Correspondence
National Leadership Coalition's Plan for Health Care Reform
N Engl J Med 1993; 328:1643-1644June 3, 1993
- Article
To the Editor:
On behalf of the National Leadership Coalition for Health Care Reform, Simmons et al. (Nov. 19 issue)1 call for a new payroll tax to fund their national health insurance scheme. They fail, however, to note the many drawbacks and limitations of this approach, more commonly known as pay-or-play.
First, as with all payroll taxes, pay-or-play is fundamentally regressive and thus, to many, unfair. It would result in both high- and low-wage earners paying the same tax rates for health care.
Second, pay-or-play mandates higher costs to employers in the form of either health insurance premiums or taxes. This, in turn, forces the price of labor up. Employers will have to absorb some of these new costs, but most will be passed on to employees. As a result, adopting pay-or-play will lead to higher rates of unemployment, more business failures, and wage reductions. Econometric models predict that adopting this system will force something between 630,000 and 3.5 million Americans out of work and onto the unemployment rolls2.
Third, pay-or-play creates incentives for employers to avoid hiring people who incur high medical costs. Hence, the handicapped, the chronically ill, and single parents with small children will face increased discrimination in the employment market. As a recent study by the Congressional Budget Office reports, “Employers forced to provide health insurance will have an incentive to discriminate against workers with high insurance costs”3.
Finally, the notion of adverse selection undermines the logic of the proposed payroll tax. According to this concept, an employer will opt to pay the tax rather than provide health insurance for employees whose premiums would cost more than the tax. The employer will choose to dump such employees into the government plan, since from the employer's perspective, this would be cheaper. Such persons are likely to be the ones requiring the most health care, however. In response, the government would have to raise the payroll tax in order to generate sufficient funds to pay the medical bills of these people. Faced with an increase in the tax, employers would again dump more employees into the government health care pool. This cycle will continue relentlessly until all that is left is a federally operated health care system.
3 ReferencesAndrew F. Shorr, M.P.H.
1120C John St., Charlottesville, VA 229031
Simmons HE ,Rhoades MM ,Goldberg MA . Comprehensive health care reform and managed competition. N Engl J Med 1992;327:1525-1528
Full Text | Web of Science | Medline2
Bast JL, Rue RC, Wesbury SA. Why we spend too much on health care. Chicago: Heartland Institute Press, 1992:80-2.
3
Selected options for expanding health insurance coverage. Washington, D.C.: Government Printing Office, 1991:39.
To the Editor:
Simmons et al. have chosen to emphasize financial issues in their plan for comprehensive health care reform. Although funding of care and access to insurance for those who can afford it are certainly important, access to care itself is even more important. The proposed financial system continues to permit deductibles and copayments, which inhibit or even prevent access to care for many people, probably more than the number who now have no insurance whatever. . . .
Samuel D. McFadden, M.D.
110 El Verano Way, San Francisco, CA 94127To the Editor:
Simmons et al. refer to the National Leadership Coalition for Health Care Reform as “an exceedingly diverse group of organizations,” including health care providers. In reviewing the Appendix, containing an updated list of member organizations, we could find only one organization, the American College of Physicians, that appeared to represent practicing physicians. We believe it safe to state that the American College of Physicians does not represent the majority of practicing physicians; on the basis of the sample it polled to endorse its plan for health care reform (approximately 4000 of its 77,000 members), we are not sure the American College of Physicians speaks for the majority of its membership, either1. Hence, we believe the article may mislead the reader by implying that this plan is universally acceptable to a majority of practicing physicians. It is interesting that there is a notable absence of major legal groups signing on to this coalition.
Although the plan has noteworthy elements, major portions seem based on naive premises. For example, empowering and requiring “every American to obtain coverage” is better than entitling them to coverage, but what of illegal immigrants, migrant workers, or members of the “underground economy”? How can their subscriptions to an insurance plan be enforced? Would more physicians accept these nonpaying patients into their practices if the costs in professional services could be deducted from income taxes (limiting paperwork and bureaucracy, and extending access to medical care through a form of “simplified administration”)2?
2 ReferencesZvi Herschman, M.D.
Saint Barnabas Medical Center, Livingston, NJ 07039Aviva Lehrfield, M.D.
Beth Israel Medical Center, New York, NY 100031
Scott HD ,Shapiro HB . Universal insurance for American health care: a proposal of the American College of Physicians. Ann Intern Med 1992;117:511-519
Web of Science | Medline2
Herschman ZJ. Economics of trauma. In: Grande CM, ed. Textbook of trauma anesthesia and critical care. St. Louis: C.V. Mosby, 1993:145-57.
Author/Editor Response
The authors reply:
To the Editor: Mr. Shorr raises a variety of familiar objections to the inclusion of a pay-or-play mechanism in a broader strategy of health care reform, and in so doing he makes some familiar mistakes. Fundamentally, he fails to recognize the simple fact that the proposal by the National Leadership Coalition is broader. Would a pay-or-play mechanism encourage employers to discriminate against potential employees who have high prospective medical bills, or to dump those at high risk into a government plan? Not in the context of a plan such as the coalition's, which requires insurance companies to use community rating. Would such a provision produce a net loss of jobs? Not in the context of a strategy that controls costs effectively, and Mr. Shorr does not dispute the proposition that the coalition's proposal would do that.
Most employers, including by far the preponderance of small businesses, provide health coverage to their employees now and, in the absence of cost constraints, currently absorb huge premium increases every year (the average per-employee cost to businesses of providing health coverage doubled between 1987 and 1992).1 These increases erode the ability of American firms to compete in international markets and draw capital away from investments in growth -- in short, they fundamentally undermine the capacity of the economy to retain and create jobs.
Finally, would a pay-or-play provision be unfair to low-wage employees? Not in the context of a proposal in which, for employers that choose to pay a payroll tax instead of purchasing health insurance directly, the cost of covering a low-wage worker through Pro-Health would be proportionately lower than the cost of covering a high-wage worker. The so-called pay option in the coalition's plan is explicitly intended to subsidize coverage by firms with low-wage employees.
We agree with Dr. McFadden that access to care is crucial, which is why we have called for ensuring it, as well as for subsidies to eliminate deductibles and copayments for those whose incomes fall below the poverty line and for sharp reductions in such payments for those whose incomes are between 100 and 200 percent of the poverty level.
As for the issues raised by Drs. Herschman and Lehrfield, we leave it to the Journal's readers to judge whether our article implied that our proposal is “universally acceptable to a majority of practicing physicians.” We do know that a strategy such as ours has broad and growing support -- in the business, labor, consumer, and, yes, provider communities.
1 ReferencesHenry E. Simmons, M.D., M.P.H.
Margaret M. Rhoades, Ph.D.
Mark A. Goldberg
National Leadership Coalition for Health Care Reform, Washington, DC 20004
