actually resulted in a net gain in coverage of about 200,000 people – less than 10 percent of the claimed expansion. Meanwhile, the health insurance tax credit passed in the Trade Promotion Act of 2002, which the Administration initially projected would provide coverage to as many as 500,000 individuals, has not even been fully implemented in nearly half the states.

  • Is the policy targeted to those most in need?

The President’s $1,000 tax credit plan does not ensure that individuals who are older or in less-than-perfect health have access to affordable coverage. As a result, its few beneficiaries are likely to be younger, healthier individuals. Similarly, the Health Savings Accounts (HSAs) endorsed by the President and enacted in the recent Medicare bill are designed to provide the most tax benefits to affluent workers.

In fact, the President has opposed support for programs that have protected coverage during the recession, Medicaid and SCHIP. Last year, he proposed to cap federal spending on these programs, which could cause over 7 million people to lose coverage by 2013.

  • Does the policy undermine coverage for those who already have it?

The President’s proposals would actually cause some currently insured individuals to join the ranks of the uninsured. The individual health insurance tax credit could draw less expensive people out of employer-sponsored health insurance, leaving an older, sicker group whose premiums will rise. Most analysts believe that this will cause some of these more vulnerable people to lose health insurance. A similar effect could result from HSAs, the Administration’s implemented Health Reimbursement Accounts (HRAs) and other proposals that promote high-deductible policies – which are more likely to attract low-cost people. And Association Health Plans (AHPs), proposed by Congress and supported by the Administration, would allow selective groups of small businesses to be exempt from state regulation – reducing their insurance premiums while raising them for those not in AHPs. The Congressional Budget Office has estimated that AHPs and similar proposals would result in 10,000 people who previously had coverage through a small employer becoming uninsured.

  • Does the proposal address the high costs of health care?

Since 2000, health cost growth has risen from 6.2 to 9.3 percent, average premiums have increased by over 40 percent, and health spending as a percent of the gross domestic product climbed from 13.3 to 14.9 percent. The President’s sole proposal to address this major problem is medical malpractice damage caps. Earlier this month, the Congressional Budget Office estimated that such caps would have no significant effect on health care spending. Meanwhile, policies enacted both increase total costs and shift a greater share of those costs onto patients. The new Medicare law, for example, increases overall Medicare costs – not counting the drug benefit – and offsets it through increased payments by Medicare beneficiaries. Similarly, HRA and HSA policies limit employer and insurer liability and leave consumers to deal with health care costs.

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