"Affordability Limbo: Can the Feds Fix it?" by David Harlow

State of the Union Address, 2010.  The First Lady (or First Guy), seated in the visitors' gallery of the House of Representatives, is flanked by Shirley Needing and Harold Heart (fictional previously uninsured folks used as sample beneficiaries of Senator Ron Wyden's health care plan). After a brief discussion of foreign policy, the President identifies Shirley and Harold as newly-insured beneficiaries of the federal universal health insurance plan, and they get a standing ovation.

How do we get there from here?  How would a new federal health insurance plan interact with the Massachusetts system under Chapter 58 for the Shirleys and Harolds of Massachusetts?

Assuming that health insurance reform continues to hold the attention of the electorate and the elected long enough for comprehensive action to be taken in Washington (and I have my doubts), let's take a peek at how Shirley and Harold would fare under a couple of the national health insurance reform
proposals on the table: the Wyden plan and the Edwards plan.  (For further background, see the discussions of these plans at Ezra Klein and The Health Care Blog, respectively. I'd also urge readers to check out more of the plans' details.  They actually cover a lot more than covering the uninsured.)

Shirley is a single waitress with an income of $15,000. Harold Heart is a salesman, married with two children, with an income of $25,000, priced out of the insurance market because of a pre-existing condition. Wait a minute, they're already covered under Chapter 58 with no out-of pocket expense for premiums.  Good for us.

Now let's give them raises and see how they do.  Let's say Shirley earns $32,000 a year, and Harold makes $55,000.  They've entered Massachusetts health insurance affordability limbo: too well-off to be eligible for free health insurance, but not obligated to buy insurance, because it's not affordable.  Will either of the Wyden or Edwards plans help them?

Wyden would cut the employment-insurance cord, and have employers give employees tax-free raises equal to health insurance costs.  Employees would buy insurance through a community-rated market, with no pre-existing conditions exclusions, etc.  Employers not currently offering health
insurance might have to offer similar raises to retain employees.  Employers would thus be effectively insulated from premium inflation (one reason the SEIU-Wal-Mart coalition supports this plan).  Subsidies would be available for people with incomes below 400% of the federal poverty level (FPL) ($40,840 for an individual; $82,600 for a family of four).

Subsidies under Wyden's plan would likely improve both Shirley's and Harold's outlook, but they won't get a free pass if coverage isn't affordable.  Both would be eligible for some premium subsidy, but Shirley would not do as well as Harold, since her employer probably would not offer raises equal to health insurance premium costs (reflecting the reality that most restaurants don't offer health insurance to their waitstaffs).

John Edwards' plan shares many characteristics with the Massachusetts system.  For example, it would expand Medicaid and SCHIP to cover all adults up to 100% of FPL and all children and parents up to 250% of FPL.  Tax credits would subsidize insurance purchased through a Connector-like "Health Markets" purchasing pool with a broad mandate to offer community-rated insurance products.  Harold and his family would just miss the income cut-off for the expanded Medicaid and SCHIP plan, but he could purchase affordable community-rated health insurance and receive tax credits to subsidize the premium.  Shirley's situation would be about the same.  (The Edwards plan has two exceptions to the insurance mandate: extreme financial hardship — as yet undefined — and a religious exception.)

Edwards holds the distinction of being the only presidential candidate to say explicitly that universal coverage will cost the federal government — and therefore all of us — an additional $90-120 billion per year. This statement will, of course, continue to be used against him as the campaign progresses.

While no plan is perfect, Massachusetts has taken an impressive first step. Yet we can't afford to go it alone; any truly compre-hensive coverage plan may well require the involvement of the federal government.

Given the compressed timeline for compliance with Chapter 58, the local community has been appropriately focused on the details of implementation and their implications. As this process continues, it is critical for Massachusetts health policy leaders — and citizens — to keep an eye on the national debate.David Harlow, principal of The Harlow Group LLC, a health care law and consulting firm, blogs at HealthBlawg.