[Congressional Record Volume 145, Number 84 (Tuesday, June 15, 1999)]
[Extensions of Remarks]
[Pages E1254-E1255]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




INTRODUCTION OF HEALTH INSURANCE FOR AMERICANS ACT OF 1999: LEGISLATION 
TO PROVIDE REFUNDABLE TAX CREDITS FOR THE PURCHASE OF HEALTH INSURANCE 
                THROUGH A FEHBP-TYPE POOLING ARRANGEMENT

                                 ______
                                 

                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                         Tuesday, June 15, 1999

  Mr. STARK. Mr. Speaker, the biggest social problem facing America 
today is that one in six of our fellow citizens have no health 
insurance and are all too often unable to afford health care.
  About 44 million Americans have no health insurance. Despite the 
unprecedented good economic times, the number of uninsured is rising 
about 100,000 a month. It is unimaginable what will happen if and when 
the economy slows and turns down. One health research group, the 
National Coalition on Health Care, has estimated that with rising 
health insurance costs and an economic downturn, the number of 
uninsured in the year 2009 would be about 61.4 million.
  The level of un-insurance among some groups is even higher. For 
example, in California it is estimated that nearly 40% of the Hispanic 
community is uninsured.
  An article by Robert Kuttner in the January 14, 1999 New England 
Journal of Medicine entitled ``The American Health Care System,'' 
describes the problem well: ``The most prominent feature of American 
health insurance coverage is its slow erosion, even as the government 
seeks to plug the gaps in coverage through such new programs as 
Medicare+Choice, the Health Insurance Portability and Accountability 
Act (HIPAA), expansions of state Medicaid programs, and the $24 billion 
Children's Health Insurance Program of 1997. Despite these efforts, the 
proportion of Americans without insurance increased from 14.2% in 1995 
to 15.3% in 1996 and to 16.1% in 1997, when 43.4 million people were 
uninsured. Not as well appreciated is the fact that the number of 
people who are under-insured, and thus must either pay out of pocket or 
forgo medical care, is growing even faster.''
  Does it matter whether people have health insurance? Of course it 
does. No health insurance all too often means important health care 
foregone, with a minor sickness turning into a major, expensive 
illness, or a warning sign ignored until it is fatal. Lack of insurance 
is a major cause of personal bankruptcy. It has forced us to develop a 
crazy, Rube Goldberg system of cross-subsidies to keep the `safety net' 
hospital providers afloat.
  Mr. Speaker, what is wrong with us? No other modern, industrialized 
nation fails to insure all its people. I don't believe we are 
incompetent, but our failure to provide basic health insurance to all 
our citizens is a national disgrace.
  Personally, I would like to see all Americans have health insurance 
through an expansion of Medicare to everyone. I am also a co-sponsor of 
Rep. McDermott's single payer type program, which is modeled on 
Canada's success in insuring all its people for about 30% less than we 
spend to insure only 84% of our citizens.
  But these efforts are not likely to succeed in an conservative 
Congress or in a closely-divided Congress.
  Therefore, yesterday I introduced legislation, H.R. 2185, to try 
another approach--a refundable tax credit approach--which I believe can 
be made to work and which is similar to a number of bills recently 
introduced by various Republican members.
  Unfortunately, many of these earlier tax credit bills don't work. 
They either throw money at people who already have health insurance 
(e.g., 100% tax deductions for health insurance for small employers), 
provide a pitiful amount of money that wouldn't buy a fig leaf of a 
policy (e.g., a $500 credit bill), or if they do provide enough money, 
waste it by providing no `pool' or `wholesale' market and forcing 
people into the retail market where insurance companies take 20-30% off 
the top, refuse to insure the sick, and raise rates on older people so 
that the credit is woefully inadequate.
  The failures in these bills can be addressed. I think my proposal 
solves many of these problems. The idea of a tax credit approach to 
ending the national disgrace of un-insurance is a new one, however, and 
we desperately need a series of detailed, thoughtful hearings to design 
a program that will provide real help and not waste scarce resources on 
middlemen.
  The Health Insurance for Americans Act I introduced:
  Provides in 2001 and thereafter a refundable tax credit of $1200 per 
adult, $600 per child, and $3600 total per family. These amounts are 
adjusted for inflation at the same rate that the Federal government's 
plan for its employees (FEHBP) increases.
  The credit is available to everyone who is not participating in a 
subsidized health plan or eligible for Medicare.
  The credit may only be used to buy ``qualified'' health insurance, 
which is defined to be private insurance sold through a new HHS Office 
of Health Insurance (OHI) in the same general manner that Federal 
employees ``buy'' health insurance through the Office of Personnel 
Management.
  Any insurer who wants to sell to Federal workers through FEHBP must 
also offer to sell one or more policies through OHI. OHI will hold an 
annual open enrollment period (similar to FEHBP's fall open enrollment) 
and insurers must sell a policy similar to that which they offer to 
Federal workers (but may also offer a zero premium policy), for which 
there is no-pre-existing condition exclusion or waiting period, for 
which the premium and quality may be negotiated between the carrier and 
OHI, and which must be community-rated (i.e., it won't rise in price as 
individuals age).
  Mr. Speaker, a refundable tax credit sounds like an easy idea, but as 
in all things in America's $1.1 trillion health care system, there are 
some serious problems that have to be addressed.
  The major problems with a refundable credit are:
  (1) How to get the money to the uninsured in advance, so that the 
uninsured, who tend to

