Chicago, IL
America faces a health care crisis. The number of uninsured is now more than 45 million, and rapidly rising health care costs threaten coverage for those who now have it. Yet Congress has failed to take meaningful steps toward comprehensive reform, and what Republican leaders have put forth would only make matters worse.
Even in the boom years of the late 1990s, when tight labor markets encouraged employers to maintain or expand health coverage for their employees, the U.S. Census Bureau found nearly 40 million Americans were uninsured. Today, that number is growing, with 6 million more uninsured since 2000. More than 8 in 10 uninsured are in working families, and almost 70 percent are in families with at least one full-time worker. Coverage for these workers may be elusive because their employers do not offer coverage or because workers do not qualify for the coverage or cannot afford their shares of the premiums.
Escalating health care costs threaten existing employer-sponsored coverage – where 2 out of 3 non-elderly Americans get their coverage – and increase the ranks of the uninsured. After four straight years of double-digit increases, premiums increased 9.2 percent last year – more than three times the national increase in wages – bringing the average total premium for family coverage to almost $11,000. Year after year, rising health care costs have become the most difficult issue in union contract negotiations, with workers making the choice to forgo some wage increases to stave off greater increases in their health care cost sharing. But the current trend is unsustainable.
Many factors contribute to rising health care costs in our fractured, profit-driven health care system. In addition to the cost of poor quality care, unchecked prescription drug prices, excessive and opaque administrative charges, and enormous compensation for health care and health insurance executives all contribute to escalating costs.
This continued threat is having a devastating effect on the number of insured Americans. The proportion of employers offering health coverage decreased from 69 percent to 60 percent over the last five years. While most firms that don’t offer coverage are small firms, large firms that have historically been the most likely to offer health benefits are also cutting back: one in four uninsured in 2001 worked for firms with 500 or more employees or were dependents of those workers.
Retiree coverage has also suffered from crippling cost hikes. Just 33 percent of all large firms (200 or more workers) offered retiree health coverage in 2005, down from 66 percent in 1988. Early retirees under the age of 65 who lack coverage from their former employer have very few options for affordable or comprehensive coverage at a time in their lives when their health care needs only get greater.
For those without employer-sponsored coverage, publicly funded health care meets a critical need. More than 40 years ago, Medicaid and Medicare were established to provide health coverage for those not well served by the private market. Medicaid now serves more than 55 million Americans, including children and many of the sickest and poorest in our nation. The rise in the uninsured would have been worse if not for the increase in the number covered through government-funded programs. However, eligibility restrictions, particularly for adults and recent immigrants, continue to limit Medicaid’s reach.
Not only does Medicaid cover those who would not otherwise have health insurance, it is an essential contributor to our health care system. Medicaid covers one in four children and provides acute and long-term care for 14 million elderly persons and persons with disabilities. In addition, Medicaid accounts for $1 of every $6 of health care spending, representing a key source of financing for health care providers who serve patients beyond those enrolled in Medicaid.
Medicare now covers more than 42million seniors and people with disabilities. While the Medicare Modernization Act of 2003 is most closely associated with the new Part D prescription drug benefit that began on January 1, 2006, other important changes were included in that law. Most notably, private managed care plans were given an enormous boost in federal reimbursement: a $12 billion stabilization fund that the Administration can use to entice private insurers to offer and maintain coverage in addition to inflated payments that amount to 15 percent more than traditional Medicare is paid. This will create a two-tiered system that allows private managed care plans to offer better benefits and lower premiums than seniors could get under traditional Medicare.
Remarkably, our extraordinary level of health spending is not reflected in better quality of care. Patients get the appropriate treatment for their health care needs only about half the time. Up to 98,000 people die each year as a result of medical errors and many more Americans suffer serious injuries and complications due to medical error, the costs of which are borne by patients and their health plans. Widespread and medically unjustified variation in utilization, quality of care and patient outcomes are very costly, both in human and financial terms. Research shows that effective treatments are vastly underutilized and a substantial percentage of patients are subjected to medical treatments that are either unnecessary or contraindicated. And on indicators of health – such as infant mortality and life expectancy – the United States ranks near the bottom among industrialized nations, despite spending much more on health care per capita.
The AFL-CIO calls on the Congress and the President to enact legislation that adheres to the following principles:
Principles to Guide Health Care Reform
- Universal health care has been labor’s goal for 50 years and remains so today. All Americans are entitled to high quality, affordable and meaningful health care coverage.
- Experience around the world demonstrates that a social insurance system is the most effective, efficient way to achieve universal coverage, providing comprehensive benefits and pooling risks, while controlling costs and driving quality improvements.
- Unless and until we have a national social insurance health care system, public policies should build upon that which works in our current system: comprehensive and affordable employer-based coverage for working families and fully-financed public programs for the poor and elderly.
