By Amy Goldstein
Washington Post Staff Writer
Saturday, January 17, 2009
Congress and the incoming Obama administration are contemplating profound shifts in the government's role in health insurance to try to alleviate a significant ripple effect of the damaged economy: Americans losing health coverage as they lose jobs.
As part of a sprawling $825 billion strategy to heal the economy that House Democrats laid out this week, lawmakers and transition officials envision a two-prong approach to help unemployed people retrieve health benefits. One would reshape a basic entitlement program, allowing states temporarily to sign up jobless residents for Medicaid, with the federal government for the first time paying the entire cost. The other proposal would provide unprecedented federal subsidies to help people afford coverage under COBRA, a law that allows some laid-off workers to buy health benefits that they used to get through their jobs.
The twin ideas, preliminarily estimated to cost $39 billion through the end of next year, would represent sharp departures in two long-standing programs and already are sparking debate along the ideological continuum on Capitol Hill and beyond. In Congress, several key Democratic House members and senators have endorsed the broad contours, while a few Republicans, including Senate Minority Leader Mitch McConnell (R-Ky.) have signaled that they are wary. Debate, however, will not solidify until lawmakers learn more precisely how much the proposals would cost and how many people they might help.
Among outside health policy specialists, conservatives are critical of expanding an entitlement and are predicting that states would have a hard time shutting the spigot of help once the federal money stopped. Liberals are predicting that, even with the large federal investment, coverage could remain unaffordable for too many people.
The ideas' boldness reflects a precipitous rise in the uninsured. Recent estimates suggest that worsening unemployment, which reached 7.2 percent last month, translates into a loss of health coverage for an additional 2.6 million people. That increase, on top of the estimated 45 million uninsured, is exacerbating a persistent problem in the U.S. health-care system: too many people who lack access to proper care.
Politically, including insurance help for the unemployed in a fast-acting economic stimulus package is part of a strategy by congressional Democrats and President-elect Barack Obama to place attention on health care right away. It is in sync with a decision to pursue immediately an expansion of health insurance for poor and working-class children, long resisted by President Bush, which the House adopted on Wednesday and a Senate panel approved the next day.
Taken together, the insurance for children and laid-off workers signifies an effort by Democrats to create momentum for the more difficult work of broad health reforms that they and the Obama administration plan to undertake soon.
In recent weeks, lawmakers have collaborated with the incoming administration to devise remedies for the jobless uninsured and to decide how much money to allot. A transition aide said: "Obama supports the protection of health insurance through COBRA and Medicaid in a time-limited way."
House Democrats say publicly that they would like to devote $30 billion over two years to subsidize COBRA and $8.6 billion to expand Medicaid. Privately, legislative sources said those figures are premature, because lawmakers are awaiting budget analyses of how much the proposals would cost -- and how many unemployed Americans would be likely to grasp the help.
The Medicaid proposal would give assistance through 2010 and would break with significant features of the program created as part of the Great Society of the 1960s. Medicaid always has been a shared financial responsibility of the U.S. government and the states. But under the proposal, federal money would pay for all benefits and administrative costs for unemployed people who joined. In addition, the expansion would be the largest step ever taken beyond Medicaid's original purpose of insuring people who are poor or disabled. There is precedent in recent years for opening Medicaid in times of crisis -- for some New York residents after 9/11 and for people who fled communities ravaged by Hurricane Katrina -- but not on the scale envisioned now.
Specifically, House sources said, the government would give states the option of allowing unemployed people to join Medicaid but would not require states to do so. States could choose whether to include three groups of uninsured residents: people who are receiving or have used up unemployment benefits, no matter how much money they have; unemployed people who qualify for food stamps, which in many states are available to residents somewhat less poor than Medicaid requires; and laid-off people with incomes as much as twice the poverty level who would not otherwise qualify for Medicaid. The last group is aimed, in part, at adults without children who are not allowed into Medicaid in most states.
House leaders said the COBRA proposal would subsidize for one year 65 percent of the price of premiums for private insurance that laid-off workers bought. According to legislative sources, that level of help could ultimately change, depending on feedback from congressional budget analysts.
For the past two decades, COBRA has guaranteed that certain laid-off workers may, if they pay for it, continue the insurance they used to get through work -- usually for 18 months. But the government has never helped them afford it, and coverage is expensive. Under COBRA, employers may charge former workers 100 percent of the insurance cost -- an average of about $12,000 a year for a family -- plus a small surcharge.
Research has shown that a small fraction of people eligible for COBRA buy it. A study released last week by Families USA, a liberal consumer health lobby, said COBRA is "an economic impossibility" for most people, because its typical costs would use up nearly 84 percent of the average unemployment benefits.
Stan Dorn, a health policy researcher at the Urban Institute, predicted that it would still be unaffordable for many if the government offered to pay 65 percent of the price. He has studied the only similar idea in place today, a provision in a 2002 trade bill that offers tax credits worth 65 percent of insurance premiums to a small group of dislocated workers. Just 12 to 15 percent of them have taken the offer, largely because the remaining 35 percent of the premium is still beyond their means. If the COBRA subsidy were for the same amount, Dorn predicted, "there is a very good chance the program will be a major failure."
However, conservatives worry that the temporary help for people to join Medicaid would be a back door to a permanent expansion of the entitlement. Nina Owcharenko, an analyst at the Heritage Foundation's Center for Health Policy Studies, predicted that, even if the extra federal money were for two years, states would face pressure to maintain the benefit. Otherwise, she said, "It's seen as kicking people off the program." She suggested that the government, instead, offer states help in finding unemployed people private coverage, which might be less generous and less expensive.
One House aide said how much help the government can afford -- and how many people might take part -- will remain unclear until the budget analyses are finished. In the meantime, he said, "this is far from a perfect solution, but it is going to help some people."