DAVIS: Universal coverage, private competition and reduced deficits

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ANALYSIS/OPINION:

Re-read that headline. I am not making this up. A health care bill exists that would accomplish what the headline says.

Moreover, it has been verified by the Congressional Budget Office (CBO), in a letter signed in May 2008 by the office’s then-Director Peter R. Orszag, who now directs President Obama’s Office of Management and Budget.

It’s called the Healthy Americans Act (the HAA). It has been fully vetted for years, written in legislative language, scored by the CBO and has substantial bipartisan support. In my Sept. 21 and Sept. 28 columns in this space, I explained the two basic, simple concepts of the HAA:

• Universal coverage, attracting liberal support - i.e., all Americans are required to purchase health insurance just like auto drivers are required to purchase car insurance.

• More consumer choice and private-market competition, attracting conservative support - permitting everyone to purchase their own insurance policies in open, competitive “state exchange” marketplaces, each of which must include the Blue Cross/Blue Shield “Basic” policy, the lowest-tier option available to all federal employees and members of Congress or its functional equivalent.

Under all current Senate and House bills, more than 150 million non-elderly Americans are left with no choice - no access to a “public option,” if there is one - since they would be stuck with the employer-provided insurance policy, which they lose as soon as they get laid off.

But under the HAA, all Americans would have a choice - stay with an employer’s policy or choose another they consider better. And all would own their own policies, which travel with them wherever they go, whether employed or unemployed. Every individual American, including all poor people, would have access to their state’s public exchanges, giving them the purchasing power of huge pools of customers, just like federal employees and members of Congress have, with guaranteed coverage, better rates and expanded choice (not just the health insurance the boss picks).

Private insurance companies will have to sharpen their pencils and offer better benefits and services or lose customers and even go out of business - the power of competition and the private market applied to the insurance industry.

So how is it possible the HAA is deficit-neutral in the first two years and reduces deficits thereafter? Mr. Orszag wrote the following in a May 2008 CBO letter on the HAA proposal: “Overall, our preliminary analysis indicates that [the HAA] would be roughly budget-neutral in 2014 [the first full year of operation after a two-year phase-in]. That is, our analysis suggests that your proposal would be essentially self-financing in the first year that it was fully implemented. That net result reflects large gross changes in the Federal Revenues [increased outlays minus increased savings] that would roughly offset each other.”

He offered three reasons.

First, there are the increased revenues from a new payment, called “Employer Responsibility Payments.” (OK, I am going to call a spade a spade: It’s a new tax.) Those employers who currently are insuring their employees would be exempt from this new tax for the first two years. This is because, under the HAA, during the first two transition years, these employers must give each employee an annual salary increase equal to the cost the employer pays for the employee’s health care.

But all other employers who did not provide health insurance for their employees would begin immediately to pay the modest tax. It is not an income tax or a flat excise tax. Rather, is a progressive tax - ranging from 3 percent to 26 percent - based on the average national health insurance premium costs, but tied to revenue generated per employee.

Second, the federal government under the HAA would receive increased tax revenues owing to the conversion of the current $250 billion-per-year tax exemption on employee health insurance premiums to the proposal’s standard deduction or tax credit. This is simple math: The exemption of $250 billion worth of income costs the federal government more because higher income-tax brackets are using it, rather than shifting these premium payments, now regarded as income, to the lower standard tax deduction or credit provided for under the HAA.

Third, Uncle Sam will save from $150 billion to $200 billion by exchanging paying for Medicaid and SCHIP to allowing poor people to purchase their own private insurance programs at least as good as the Blue Cross basic federal employee/congressional plan.

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