History

Rising health care costs and the plight of the uninsured were a central focus of the presidential campaigns in 2004.  Recognizing the fact that the elimination of health care coverage by small firms largely accounts for the increase in the uninsured, both candidates focused their attention on helping small businesses afford coverage. Interestingly, though both Republican President George Bush and Democratic Senator John Kerry (D-MA) proposed a mix of public and private options, the crux of both plans utilized the strengths of the current market-based health care system to lower costs and provide access to coverage for the uninsured.

Rather than propose a government-run health care system, such as the system favored by the Clinton administration, Senator Kerry put forward a plan to allow small businesses to buy into the Federal Employees Health Benefits Program (FEHBP).  Similar to the choice of coverage offered to federal employees, the Kerry plan would have offered small employers a menu of health coverage options. As is the case in the current FEHBP, the Office of Personnel Management (OPM) would have overseen health insurance plans participating in the program. Senator Kerry proposed to subsidize the new coverage as well as existing health coverage offered by larger employers with a newly created federal risk pool where the federal government would pay the costs associated with very sick employees in exchange for a promise by employers to cover all full-time employees.

Proposals favored by President Bush also rely on the strength of the market-based system.  His support for a combination of tax credits to assist with the purchase of Health Savings Accounts (HSAs), Association Health Plans (AHPs), and expansion of enrollment in Medicaid and the State Children's Health Insurance Program (S-CHIP) for children makes it likely that efforts to assist the uninsured in 2005 will be incremental in nature, rather than large-scale reform.

Congress, too, has eschewed a "one-size-fits-all" solution in favor of targeted assistance to different uninsured populations. In May of 2004, the Senate Uninsured Task Force, chaired by Senator Judd Gregg (R-NH), reported its recommendations to increase insurance coverage. Among the panel’s recommendations were:  tax credits and subsidies, liability reforms, aid to colleges that offer students health insurance, deferred interest payments or loan forgiveness for students who set up HSAs, student loan deferral for health professionals who serve the uninsured in nonprofit clinics, a tax deduction for medical specialists who give charity care, easing religious-run health clinics’ ability to qualify for community health center grants, and expanding use of information technology in health care.  Also included were optional recommendations for AHPs and larger scale insurance reforms at the state level. 

Recent actions by the House of Representatives have focused on AHP legislation that passed the House with a wide bipartisan margin in May of 2004.  AHPs, which allow small businesses to join together to purchase health insurance through associations, are widely supported by small business groups but have been criticized by state regulators and insurers who are concerned about adverse selection, adequacy of claims reserves, and an unlevel playing field. Numerous concessions in the legislation have attempted to address these concerns by creating solvency standards, limiting AHPs to associations that have average or higher health costs or represent multiple industries to prevent adverse selection, and requiring AHPs to pay state premium taxes to support efforts such as state high-risk insurance pools.  Despite these modifications, Senate opposition remained strong, making enactment of AHPs impossible in 2004.

In addition to AHPs, both the Energy and Commerce Committee and the Ways and Means Committee have held hearings to examine hospital billing practices for uninsured patients. House and Senate Members also introduced many new "tax credit" proposals to assist the uninsured; none has been acted upon by the Congress. Likewise, both the House and Senate included an uninsured reserve fund in their budget resolutions, but the funding was never utilized. 

Health Savings Accounts (HSAs), enacted in December of 2003, were quickly implemented by the U.S. Treasury Department.  Contained in the Medicare Prescription Drug, Improvement, and Modernization Act, HSAs allow employers or employees to set aside pretax income to pay for medical expenses.  Improved features of HSAs over predecessor Medical Savings Accounts (MSAs) are the inclusion of all individuals, not just the self-employed or employees of small businesses, pairing of the account with an insurance product that has a lower deductible, the ability of both the employer and employee to contribute, and rollover of funds from year to year. Groups offering the plans and custodians of the accounts have given Treasury high marks for its responsiveness in implementation of the law.

Other actions to assist the uninsured include the Trade Adjustment Assistance (TAA) health coverage tax credit, enacted in 2002.  This precedent-setting law provides over 200,000 trade-related unemployed workers and their dependents – as well as some Pension Benefit Guaranty Corporation (PBGC) retirees – a 65 percent tax credit to help purchase health insurance. The law also provides funding for states to strengthen or establish high-risk pools. The Act requires states to elect a health insurance option toward which the tax credit could be used before individuals can take advantage of the credit. By the end of 2003, more than half of the states had elected a health insurance option for the TAA tax credit’s use, in addition to several options automatically available to displaced trade workers.

The TAA health coverage tax credit has generated great interest among those in Congress, advocacy groups, consumer groups, and unions in that it provides a pilot study on the use of advanceable, refundable tax credits. By all accounts of both Republicans and Democrats, Treasury continues to administer the TAA health coverage tax credit effectively. In September, the Government Accountability Office (GAO) issued a report outlining executive and legislative changes needed to improve the efficacy of the TAA program, but giving a fairly good review of the administration's efforts to implement the program.

Other historic efforts to assist the uninsured include the 1996 enactment of the Health Insurance Portability and Accountability Act (HIPAA), which attempted to solve the problem of uninsurance known as “job lock” for people with pre-existing conditions.  While HIPAA has helped some individuals with pre-existing conditions who change from one insurance group to another group, it has not helped to make insurance affordable for those with pre-existing conditions who must move from group coverage to individual coverage – as the law had originally intended. HIPAA also included two other provisions to try to increase health coverage: MSAs and increased deductibility for the self-employed.  As discussed above, enrollment in MSAs was highly disappointing, mostly attributed to design problems resulting from the political controversy as MSAs were legislated.  Deductibility for health insurance purchased by the self-employed would have increased to 80 percent by 2006 under HIPAA, but has since been increased to 100 percent deductibility by 2003 in subsequent legislation.

The State Children’s Health Insurance Program (S-CHIP), signed into law in 1997, was a revolutionary new public program that was anticipated to cover 10 million uninsured children.  Unfortunately, though, the program has enrolled only about half that many and the number of uninsured overall has increased. The S-CHIP’s failure to achieve higher enrollment has been largely attributed to the difficulty in educating and physically signing up the targeted population for this program, as well as the complexity of the process in some states.

More expansive efforts to solve the problem of the uninsured, such as the Clinton Health Security Act of 1994, have been roundly rejected by Congress as being too far-reaching and overly intrusive by the government.  Since this comprehensive reform effort collapsed, most lawmakers and policy experts have agreed that future efforts to solve the problem of the uninsured must proceed in an incremental, voluntary fashion.


The Future

The outlook for the uninsured is somewhat uncertain for 2005.  Though President Bush and congressional leaders have expressed strong support for measures to assist the uninsured, the growing budget deficit will make action difficult.

The administration's budget submission to Congress will be an early indication of the priority that the uninsured will play in the administration's overall agenda. As the President has indicated that he will reduce the deficit by 50 percent over the next five years, many anticipate that there may be reductions to programs such as Medicaid, which provides health care to low-income and uninsured Americans.

However, as in 2004, the budget is likely to include funding for administration priorities to assist the uninsured, such as tax credits and deductions, and AHPs.

Congress is likely to consider several measures to assist the uninsured. The House will most likely pass AHP legislation once again.  The Senate may consider broader reforms to the insurance market, such as those included in last year's Republican task force recommendations.

Growing health care costs made the issue of health costs and the uninsured an important one in the 2004 elections. As this message has proven to resonate with the public, it is likely that the issue of health care costs and the uninsured will continue to be of interest to both Democrats and Republicans throughout 2005.