Michael Grady, MD
In 2009 the Oregon Legislature passed HB 2009, which would result in health insurance coverage for all Oregonians by 2015. As this 2011 legislative session winds down, it is worth examining how far we have progressed, and consider a couple of proposals that, together, could move Oregon far ahead of other states in transforming our health system.
Not much progress, or so it seems.
Yes, we have passed a health insurance exchange bill (SB 99) but it is difficult to see how this will significantly lead to either universal coverage or “bending the cost curve.” Absent a robust publicly-owned plan, the insurance exchange will just be another playground for insurance companies. Competition (its newest iteration in the form of insurance “exchanges”, “marketplaces” and “malls”) has failed miserably to find a solution to the problem of people who need health insurance but can’t afford it. Even if a plausible business plan emerges, the exchange will result in covering only a little more than half of the currently 600,000 uninsured in Oregon by 2015. What happens to the other uninsured Oregonians?
In HB 3650, the Health Care Transformation bill, we have a serious and needed attempt to change the delivery of health care, beginning with recipients of both Medicare and Medicaid. However, the details are murky to say the least, and how these Coordinated Care Organizations (CCOs) will function in smaller and more remote communities is even less clear. We also haven’t addressed how the global prospective payment will be divided among providers in one of these CCOs, which is crucial to figure out as far as I can see.
It is difficult to understand how we can get to a transformed system without an upfront investment to get us through the transition. Trying to achieve this in the current budget climate is laudable for sure, but may not be possible.
Which brings me to my proposal. Out of the legislative dumpster of dead bills and dash amendments, I found two ideas which, when combined, might lead to a more just and sustainable health care system for Oregon.
Originally a concept proposed by lobbyist John DiLorenzo, SB 972 called for the Oregon Health Authority to examine and bring back to the legislature in 2012 a bill that would create a dedicated sales tax to fund universal heath care in Oregon. Individuals and businesses would no longer pay health insurance premiums. Every Oregonian would be eligible for an essential benefits package paid for by a 5-7% sales tax. Disconnecting health insurance from employment would be liberating for both business and individuals, creating a more attractive business climate in Oregon and more mobility for employees. In addition, the dreadful double whammy of lost job and lost insurance, which is devastating families in this economy, could be avoided.
But what would that “essential benefits package” include, and given health care inflation rates, how can that package be sustainable, i.e. avoid a slowly increasing sales tax creep? In work sessions around the exchange bill, Sen. Alan Bates proposed that the Oregon Health Plan (OHP) could become the publicly-owned plan in an insurance exchange. I suspect that Sen. Bates, like me a family physician, understands from experience that OHP could serve as an adequate, ethically-defensible floor for health coverage for all Oregonians.
For over five years now, I have had a medical practice that is 95% OHP and no one has lost life or limb or had their life cut short because they had this level of coverage. Imagine if we could 1) maximize leverage of federal funds with the expansion of Medicaid called for by the Affordable Care Act, and 2) create an essential benefit by using the prioritized list of services inherent in OHP, along with 3) a sales tax dedicated to providing an OHP level benefit to all Oregonians that would be sustainable and perhaps even come under the 5-7 % number.
The short answer to what is wrong with our health care system has been clear for a long time. Everything. We have failed to provide a basic level of health care to all our citizens or define a sustainable benefit for publicly provided care. We deliver care in a largely fee for service model that has no hope of controlling costs or insuring quality, and we finance our system using mechanisms that guarantee gaps in coverage and the incessant cost shifting that ensues. Coverage, benefit, delivery and financing must all be addressed together. Starting over with a dedicated financing mechanism for a defined benefit, available to all, delivered using mechanisms from the health transformation process begun in the current session could lead out of this health care wilderness.
Of course there are many obstacles to this idea. Chief among them certainly, is the historical response of Oregon voters to a sales tax. I am not especially fond of a regressive tax that burdens poor people disproportionately, but there are no perfect solutions to avoiding the cataclysmic trajectory we are on. Oregon is one of the least taxed states and one of the few without a sales tax. This gives us an opportunity that other states do not have.
We desperately need new ideas. Mr. DiLorenzo and Sen. Bates have proposed novel approaches. Combining them would provide a just and sustainable health care benefit for all in this state, make Oregon more attractive to business and free the health of Oregonians from the vicissitudes of the general fund budget.
Michael Grady, MD, practices family medicine in Silverton, Oregon, and is a member of the Community Leadership Council here at We Can do Better.
