Democrats Focus on Health Care for All

Ten years after Bill Clinton’s attempt to remake the health-care system nearly capsized his presidency, the cause of guaranteeing universal access to health coverage is emerging as a centerpiece of the Democratic strategy for recapturing the White House in 2004.

Rep. Richard A. Gephardt (D-Mo.) last week formally launched his presidential campaign with a simple but sweeping and potentially vastly expensive plan to guarantee coverage to all employed Americans through tax credits for employers. Former Vermont Gov. Howard Dean, another contender for the 2004 nomination, already has offered a plan to dramatically expand coverage. And the other leading Democratic hopefuls are all devising their own alternatives.

The proposals are being propelled by a return of the problem that inspired Clinton’s doomed crusade: rising health insurance costs and declining access to coverage.

Chastened by the backlash against Clinton’s effort to fundamentally restructure the marketplace, the new Democratic plans look to cover the uninsured without significantly disrupting the system that provides health care for those with insurance -- more than 85% of Americans. As Gephardt put it Wednesday: “America won’t accept a big government contraption tangled in its own complexity.”

But the new proposals face a different hurdle. At a time when the federal budget is already facing mammoth deficits, all could be expensive -- with Gephardt’s potentially topping the list.

“No one should kid themselves that this proposal won’t cost a fortune,” said Democratic health-care expert Sarah Bianchi, the former chief policy advisor for 2000 Democratic presidential nominee Al Gore.

In stressing health care, the Democrats are focusing on what could be one of President Bush’s principal domestic vulnerabilities. In the most recent Los Angeles Times Poll, just 40% of those surveyed said they approved of the way Bush is dealing with the cost and availability of health care; 45% disapproved.

That discontent is rooted in a resumption of the storms that blew through the health-care system at the beginning of the 1990s. The cost of health insurance moderated later in the decade, but premiums have jumped by double digits in each of the last two years, according to a survey by the Kaiser Family Foundation.

As the cost of insurance rises, the number of employers -- especially small businesses -- offering coverage is declining. As a result, the number of Americans without health insurance, after declining through Clinton’s last years in office, soared by 1.4 million in 2001, to 41.2 million. Although the Census Bureau won’t release the final figures until September, all indications are that the number of uninsured rose significantly again in 2002.

Gephardt’s plan to expand coverage is built on a little-known detail about that army of uninsured: More than 80% of them live in households with either a full-time (70%) or part-time (12%) worker, according to Kaiser studies.

To reach those families, Gephardt would require all employers to offer coverage to their workers. He would provide employers with a refundable tax credit that would cover most -- in some cases all -- of the cost of doing so.

He would seek to cover the remaining uninsured Americans by letting individuals ages 55 or older buy into Medicare, by allowing working-poor parents to participate in a joint state-federal program that provides health care for their children, and by offering subsidies for unemployed workers to purchase coverage under the federal COBRA plan.

The tax credit is the core of Gephardt’s plan. Under current law, employers can deduct the cost of health insurance from their income as a business expense, thus reducing their taxes. Gephardt’s staff calculates the current tax benefit covers about 35% of the cost of the insurance that employers provide workers.

Although Gephardt hasn’t finalized his proposal, aides say they are discussing a more lucrative tax credit that would reimburse employers for as much as 60% to 65% of the cost of insurance.

Under the tentative plan, companies that don’t now provide insurance could pass all the remaining cost off to their workers, meaning those employers would not face any additional charge for providing coverage. That could reduce opposition to the proposal from small businesses.

Companies that now provide insurance would face a requirement to continue contributing at the same level if they currently pay for a larger share of the premium than the credit subsidizes.

So, if the credit is set at 65% of the cost of health insurance, a company that now picks up 75% (roughly the national average) might still have to pay 10% of the cost, with their employees contributing the remainder. But such employers would still be big winners under Gephardt’s proposal because the government would pick up most of the premium costs they now pay out of their pockets.

Gephardt aides say that’s necessary to induce large employers to continue offering affordable insurance as the costs rise. It could also expand the plan’s political appeal by making it more attractive to both big business and organized labor, which is resisting efforts from employers to shift more health-care costs to workers.

But subsidizing coverage at firms that now provide it could send the plan’s price tag soaring. Based on studies she has done of similar proposals, Bianchi estimated the cost of Gephardt’s proposal could approach or exceed $2 trillion over 10 years.

Although Gephardt won’t put a price tag on the plan until he completes its details, his aides said he would pay for it in part by repealing most of the Bush tax cut passed in 2001 and by eliminating existing tax benefits for employer-provided health care. He also would draw from the increased tax revenue he expects from expanded business growth as employers benefit from reduced health-care costs.

Gephardt plans to flesh out his proposal in a speech within a few weeks.

Dean’s competing plan is built around expanding Medicaid -- the health-care program for the needy -- to all Americans younger than age 23 and offering subsidies only to small employers. He predicted Gephardt’s plan would cost too much because it does too little to target its aid.

“I really want to balance the budget in addition to providing health care, and if you do that, you are not going to be able to subsidize large corporations,” Dean said in an interview.

Dean does not have a cost estimate for his proposal.

Republicans agree that Gephardt’s plan would be too costly, and they add another complaint. Bush and other Republicans want to help the uninsured by providing them with individual tax credits to purchase insurance. They argue that that approach would give workers more freedom to choose coverage that best suits their needs.

“The irony is you’ve got liberals saying we’ve got to let employers, even if they are lousy employers, make all the decisions for you and your family, and here are the conservatives saying, ‘Let’s let ordinary people decide what’s best for themselves,’ ” said Stuart Butler, director of domestic policy studies at the conservative Heritage Foundation.

Democrats like Gephardt believe that such individual subsidies won’t provide enough money to help the poor buy decent coverage, and more important, will unravel the principle of group insurance -- provided mostly through employers -- that shares the insurance risk between the young and the old, the healthy and the sick.

The competition now underway in the Democratic race virtually guarantees that the argument over how best to cover the uninsured will play a larger role in the 2004 presidential race than it did in 2000.

“To me, what’s exciting is that the universal coverage debate is back on the national agenda,” said Kenneth E. Thorpe, a former Clinton administration official who now teaches at Emory University in Atlanta. “That in itself is huge.”