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What to do about the cost of health care?
By Dustin Block
By Dustin Block Journal Times analysis RACINE COUNTY - Chances are you've had a problem with health care costs. If you haven't, then you know somebody who has.
Last year, an estimated 500,000 people in Wisconsin, and 44 million nationwide, did not have health insurance. But the number of people struggling with affordable health care and rising costs is much higher.
People with insurance are paying, on average, roughly 20 percent of their health bills, plus annual increases in their premiums. Meanwhile, businesses are facing increases of 10 to 25 percent in health costs annually, forcing them to lay off employees and to raise prices.
The result is a growing consensus that something needs to be done about health care costs. What's unclear is whether the consensus will turn into a political movement strong enough to facilitate change at a state or national level.
Paying for the plan remains the major obstacle. An initial proposal called for a payroll tax on business and employees to raise at least $12 billion annually. Supporting a tax increase on businesses, particularly in an election year, would be politically damaging to any candidate.
Racine County Executive Bill McReynolds, a Republican candidate for state Senate, demonstrated the knee-jerk opposition to health care reform last week with a scathing attack on his opponent, state Rep. John Lehman, D-Racine, who backs the Wisconsin Health Plan.
In response, Lehman said he backed a bipartisan approach to controlling health care costs and extending insurance to all residents.
The differences in approach between McReynolds and Lehman captures the promise and difficulties the Wisconsin Health Plan faces in a political debate.
Grassroots effort
The outright rejection of the proposal, known as the Wisconsin Plan, was the type of reaction the authors of the bill have been trying to avoid.
David Riemer and Lisa Ellinger, former members of Gov. Jim Doyle's administration, have traveled the state, soliciting input on the proposal in the hopes of building grassroots support for change.
They've taken an interesting approach to lawmaking: Disagree with their efforts to create an affordable health care system for all state residents? No problem, what's your solution?
The approach has achieved modest success. Ellinger pointed out that hospitals and Wisconsin Manufacturers and Commerce haven't come out hard against their proposal, despite their steadfast opposition to government involvement in health care.
She also noted that there are Republicans who support the plan, including state Rep. Curt Gielow, R-Mequon, who is co-sponsoring the proposal with state Rep. Jon Richards, D-Milwaukee.
Richards added that there are number of people in state government who are "quietly intrigued" by the proposal, which was crafted as a combination of Democratic-backed efforts to provide health care for all, and Republican-backed methods to implement the plan.
For example, the plan includes health savings accounts - a Republican plan - for all Wisconsin residents between 18 and 65 who have lived in the state for six months.
Democrats generally oppose HSAs as favoring the "healthy and the wealthy" - people who don't have a lot of medical expenses and do have extra money to save.
In response, the Wisconsin Health Plan seeds the HSAs with $500 per year. This money can be used for medical-related expenses, including dental care, or can be rolled over to the next year. State residents also could save money in the accounts tax-free.
The Wisconsin Health Plan also includes co-pays and deductibles for all state residents, and a cap on out-of-pocket expenses of $500 for children, $2,000 for adults, and $3,000 for families.
Political hurdle The funding mechanism for the Wisconsin Health Plan was purposely left out of the bill introduced into the Assembly. The hope was by focusing on the plan itself, and not the increase in taxes needed to fund the bill, that the proposal could be discussed without political recriminations.
But the plan written by Riemer and Ellinger includes up to a 12 percent increase in the state's payroll tax, depending on the size of the business, and a 2 percent contribution from employees. For all of their bipartisan efforts to craft the plan, it's the tax increase that makes it difficult for even election-year Democrats to support.
Doyle, facing a tough re-election challenge from Republican Mark Green, hasn't lent support to the proposal. Locally, Lehman may have trouble withstanding McReynolds' simple attack, particularly if health care reform is presented as a surface issue of taxing and spending at the expense of business.
The reality of the Wisconsin Health Plan is more complicated. While health care reformers can take solace in how the plan extends insurance to all state residents, the strength of the proposal may be its pro-business leanings. Focusing on taxes alone overlooks a promising plan to stabilize the financially chaotic health care system.
In his attack on the Wisconsin Health Plan, McReynolds himself inadvertently backed a large portion of the proposal. He called for tax-free health savings accounts, better transparency in health care costs and incentives for health care providers and consumers to make cost-effective decisions. The Wisconsin Health Plan includes all three provisions.
Current roles retained Using a three-tiered system, based on the health insurance plan given to state employees, the Wisconsin Health Plan divides insurance companies and medical providers into tiers.
Companies that qualify for "Tier 1" are available to all state employees for free. Companies in "Tier 2" or "Tier 3" are available to employees, but at additional cost.
Implemented statewide, the tiered system would give health care companies strong incentives to qualify for Tier 1. It also puts the state in a position of setting guidelines for what it takes to reach Tier 1, without creating a large government bureaucracy to run the program. Instead, the state sets the rules and private companies compete to follow those rules.
"The role of government is very small and limited in this plan," said Riemer, noting a key point of the proposal: It leaves the current players in health care, including hospitals and insurance companies, in place. "The government referees. Beyond that, we let them (health industry businesses) do their thing."
Pro-business The recent trouble with health care costs is their unpredictability. Businesses, local governments and individuals are struggling to budget into the future, because health care costs are increasing in spikes. One year, the increase can be 8 percent, the next year it can be 25 percent. With minimal negotiating power, businesses and governments are left to pay the steep increases and make cuts elsewhere.
The Wisconsin Health Plan works to even out the spikes by pooling state residents and creating purchasing pools that insurance companies can't ignore. The state would absorb the volatility of the health care market by simply taking away business' health care expenses. In return, businesses would pay up to a 12 percent payroll tax and employees would pay a flat 2 percent tax. The combined 14 percent of total payroll is less than the current state average of 15 percent of payroll being spent on health care.
Further, the percentage of payroll being spent on health care is growing annually. Ignoring the health care crisis, Ellinger said, is the anti-business stance.
"Doing nothing and allowing the status quo to continue is a jobs killer," Ellinger said.
Politics
The complexity of the health care issue could be its undoing. While the Wisconsin Health Plan is a seemingly elegant solution to a worsening problem, charges of tax increases on businesses could be too potent to overcome.
The equalizer could be grassroots efforts like Riemer and Ellinger are working to create. Politicians need permission from the public to make radical changes.
"The people are way ahead of the politicians on this one," said Richards, who remained optimistic that state legislators could turn in favor of the plan. Initial meetings with Democrats and Republicans are going well, he said. Ellinger added that several politicians are "quietly intrigued."
The hope for the Wisconsin Health Plan is to have it passed in the next state budget. Its prospects could hinge on the governor's race, and whether Doyle or Green would be willing to take the political risk of backing a comprehensive change to health care in Wisconsin.
The question for the gubernatorial candidates isn't whether reform is needed, it's whether the situation has gotten so bad that they can risk the change. With hundreds of thousands without insurance and businesses and individuals struggling to afford even basic health care, it's time for reform.
Either Doyle or Green could seize control of the November election by embracing the Wisconsin Health Plan - if they can resist the simple worries about tax increases and sell the comprehensive reform that would help businesses and individuals. If they can't, the status quo of deteriorating health care at escalating prices will persist - and the entire state will continue to carry the burden.
"We have to do this before a catastrophic event happens and our health care system collapses under its weight," Richards said. "It's good for us to address now, than when we may not have many good options."
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