[[Page E1255]]

be lower income, can buy a policy without waiting for a refundable 
credit?
  (2) How to make sure that the credit is spent on health insurance and 
there is no tax fraud?
  I solve both of these problems through credit advances to insurers 
administered through OHI.
  (3) How to limit the credit to those who are uninsured, and avoid 
encouraging employers and those buying private insurance on their own 
from substituting the credit for their current coverage?
  By limiting the size of the credit, most people who have insurance 
through the workplace or are participating in public programs will want 
to continue with their current coverage. The credit is adequate to 
ensure a good health insurance plan, but most workers and employers 
will want to continue with the current system.
  Having said this, there is no question that this credit is likely to 
erode gradually the employer-based system. It is hard to see employers 
wanting to offer new employees a health plan, when they can use this 
new public plan. Indeed, it is likely that an employer will say, ``I 
will pay you more in salary if you will go use the tax credit 
program.''
  But is this bad? The employer-based health insurance system is an 
historical accident of wage controls during World War II where in lieu 
of higher wages, people were able to get health insurance as a fringe 
benefit. This system is collapsing. No one today would ever design from 
scratch such a system where your family's health care depended on where 
you worked. It is, frankly, probably good that this system would 
gradually erode--if there is something to replace it. The Health 
Insurance for Americans Act provides that replacement. To the extent 
that workers have better health care through their employer, the 
employer can continue to provide increased pay for the purchase of 
``supplemental'' or ``wrap-around'' health benefits and can even help 
arrange such additional policies for their workers--and both workers 
and employers come out ahead.
  The bill I am introducing does not force an overnight revolution in 
the employer-provided system. But the current system is dying, and my 
bill provides a transition to a new system in which employees will have 
individual choice of a wide range of insurers (instead of today's 
reality, where most employees are offered one plan and only one plan).
  (4) How to make the credit effective by allowing the individual to 
buy ``wholesale'' or at group rates, rather than ``retail'' or 
individual rates?
  (5) How to make sure that individual who most need health insurance--
those who have been sick--are able to use the credit to obtain 
affordable insurance?
  (6) How to minimize the problem created when the healthiest 
individuals take their credit and buy policies which are ``good'' for 
them (e.g., Medical Savings Accounts), but ``bad'' for society because 
they leave the sicker in a smaller, more expensive insurance pool (that 
is, how do we keep the insurance pool as large as possible and avoid 
segmentation and an `insurance death' spiral)?

  Again, the OHI/FEHBP idea largely solves these 3 problems, by giving 
individuals a forum where they can comparison shop for a variety of 
plans that meet the standards of the OHI and achieve efficiencies of 
scale and reduced overhead.
  These questions are the single biggest problem facing the refundable 
credit proposal. Even if we are able to `pool' the individuals, will 
insurers offer an affordable policy to a group which they may fear will 
have a disproportionate number of very sick individuals?
  We may need to develop a national risk pool `outlet' to take the 
expensive risks and subsidize them in a separate pool, so that the cost 
of premiums for most of the people using OHI is affordable. Another 
alternative, and probably the one that makes the most sense for 
society, is to mandate that individuals participate in the OHI pool (if 
they don't have similar levels of insurance elsewhere). Only by getting 
everyone to participate can we ensure a decent price by spreading the 
risk. The danger that young, healthy individuals will ignore (forego) 
the tax credit program may be serious enough that it will cause 
insurers to price the OHI policies too high, thus starting an insurance 
``death spiral'' as healthier people refuse to participate and rates 
start rising to cover the costs of the shrinking pool of sicker-than-
average individuals.
  As I said earlier, the different Republican tax credit proposals fail 
to deal with these key questions and problems. But their bills have 
helped focus us on this national crisis. Through hearings and studies, 
I hope we can find ways to ensure that these technical--but very 
important questions--are addressed.
  There is one key, monstrous question left: how to pay for the 
refundable credit so we may end the national disgrace of 44 million 
uninsured?
  I have not addressed this issue in the bill, but am willing to offer 
a number of options. I would like to see the temporary budget surpluses 
used to start this program--but those surpluses are temporary and we 
need a permanent financing source.
  The problem of the uninsured is largely due to the fact that many 
business refuse or are unable to provide health insurance to their 
workers. The fairest way to finance this program would be a tax on 
businesses which do not provide an equivalent amount of insurance to 
their workers. Such a tax, of course, would slow the tendency of this 
program to encourage businesses to drop coverage. Since many small 
businesses could not afford the tax, we will need to subsidize them.
  Another approach would be to apply the next minimum wage increase to 
the payment of health insurance premiums by those firms which do not 
offer insurance. A 50 cent per hour minimum wage increase dedicated to 
health insurance would pay most of an individual's premium.
  Other financing sources could be a provider and insurer surtax, since 
these groups will no longer need to be subsidize the uninsured and will 
be receiving tens of billions in additional income. Finally, to end the 
national disgrace of un-insurance, a small national sales or VAT tax 
would be in order.
  Again, Mr. Speaker, I have said that the earlier tax credit proposals 
have serious structural problems. The biggest problem they have is not 
saying how they will pay for their plans. Until Members talk about 
financing, all of these plans are sound and fury, signifying nothing.
  These tax credit bills are obviously expensive, but so is the cost of 
1 in 6 Americans being uninsured. In deaths, increased disability and 
morbidity, and more expensive use of emergency rooms, American society 
pays for the uninsured. If we could end the national disgrace of un-
insurance, we would save billions in improved productivity, reduced 
provider costs, bad debt, personal bankruptcy, and disproportionate 
share hospital payments.
  Mr. Speaker, it is time for America to join the rest of the civilized 
world and provide health insurance for all its citizens.

                          ____________________