- Since we as a nation benefit when all have health coverage, financing for health care must be a shared responsibility, with a continued role for employers.
- Expanding coverage to the uninsured and helping maintain coverage for those who are currently insured requires effective cost containment.
- Ending the epidemic of poor quality and downright dangerous care requires collaborative work among providers, health organizations, payers and consumers, but it is best leveraged by large payers – like federal and state health care programs and employers – committed to purchasing only high quality care.
- Full inclusion of the healthcare workforce will be necessary to successfully achieve reform, not just in its implementation, but also in planning and mapping the direction of reform.
Policies to Achieve Meaningful Health Care Reform
- Move toward universal health care: A number of policies would help achieve universal health care, including single payer proposals, such as those that build upon an improved Medicare to provide coverage for all Americans. Medicare’s administrative costs run far below those of private insurers – just 3 percent for Medicare compared to 13 percent for private insurance companies. Furthermore, Medicare is built upon shared financing, funded from payroll taxes, general revenues and enrollee premiums.
- Support universal coverage proposals in the states: In the face of federal inaction on one of our nation’s most urgent needs, states are filling the void. Maine developed a program for universal coverage, Dirigo Health, to rein in rising health care costs and extend coverage to uninsured Mainers. A broad labor-led coalition in Wisconsin has developed the Wisconsin Health Care Partnership Plan. Massachusetts and Vermont have passed legislation that seeks to achieve universal coverage. And many other states have sought to level the playing field between employers that provide coverage to their workers and those that don’t. The Fair Share legislation, introduced in 31 states, would require large employers that don’t pay their fair share toward health care to pay into a fund that would help cover uninsured workers.
- Fight the attacks on employer-based coverage: Two out of three Americans get their health insurance from an employer-based plan. With its natural pooling of risk and potential for using bulk purchasing to leverage lower costs and higher quality, employer-based coverage is the best and often only way for most Americans to obtain affordable coverage in our current system. Any policies that undermine this coverage must be strongly opposed. High-deductible health plans and Health Savings Accounts not only don’t deliver on the rhetoric of insuring more Americans and holding down costs, they will actually make matters worse for those who now have good coverage. This policy will lead to higher premiums for traditional coverage and employers either cutting back or eliminating their coverage all together.
- Rein in skyrocketing health care costs: Health care costs are growing 2 to 3 times faster than both the overall rate of inflation and worker wages. An increasing number of employers are responding by shifting more costs onto workers, which will only lead to more uninsured and workers forgoing needed care. To fight these proposals at the bargaining table, we need alternatives to cost shifting. One such alternative would have employers use value-based purchasing to reduce expensive medical errors and poor quality care. Another option is reinsurance, which addresses an inescapable fact of health care in the United States: the top ten percent of health care users account for about 70 percent of total health expenditures in the U.S. Providing financial assistance for high-cost cases would generate immediate savings for employers and stabilize year-to-year cost fluctuations that are reflected in rising premiums.
- Preserve retiree health benefits: Retiree health benefits are under attack in both the private and public sectors and early retirees in particular have no other affordable option to obtain coverage to bridge them to Medicare eligibility at age 65. Reinsurance would be of particular help in alleviating some of the cost pressures of retiree health benefits, since older workers are more likely to have chronic health conditions and more serious health care needs that drive up costs. Another option would be to provide substantial subsidies for the purchase of health insurance. Under current law, early retirees who receive a benefit from the Pension Benefit Guarantee Corporation qualify for a tax credit for health insurance (known as the Health Coverage Tax Credit). This program should be improved to make the program work as intended and modified to include other early retirees. These and other measures that target legacy costs would help preserve retiree health benefits.
- Make the new Medicare Prescription Drug Benefit work as promised. Implementation of the new drug benefit has been an unmitigated mess. Low income individuals have slipped through the cracks, seniors are struggling with the multitude of plan choices and benefit designs, and pharmacists and states have had to step in to help where private insurance plans have put seniors at risk. At a minimum, Congress should extend the enrollment deadline for individuals to sign up for the new benefit without penalty. But the program needs a fundamental overhaul, e.g., require the secretary of HHS to negotiate for lower prescription drug prices, fill the gap in coverage, and provide a Medicare option to all to ensure affordability, stability and simplicity.
- Preserve vital public programs: Medicaid is not only an essential provider of care for the poorest Americans, it provides vital economic support for our entire health care system. Cuts to the program not only put at risk the women and children who rely upon the program, they also further fray an already strained safety net and leave states to pick up the additional cost. In addition, Medicaid and SCHIP should be expanded and enrollment simplified to cover more children. Of the 46 million uninsured, about 9 million are children, and as many as 70 percent of those children are eligible for Medicaid or SCHIP.