Sounds like an excellent idea. I believe that a 5% sales tax together with a payroll tax of ~3% to 5% could get us to universal coverage in the state, at least to the level that I have long thought about and that Dr. Grady suggests.
I obtained from 4 for-profit and non-profit employers ( a small non-profit, a mid-size city, a manufacturer with ~110 employees, and a grocery store with ~120 employees) that their health insurance cost’s added in their last fiscal year 12.5 to 20.00% to their payroll costs, with payroll taxes adding another ~12%. Health insurance added additional costs in the time required to investigate and choose plans annually, and added stress because some employees are covered, and others are not.
When I interviewed John DiLorenzo 2 years ago concerning his concept he referred to health insurance being the most regressive ‘tax’ of all, and discussed benefits to business and i kept inserting the term “public and private employers” for business. At a recent conference Rep. Dembrow told how he benefitted while working in France from health coverage based on a payroll tax and a consumption tax; Sen Morse talked about “marrying” SB972 and HB3510. WE CAN DO THIS! (and incidentally i have a dvd of the panel featuring Dembrow and Morse—you can write me for a copy: rhall@oregonstate.edu — Roberta Hall
Roberta – that would be awesome to get a copy of the DVD; maybe Rick could post it along with your reply here. Isn’t it amazing how our brains distinguish between a premium, a tax, a surcharge, etc? Your comment from John DiLorenzo referring to premiums as a “regressive tax” has really got me thinking! We’re always pointing out how much words matter, and if we think about health insurance premiums as a tax it really changes the entire frame of reference.
Dr Grady,
this is a great beginning to resolving the health care crisis. We MUST insure everyone, and we must do it as quickly as possible. A sales tax dedicated to health insurance would do just that.
But I wonder if the sales tax would placed the burden of health care on the poor. They have less opportunity to go outside the state to purchase items. Yesterday, a rebroadcast on Think Out Loud, noted that many people don’t even have access to local grocery stores. Some must drive as far away as 100 miles.
If we did it with a sales tax, I think we would need to make sure that food is not taxed. We should, in fact, tie sales tax to items that decrease health. This might seem paternalistic, but it’s not. It’s a recognition that those things that contribute most to lack of health should be taxed more than those that contribute to an increase of health. But part of that would entail insuring that Oregonians have easy access to places that sale quality food items.
There are probably a hundred things wrong with my proposal and I’m not smart enough to know what they are. The next step might be to get in a room with Sen. Bates and Mr. DiLorenzo ( and other smart people ) to see if anything like this has a fighting chance as a legislative concept….Roberta, I’m anxious to see the DVD. I think Rep. Dembrow and Sen. Morse ( among others ) might be open to this melding of ideas…. Liz is right about the framing issue. Separating employment and health insurance could actually be promoted as a kind of ” jobs bill”, such is the potential of a plan that would lower labor costs by 15-20% making Oregon an attractive place to do business. And the larger the business, the greater the savings ( Boeing plants in Wilsonville?? )….Jeff, as I said privately, my understanding is that a sales tax would exclude food sold in grocery stores and some other essentials, as I believe is the general model of state sales taxes elsewhere…
One of the keys to lowering costs is addressing the benefit. We don’t like to talk about limitations in this country and so this becomes the hardest piece . There is not enough savings in limiting CEO compensation, rooting out ” waste and fraud” or malpractice reform to significantly bend the cost curve. It is our collective demand for health care, so wildly different than in other countries, that is the problem. The opportunity in Oregon is that we’ve already been down this path with the Oregon Health Decisions process that led to OHP. We have been immunized in a way to the charge of “rationing”. We understand that we can ration services or ration eligibility and we are past pretending that that isn’t the choice. We have an opportunity to take this the next step and make a basic health care benefit the equivalent of K -12 education, an essential part of the infrastructure of Oregon.
Mike, I am one of the elderly poor; that is, I am 83 and eligible for food assistance. My total health insurance at present is Medicare and it is sufficient for me because I spend my dollars for ways to stay healthy instead of additional health insurance premiums. It is a matter of choice – I can’t afford both.
Mike, I like your independent thinking process. I also like the sales tax idea.. The 10% Federal Luxury Tax during World War II is an example of a tax for a specific purpose. (That “luxuries” included anything imported, including food, is something to contemplate in today’s marketplace.) Defining the guidelines for how the tax would be collected and how it would be applied would need to be done before asking Oregon residents to vote for it – otherwise it would fail to pass.