White House Favors U.S. Aid for Uninsured

More than 6 million adults without health insurance could be covered at a cost of $23 billion a year by expanding current federal health programs for the poor, according to a report being issued today by the Clinton administration. The study claims this would be more effective than giving people tax deductions or credits to buy private insurance.

The report, along with a similar one by a liberal policy think tank, will be used as ammunition in the coming fierce battles in Congress and on the campaign trail over the best way to help the uninsured.

Congressional GOP leaders, eager to stake out a strong position on the issue as Congress returns this week from its summer break, want to pass a new tax deduction to promote the individual purchase of coverage.

And the Republican presidential nominee, Texas Gov. George W. Bush, has called for a $2,000 tax credit to make it easier to buy health insurance. It would be refundable, so people who make too little to pay taxes would still get the $2,000 from the government to buy insurance.

Vice President Al Gore, the Democratic nominee, wants to raise the eligibility limits on a program offering coverage to children in low-income families, and he wants to extend the coverage to their parents.

The issue of the uninsured is becoming an important part of the political debate for the first time since the 1994 collapse of President Clinton’s proposal to require universal coverage through employers.

The emphasis now is strictly incremental--how to take gradual steps to bring health insurance to more people. Party differences are basic: Democrats want a bigger role for government, and Republicans want to help people buy private insurance.

Today’s administration report, although it promotes the approach favored by Gore and the Democrats, recognizes the difficulty of how to cover the uninsured, who are becoming more numerous despite a decade of prosperity.

“Reversing the trend of declining insurance coverage among Americans will require a major commitment by the public sector,” says the report prepared by the president’s Council of Economic Advisors, which reviewed different approaches to the issue. “One common theme in these studies is that there is no silver bullet that will easily or inexpensively resolve the problem of the uninsured in America,” it says.

The uninsured population accounts for 18% of all Americans under age 65: 32 million adults and 11.9 million children. They are most likely to be workers and their children in families with incomes under $25,000 a year, members of minority groups, employees of companies with fewer than 25 workers, and people who work in retail stores, hotels, restaurants and other service industry jobs. Among major population groups, the uninsured include 13.7% of white non-Latinos, 23.8% of blacks, 37.1% of Latinos, 22% of Asians and 24% of Native Americans. Virtually all Americans 65 and older are covered through the federal government’s Medicare program.

The report also acknowledged that not only the poor have a hard time getting coverage.

“Many Americans with incomes well above poverty--such as people who have lost access to employer-based coverage, the near-elderly and people with chronic illness--have difficulty obtaining quality insurance at a reasonable price,” says the study, titled “Reaching the Uninsured: Alternative Approaches to Expanding Health Insurance Access.”

California Faces Special Problems

Although the report deals with a national approach, California faces two special problems. The state has many small businesses that don’t offer coverage to their workers. And there are many people without insurance who don’t want to have anything to do with government programs, even if they qualify.

About 23% of California residents are uninsured, far above the national figure of 18%. Los Angeles, with 31% of its population uninsured, has the third-highest rate among major metropolitan areas, surpassed only by El Paso and Jersey City, N.J.

For Los Angeles County, with a large, low-income immigrant population, there are strong obstacles to enrollment in federal programs--”rumors and a lot of fear,” said Barbara Frankel, supervising attorney for the Los Angeles Health Consumer Center, a counseling project for low-income people.

The Clinton administration’s CEA report will be formally issued today along with a study by the Center on Budget and Policy Priorities, a Washington-based group that endorses raising the income limits for government health programs for the poor.

Most children are now eligible for programs, but their parents are not covered. If the adults were covered, they would be more likely to enroll the entire family, the center predicted.

“Including parents is a good strategy not only because it reduces the uninsured generally and supports work, but also because it helps assure that children have needed coverage,” said Leighton Ku, main author of the report.

The administration’s report levels its sharpest criticisms at tax deductions, which it says would help only 600,000 people who were previously uninsured. Individuals would claim as a deduction the cost of the premium for their health insurance policy. Because the deduction would be worth only a relatively small portion of the cost of insurance, few people would buy it, the study claims.

For example, suppose a family health insurance policy cost $4,500 a year. For someone in the 15% tax bracket, the deduction would save $675 annually, requiring the family to spend $3,825 out of pocket for the policy. A deduction “would provide a tax break to predominantly middle- and upper-income households already purchasing such coverage,” the report says.

The $2,000 refundable tax credit would be much more effective, bringing coverage to more than 4 million people, according to the study. The credit is a dollar-for-dollar reduction in taxes, but the money can be used only to buy the policy. If a family owes $3,000 in taxes, for example, the tax bill is reduced to $1,000.

The most efficient way to expand coverage to low-income people, the study claims, is by increasing direct government coverage to all adults with family incomes below the poverty line, about $17,000 a year for a family of four. The adults would enroll in the government program that helps pay health costs for the poor, called Medicaid nationally and Medi-Cal in California.

Total cost to the taxpayers would be $23 billion a year, compared with $38 billion for the tax credits and $1.6 billion for the tax deductions, the study said.

A Cost Comparison of Health Proposals

The $23-billion program would cover all adults with incomes below the poverty line.

A less expensive version would cover only those adults whose children already are enrolled in a subsidized health insurance program. This is known in California as Healthy Families. Limiting the new national coverage to these parents would bring insurance to 2 million additional people at a cost of $6 billion a year.

California’s Legislature voted last week to extend Healthy Families to 600,000 low-income parents, but it did not provide any money to pay for the new coverage.

California’s situation is indicative of the national problem. Many children who are eligible are still not enrolled in either Medi-Cal, designed for the poorest Californians, or Healthy Families, aimed at the working poor.

“Families are proud, and they’re working,” said Michael Koch, director of the California Kids Health Care Foundation. “They don’t want to apply for Medi-Cal.” If the children are healthy, their parents will “roll the dice and go uninsured,” said Koch, whose organization provides insurance for immigrant children who may be undocumented and can’t apply for government programs.

“It’s a real frustration that you have the money and the programs and kids are still not signing up,” said Koch, who said he gets lots of calls from families who could qualify for Medi-Cal or Healthy Families but refuse to apply.

“People are very confused about the options open to them,” said Jean Nudelman, director of Kaiser Permanente Cares for Kids, which offers help when families have too much income to qualify for either Medi-Cal or Healthy Families. Kaiser offers low-cost coverage, just $35 a month per child with a maximum payment of $105 a month, for families with annual incomes from $41,750 to $50,000. Although Kaiser expected to enroll 5,000 children, fewer than 2,000 have signed up since the program began in September 1998. “We have to learn a lot more about reaching people,” Nudelman said.

California’s difficulties suggest that no matter what approach is offered by Congress, the Clinton administration or the presidential candidates, bringing health insurance to all Americans will remain an expensive challenge. “While there are multiple barriers to coverage, lack of affordability remains the primary reason why 44 million Americans lack health insurance,” the CEA study says.