Universal Solutions

Bernie Horn is policy director at the Center for Policy Alternatives. CPA is the nation’s only nonpartisan organization working to strengthen the capacity of state legislators to lead and achieve progressive change.

The debate over health care reform on Capitol Hill was quietly reshaped recently when Sen. Russ Feingold, D-Wis., tacitly admitted that the federal government isn’t likely to cover the uninsured for years to come. He proposed instead that Congress support universal health care pilot projects in three to five states.

I say, it’s about time. Let’s recognize that nothing particularly good will come out of Washington, D.C., before we change presidents in 2009—and only Pollyanna would expect dramatic new enactments even then. Let’s admit that, for progressives, the action is in the states.

(Feingold spells out his proposal for TomPaine.com in this commentary .)

Universal health means a system that covers all residents through public or private means. A single-payer system—with only one government-designated insurer—is a type of universal health system that is both highly efficient and highly controversial. A single-payer system should be demonstrated. Yet given the debate over it, it’s unlikely any state will adopt that model.

Feingold’s State-Based Health Care Reform Act would set up a federal task force to select a few states to implement universal health coverage pilot projects. The states would be given wide discretion to accomplish the goal—and $32 billion in matching funds. At the end of five years, the task force would evaluate each of the pilot projects in a report to Congress. In other words, to paraphrase Chairman Mao, let 3 to 5 flowers bloom.

State legislatures have proven that they deserve this important assignment. Just this year, legislatures have produced three historic health care laws.

In January, Maryland enacted the Fair Share Health Care Act, overriding a GOP-governor’s veto. This law requires companies with more than 10,000 employees to pay at least 8 percent of their payroll cost into a state fund for health care for the uninsured, with a credit up to 8 percent of payroll for what they actually spend on health care for their employees. It is modest legislation, and yet it is a major step forward for any state to mandate a minimum level of employer healthcare spending. It’s like creating a whole new category of a minimum wage.

Then Massachusetts enacted a law requiring all residents to have healthcare coverage by July 1, 2007. Businesses with more than ten employees that do not provide insurance must make a contribution of up to $295 per year per worker to the state. Insurance premiums for lower-income residents will be subsidized on a sliding scale. The law is a compromise between a Democrat-controlled legislature and a Republican governor.

Vermont enacted its own universal coverage law, projected to cover 96 percent of residents by 2010. A new coverage plan—to be offered through private health insurers—has fixed, affordable premiums, deductibles and copays. Similar to Massachusetts, companies with more than eight employees would pay $365 per year per uninsured worker. And like Massachusetts, insurance for lower-income residents would be subsidized. But Vermont’s law—also crafted by a Democratic legislature and a Republican governor—does not mandate coverage.

Yes, Maryland’s Fair Share Act was recently struck down by a federal judge, but it will either win on appeal or be fixed in the next state legislative session. Yes, Massachusetts’ universal health care plan puts too much responsibility on individuals and not enough on corporations. And yes, Vermont’s health plan is voluntary and may involve a bit of wishful thinking.

Nevertheless, states are leading the way. And states would have a far easier time constructing universal health care programs with just a little help from the federal government. But financial participation is not the only assistance they need.

Federal laws currently stand in the way of state-based healthcare reforms. The federal Employee Retirement Income Security Act (ERISA) sets minimum standards for private employer-sponsored health plans. One provision preempts any state law that would compel an employer to alter its ERISA-regulated healthcare plan. That’s the basis for the federal judge’s ruling against Maryland’s Fair Share Act. In 1983, Congress amended ERISA to provide an exemption for the Hawaii law that requires employers to make a substantial contribution toward health insurance for full-time workers. Other states need ERISA flexibility.

Similarly, federal Medicaid law is being used to block states from negotiating fair prescription drug prices. In part due to the Medicaid “Best Price” rule, only federal agencies and the most aggressive state Medicaid programs pay drug prices that are similar to those in the rest of the world. Everyone else pays too much. States can dramatically reduce drug costs for universal care programs if they have federal permission to piggyback on Medicaid prices. Of course, the Bush administration has blocked all state efforts to do so, arguing that would require congressional authorization.

Americans know that our healthcare system is broken, with 46 million uninsured and 30 million more underinsured. Individuals, businesses—in fact our whole economy—is suffering. Even the judge who overturned Fair Share Health Care recognized that “it is strongly in the public interest to permit states to perform their traditional role of serving as laboratories for experiment in controlling the costs and increasing the quality of health care for all citizens.”

It’s time for the federal government to help some states incubate the solution.