In A Nutshell
It would be possible to provide Medicaid coverage to everyone in the United States at a cost of about $76 billion dollars a year. This could be financed by imposing a tax of employers of uninsured persons of $1.25 per hour for part-time workers or $50 per week for full time workers, and by increasing the Medicare portion of the FICA tax from 1.45% each of payroll paid by employer and employee to 1.8%. The effect of the tax on uninsured persons is best viewed as another form of minimum wage increase.
Migration into Medicaid of employees of firms that now offer private insurance could be prevented by requiring insured employees to elect to cover their uninsured dependents with at least a bare bones health insurance plan, and by requiring employers with 200 or more employees to keep their existing plans in place and to cover all full time employees (something 99% of them do now).
One of the main reasons that there is not more pressure to bring universal health care (not necessarily a single payer system) to the United States is that few people realize just how low the cost of doing it is, and few people understand how simple a plan that would achieve that goal could be. The plan I propose below is not innovative, is probably not the cheapest possible plan, and is probably not the best possible plan. But, it is simple, it would clearly work, and it is an affordable solution to a national crisis. This plan shows that we can afford to make universal health care available in the United States. If we could enact it, ending the crisis we face now, where huge numbers of Americans have no access to health care, we could afford to take our time to find a better solution to our nation's health care woes in the long term.
The federal government spent $2,292 billion in 2004. State and local government spend $1,495 billion in 2003. More than $850 billion of that went towards providing health care (and that doesn't include amounts provided to government employees as an employee benefit -- almost all of the 16 million plus government employees).
In 2003, there were 45 million people not covered by health insurance in the United States (about one in six people in the United States), of whom a little more than 8 million are children. The uninsured are overwhelmingly under age 65 (almost everyone who is age 65 and over is covered by Medicare), not in poverty and not disabled (those in poverty and the disabled are usually covered by Medicaid).
There are about 32 million people in the United States who are covered by Medicaid, a cooperative state and federal health care program that provides health coverage to the poor, the disabled and elderly people who need long term care or other services that Medicare does not provide.
Medicaid spends about $50.4 billion a year providing health care to the 50% of its beneficiaries who are children and 25% of its beneficiaries who are non-disabled, non-elderly adults. Medicaid spends about $48.2 billion providing health care (mostly nursing home care) to the 9% of its beneficiaries who are elderly, and about $80.5 billion providing health care to the 16% of its beneficiaries who are disabled.
Medicaid costs $1,305 per child, and $1,725 per adult, who is not elderly or disabled, in 2001 (but employee spending for health insurance coverage has increased 126 percent between 2000 and 2004 and Medicaid costs have also probably seen large increases). In 2004, private health insurance coverage premiums for a family of four average about $2,488 per person and $3,695 a single worker.
It would cost 76 billion to provide Medicaid coverage to every uninsured person in the United States. This is equivalent to 3.3% of the federal budget, 2% of government spending at all levels, and 9% of combined federal, state and local health care spending for non-employees. I propose that we do just that. We should make Medicaid available to everyone in the United States who is not already covered by health insurance or Medicare.
Paying For It.
Much of the tax base could come from the uninsured themselves, a great many of whom would willingly accept a pay cut if they could obtain health insurance from their employers. About 60% of the uninsured work at least part time, and the remainder are mostly dependents of people who work. About half of those who work are in small firms of fewer than 25 employees. Two-thirds have household incomes of $25,000 a year or more. A third have a household income of $50,000 a year or more.
A tax of $1.25 per hour on employers of uninsured part-time employees, and $50 a week on employers of uninsured full-time employees, could pay for a majority of the cost of extending Medicaid coverage to everyone without health insurance. The effect on employers would be similar to a $1.25 increase in the minimum wage, which is now at near record lows in real dollar terms or measured against the poverty line or worker productivity. This could be collected as part of the same bureacracy that collects exising FICA taxes. Employers already keep all of the necessary wage and hour records now in order to comply with other existing laws.
After the proceeds of a $1.25 per hour tax on employers of uninsured persons, expanding the Medicaid program to provide universal health coverage to every American would cost less per year than the prescription drug benefit that Congress just added to the Medicare program (a $53 billion dollar a year program).
The cost estimate for the plan I propose, less than $38 billion a year net of the tax collections it produces, does not include any allowance for the decreased administrative costs, increased ability to bargain with medical providers, and decreased need to care due to preventative actions which I discuss below. Thus, nationally, viewing the health care system as a whole, the real cost is probably far less than $38 billion a year.
One way the remaining costs of the program could be paid for would be by increasing the Medicare part of the FICA tax from 1.45% of payrolls paid by employer and employee alike, to 1.8% (a combined employer and employee cost of about $350 for a household making the median income). This adjustment in the FICA payroll tax Medicare portion, and a $1.25 per hour tax on employers who don't provide their employees with health insurance, would be a small price to pay to bring the United States into the 21st century by providing universal health care to everyone who lives here.
Preventing Migration Out Of the Private System.
The proposed tax on employers who do not provide health insurance to their employees is smaller than the cost of providing health insurance. This will create an incentive for some employers to stop providing health insurance. But, many firms that provide health care now will find that they are at less of a competitive disadvantage in their cost structure after the plan is put in place, because their competitors who do not provide health insurance will have a significant new tax burden that they do not have. Also, Medicaid is not a plan that provides the same quality of coverage that a typical private health insurer would provide. The choice of doctors is more narrow, and the benefits are often less expansive.
Part of the solution could be to require all firms with 200 or more employees to maintain health insurance coverage for all employees who currently have it and for all full time employees. About 99% of these firms already offer health benefits to, at least, some of their employees.
Another part of the solution would be to require that employees with dependents who have the option of obtaining health care from their employer for their dependents must do so unless the dependents have coverage from a source other than Medicaid already. This would prevent individual workers from choosing Medicaid over the insurance that protects them, and since many employers choose to require an employee contribution for dependent coverage (the law might set a maximum contribution level for a bare bones dependent care plan which health insurers would be required to offer), this would also limit the amount that health insurance costs an employer over and above the cost of paying the new tax on uninsured persons.
If, over time, the savings expected in the private sector from reduced bad debt and charity care do not reduce health insurance premiums, and many employers do choose Medicaid over private health insurance, a modest increase in the uninsured person's tax might be necessary.
This very simple proposal to expand Medicaid could also significantly reduce some government health care expenditures and provide other benefits. For example:
* If everyone who did not have employer provided health care or Medicare was automatically eligible for Medicaid, the cost of processing Medicaid eligibilty applications could be dramatically slashed.
* About 20% of health care costs now are due to charity care or bad debt, items in health care provider budgets which would be dramatically reduced if Medicaid was available universally.
* Emergency room crowding and the large quantity of charity care provided there (as a result of a federal law mandate to stabilize every patient who walks into an emergency room regardless of ability to pay) would be greatly reduced as a great many of those patients could instead seek care from a far lower cost provider such as a doctor's office or clinic.
* The cost of treating accutely ill patients (who often lose their jobs and are forced into poverty making them eligible for Medicaid) would be significantly reduced if sick or injured people could seek lower cost preventative treatment or treatment in the early stages of a condition, rather than waiting until the condition became more serious.
* The incentive to stay on welfare so that you could continue to receive Medicaid, which is now a significant welfare to work barrier for many people, would be dramatically reduced.
* The risk involved in starting your own small business would be greatly reduced if entrapreneurs knew that they could pay a modest tax ($2,500 a year) and get bare bones medical coverage.
(All statistics above not supported by a specific citation are from The World Almanac and Book of Facts 2005).