V I E W P O I N T

Achieving Universal Health Coverage: The Role of a Public Plan

An important goal of health care reform is to achieve universal coverage as a crucial first step toward improving access to high-quality, efficient care and controlling the rate of increase in health spending.

Several health care reform proposals seek to achieve universal health care coverage by building on our current system of employer-provided insurance and public programs including Medicare, Medicaid and SCHIP. These include President-elect Barack Obama's plan; legislation introduced in Congress by Representative Pete Stark, Representative John Dingell and Senator Edward Kennedy; and Senator Baucus' "Call to Action: Health Reform 2009," which details his vision for health care reform. These proposals call for a public plan option, based on Medicare, that would offer benefits similar to those available to Members of Congress and federal employees through the Federal Employees Health Benefits Program (FEHBP). Financing would be shared among the government, employers, and employees, and subsidies would be available for low- and middle-income individuals and families and for small businesses. Some proposals include improvements to Medicare, based on provisions in the new public plan for younger people. They do not include enrolling additional people in the Medicare program.

Proposals to expand health insurance coverage incrementally through Medicare include legislation by Senator Rockefeller and Representative Stark to provide people age 55-65 with the option of buying into Medicare. In addition, Senator Bingaman and Representative Green have introduced legislation to phase out the two-year waiting period for Medicare for individuals who become eligible for Social Security benefits. These proposals are included in Senator Baucus' health plan outline.

Obama Proposal

As a presidential candidate, Barack Obama proposed a comprehensive health care reform proposal which begins by ensuring that all Americans under age 65 have access to affordable health insurance. President-elect Obama emphasizes that nothing would change for people who have health insurance they like except that their premiums would be lower. This would be due to "efficiencies" in the system - expanded use of health IT, chronic disease prevention and management, competition among insurance companies, and "reining in the abusive practices of monopoly insurance and drug companies." In addition, the Obama plan would reduce health insurance premiums by providing reinsurance for catastrophic cases (although this would increase costs to the federal government) and by reducing spending on care for people previously without insurance (cost shifting, uncompensated care).

President-elect Obama proposes a new public plan which would offer benefits similar to those offered in the Federal Employees Health Benefits Program (FEHBP) or, in other words, similar to those available to Members of Congress and federal employees. This plan would be available to individuals who do not qualify for Medicaid or SCHIP, those who do not have employer-provided insurance and to small businesses who want to provide insurance. Subsidies would be available for individuals and small businesses in need of assistance. The public plan, along with private insurance plans, would be offered through a newly-established National Health Insurance Exchange. Insurance companies would not be allowed to deny coverage to people with pre-existing conditions or to drop people if they become sick. Employers, except very small employers, would be required to contribute toward their employees' health insurance costs or help pay for the public plan. President-elect Obama would pay for his plan with long-term savings from the expanded use of health information technology and preventive care as well as by using funds from expiring Bush tax cuts that benefit higher-income people. ($1.6 trillion/10 years)

The Obama plan includes a mandate that children have health insurance coverage either through their parents' employer-sponsored insurance or through Medicaid and SCHIP, which would be expanded to include more families and working people. In addition, children could be covered through new options - a public plan or a private plan in the National Health Insurance Exchange. Although there is no mandate for older individuals to have health insurance coverage, the belief is that the Obama plan would achieve near universal coverage because health insurance would be available and affordable for all Americans under age 65.

Medicare is left unchanged for older and disabled Americans. The Obama plan does not propose expanding Medicare to cover people without insurance, and it does not mention using Medicare funds to pay for expanded health insurance coverage for younger people.

Stark Proposal

Representative Pete Stark introduced H.R. 1841, the AmeriCare Health Care Act, on March 29, 2007. According to his press release, "This straightforward legislation would provide universal health care coverage by building on what works in today's health care system - Medicare and employer-based coverage.

This legislation does not expand Medicare coverage. Rather it establishes a new program, Title XXII of the Social Security Act, which is modeled on Medicare and would use Medicare's existing administrative structure to process claims. Enrollees would have the option of an enhanced Medicare-like public plan, or coverage modeled on the Federal Employees Health Benefits Program (FEHBP) provided by private plans that contract with the federal government.

The new AmeriCare program would require all eligible individuals to pay premiums for coverage under Title XXII unless they were receiving employer-provided insurance with benefits at least as good as those offered under AmeriCare. AmeriCare would offer current Medicare Part A and Part B benefits, along with prescription drug coverage, with one deductible. It would improve upon Medicare benefits by providing mental health parity, as well as pediatric care and family planning and pregnancy-related services. Annual out-of-pocket spending would be capped for individuals and families.

Funding for AmeriCare would come from employer and employee premiums and from general revenues. It would also come from the states, since AmeriCare would provide benefits for women and children currently eligible for Medicaid and SCHIP. State Medicaid programs would continue to be responsible for long-term care. Subsidies would be available to help people under 300 percent of poverty with their out-of-pocket costs. A 2007 study by The Commonwealth Fund concludes that the Stark legislation would reduce overall health spending by expanding insurance coverage to all and thus reducing cost shifting to provide health care for the uninsured, and by building on the administrative efficiencies of Medicare.

The AmeriCare Health Care Act would not increase the number of people eligible for Medicare or use Medicare Trust Fund dollars to finance health care for younger people. Medicare would be improved by provisions in the bill that modify Medicare benefits to conform to AmeriCare.

Kennedy, Dingell Proposal

 Senator Edward Kennedy and Representative John Dingell introduced the Medicare for All Act (S. 1218, H.R. 2034), which adds a new Title XXII to the Social Security Act. This legislation is similar to AmeriCare. Three main differences are:

•  H.R. 1841, the AmeriCare Health Care Act , sets up a Medicare-style program (AmeriCare) for those under 65 but makes parallel improvements in Medicare - e.g., creates a stop loss/limit on cost-sharing in existing Medicare as well as AmeriCare.  H.R. 2034, the Medicare for All Act, does not make any changes to Medicare itself.

•  H.R. 1841 lets people keep their employer-sponsored insurance as long as it meets standards.

•  H.R. 1841 employs premiums like Medicare.  H.R. 2034 uses income-related payments. 

Baucus Proposal

 Senator Max Baucus' "Call to Action: Health Reform 2009," plan would establish a National Health Insurance Exchange through which individuals and small employers could purchase private health insurance or a public plan option similar to Medicare.

Support for Public Plan Option for Expanding Health Insurance 

- All Americans, not just seniors, the disabled and low-income, should have the option of buying a government run health insurance plan.

- Large purchaser and lower administrative costs would help contain health costs.

- Could be used as a testing ground on ways to improve quality, reduce waste (as could Medicare).

- "Could evolve into single-payer over time," (Paul Krugman, "Why Not Single-Payer?" New York Times blog, October 7, 2007)

Government Relations and Policy, December 2008

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