Legislation & Politics

Read AFSCME's Statement to the Committee on Ways & Means on Health Care Reform -March 25, 2009

Statement For The Record of the American Federation of State, County and Municipal Employees (AFSCME) For the Hearing on Health Reform in the 21st Century: Expanding Coverage, Improving Quality and Controlling Costs before the Committee on Ways and Means U.S. House of Representatives March 11, 2009


We submit this testimony on behalf of the 1.6 million members of the American Federation of State, County and Municipal Employees (AFSCME) for the official record of the House Ways and Means Committee's hearing on Health Reform in the 21st Century: Expanding Coverage, Improving Quality and Controlling Costs.

The time for health care reform is now.  President Obama delivered this message at the White House health care summit on March 5, as he has consistently throughout his presidential campaign and since taking the oath of office.  We cannot wait while 46 million Americans lack health coverage, health care costs continue to spiral out of control, too many health plans do not provide comprehensive benefits, and our health care system often fails to deliver the high-quality care that we need.  We must build on what works, including employer-sponsored coverage and public programs, and make the policy changes that are needed to reach our goal of quality, affordable health care for all.  

Support Public Health Insurance Plan Option

One key component of a reformed health care system is inclusion of a widely available public health insurance plan.  Today, consolidation in the private insurance industry has greatly narrowed price and quality competition.  The addition of a public health insurance plan would play an important role in broadening consumer choice.  When either a public or private plan does not meet a family's needs, they can vote with their feet, the measure of  true competition.

A public health insurance plan option would also promote stability in the insurance market.  Private plans often contract with new providers while dropping others, change benefits and cost-sharing, and sometimes move in and out of markets completely.  This has the effect of disrupting care as well as results in unexpected increases in out-of-pocket expenses.  A public health insurance option will provide a guarantee to families that a high quality plan will be available no matter what happens to their private coverage.

A public health insurance plan option alongside private insurance options would promote efficiency in the private market.  Between 1997 and 2006, per enrollee spending in private insurance grew 59% faster than spending in the traditional, government-administered Medicare program.  A comparison of administrative costs shows that Medicare spends about 2% for overhead, while administrative costs (including profits) in private group coverage runs 12% to 15% of cost.  To curb the unsustainable growth in health care costs, private insurers must find efficiencies, and competition with a public health insurance plan would provide a strong incentive for them to do so.

A public health insurance plan option would also improve health care quality and advance innovations.  Currently, private health insurers have scant motivation to implement or improve disease management programs since they might become a magnet for sicker subscribers.  Moreover, a financial disincentive exists to share best practices with those outside their network given competition for plan members.  A new public health insurance plan would be well situated to be a leader in the adoption of evidence-based medical protocols, expansion of quality incentives, and development of innovative and transparent payment mechanisms.  And, a public health insurance plan would help advance electronic medical records and the adoption of best practices. 

Extensive support exists for including a public health insurance plan as one option in an insurance exchange.  President Obama has consistently expressed his support for a new public health insurance option as have health care leaders in Congress and respected researchers and academics.

Karen Davis, President of The Commonwealth Fund, offered compelling testimony on this point at the March 11 hearing.  She expressed her strong support for an insurance exchange with a choice of private plans and a new public health insurance plan, noting many of the same advantages we have expressed in this statement.  In response to questioning, she also allayed the "crowd out" fear, citing the Commonwealth Fund's prediction that private insurance would continue to have a substantial share of an expanded market.  Davis also noted that with a public health insurance plan option, our country would save $3 trillion in health care costs by 2020, whereas without that option, cost savings would be $800 billion, less than one third of those savings.

Further research demonstrates that the general public strongly supports a public health insurance option in health care reform.  In fact, polling shows that three-quarters of voters supported a public health insurance plan option.  This support crosses all political lines as well as among both urban and rural voters.

Build on Employer-Provided Health Care

Any health care reform legislation must build upon the foundation of employer-sponsored coverage.  Employers provide a ready-made, stable risk pooling mechanism, coverage with lower administrative costs than individual coverage, and the institutional skills and expertise to carry out complex negotiations with insurers that the average family is not equipped to perform.

According to government figures from 2007, 70% of the 253 million people with health insurance received at least some of their coverage through employers.  Employment-based insurance covers three-fifths of the population under age 65.  To ensure that individuals can keep their current coverage if they are satisfied with it, it is vitally important to adopt policies that do not cause erosion in employer-provided insurance. 

Eliminating or weakening the tax exclusion for employer health coverage contributions would dismantle the employer-based system.  The tax exclusion for health benefits has been in the tax code for over 50 years. 

The Commonwealth Fund's Davis warned in her testimony that capping the health benefits tax exclusion could result in employers dropping coverage entirely.  As Subcommittee Chairman Stark noted at the hearing, we do not want to undermine employer coverage but rather build on what works when reforming the system.

During his presidential campaign, President Obama called taxing employee health benefits "the largest middle-class tax increase in history."  Many employers also support retaining nontaxable health insurance benefits, viewing it as a valuable way to recruit and retain workers.  The U.S. Chamber of Commerce opposes eliminating the tax exclusion of health benefits.

Employers' Responsibility to Contribute to the New Health Care System

The ultimate goal of health care reform is quality, affordable coverage for all.  Families, employers and the government should share in the responsibility of contributing to the system through progressive financing.  While our health care system is based on employer-provided coverage, some employers are shirking their responsibility.  The fact that some employers do not provide health benefits creates an uneven playing field that puts responsible employers at a competitive disadvantage.  In addition, the cost-shifting that occurs to pay for uncompensated care means that those employers who provide coverage to their workers are also helping to pay for the health care received by those working for employers who do not provide coverage.  In 2005 it was estimated that this cost added $900 to the average annual premium for family coverage.  No doubt the cost is much higher today.

AFSCME urges Congress to support a "pay or play" approach where employers either provide a comprehensive set of benefits or make a substantial payment towards the cost of those benefits so their workers can obtain coverage. 

Conclusion

In conclusion, AFSCME very much appreciates that the Ways and Means Committee is focusing its attention on health care reform as an absolute priority this year.  We look forward to working with you to enact legislation that will establish affordable coverage for everyone in a system that is adequately financed through shared responsibility, protects our employer-based system, provides comprehensive benefits that cover what people need, and includes the choice of a public health insurance plan.

Print Version