Health Care Reform: Building From the States?

Health Care Reform: Building From the States?

by Sherry Glied (Health Policy and Management)

Health care reform promises to be a hot issue in the 2008 presidential elections. By any measure, this discussion is long overdue. The number of uninsured Americans has risen substantially since 1993, and now numbers over 46 million. Health care costs have climbed to 16 percent of the GDP, about twice as much per capita in real dollars as any other country spends. Federal spending on health care now consumes 19 percent of the federal budget. Without further intervention, the Congressional Budget Office anticipates federal health spending will exceed 20 percent of the GDP by 2050. And a growing body of literature suggests that the quality of U.S. health care leaves much to be desired, and certainly cannot justify the exceptionally high price we pay for it.

Cataloguing the symptoms of the problem is easy, but the diagnosis is more contentious, and the cure quite elusive. Some argue that these various deficiencies stem from the insurance, employer contributions, and distortionary tax incentives design that insulate individuals from the cost implications of their health care decisions. Others assert that insurance pricing practices, administrative costs, and the lack of universal insurance explain the high costs of care in the United States. What can be done? The various primary candidates' proposals address various elements of these two core positions-here a change in the tax code, there an insurance purchasing arrangement; here an individual mandate, there a new set of subsidies for low income uninsured people; here a disease management initiative, there a new set of options for small employers purchasing coverage. Most of these components have merit and are supported by evidence-whether they will ever become legislation or add up to comprehensive reform is unclear.

More striking are the two obvious options that have not entered the debate. One is an expansion of the federal Medicare program. While a favorite of pundits, a Medicare expansion is an unlikely route for reform. The design of the Medicare program itself is outdated and would need substantial revision. Medicare would centralize all health care decision-making in Washington, and this monolithic program would likely be quite inflexible in addressing health care changes over time. Finally, an expansion of Medicare, while it would have little impact on national health care spending, would dramatically increase the share of health care spending in the already strained federal budget.

Perhaps a more promising route would be to build on the existing Medicaid program, the federal-state health insurance program that now serves low income children and some low income adults. Medicaid, and its sister program, the State Child Health Insurance Program, have been steady sources of coverage growth for over 20 years. Medicaid forms the foundation of state efforts to achieve universal coverage, including Governor Romney's effort in Massachusetts and Governor Schwarzenegger's effort in California. The decentralized structure of Medicaid has allowed states to experiment with new coverage designs and cost control strategies. The shared financing structure diffuses the cost impact of expansions.

Universal expansion through federal support of state efforts has a noteworthy precedent-that's the way that universal health insurance is structured in Canada. A proposal to provide financial and regulatory encouragement to the states so that they can expand Medicaid up the income scale, perhaps in combination with an individual mandate or a buy-in option for those who can more readily afford coverage, has none of the elegance of a unified national health insurance plan. This clumsier model, however, may be more likely to achieve the goal of universal insurance and offer some workable and innovative strategies for addressing the cost and quality problems that plague our system.

Sherry Glied is Chair and Professor of Health Policy and Management at Columbia University. Her principal areas of research are in health policy reform and mental healthcare policy. She served as a senior economist for healthcare and labor market policy to the President's Council of Economic Advisers, under both President Bush and President Clinton. In the latter part of her term, she was a participant in President Clinton's Health Care Task Force.