From the NY Times: A Public Option That Works
California Desk
August 26, 2009
By WILLIAM H. DOW, ARINDRAJIT DUBE and CARRIE HOVERMAN COLLA
Published: August 21, 2009
TWO burning questions are at the center of America´s health care debate.
First, should employers be required to pay for their employees´ health
insurance? And second, should there be a "public option" that competes with
private insurance?
Answers might be found in San Francisco, where ambitious health care
legislation went into effect early last year. San Francisco and
Massachusetts now offer the only near-universal health care programs in the
United States.
The early results are in. Today, almost all residents in the city have
affordable access to a comprehensive health care delivery system through
the Healthy San Francisco program. Covered services include the use of a
so-called "medical home" that coordinates care at approved clinics and
hospitals within San Francisco, with both public and private facilities.
Although not formally insurance, the program is tantamount to a public
option of comprehensive health insurance, with the caveat that services are
covered only in the city of San Francisco. Enrollees with incomes under 300
percent of the federal poverty level have heavily subsidized access, and
those with higher incomes may buy into the public program at rates
substantially lower than what they would pay for an individual policy in
the private-insurance market.
To pay for this, San Francisco put into effect an employer-health-spending
requirement, akin to the "pay or play" employer insurance mandates being
considered in Congress. Businesses with 100 or more employees must spend
1.85 an hour toward health care for each employee. Businesses with 20 to
99 employees pay $1.23 an hour, and businesses with 19 or fewer employees
are exempt. These are much higher spending levels than mandated in
Massachusetts, and more stringent than any of the plans currently under
consideration in Congress. Businesses can meet the requirement by paying
for private insurance, by paying into medical-reimbursement accounts or by
paying into the city´s Healthy San Francisco public option.
There has been great demand for this plan. Thus far, around 45,000 adults
have enrolled, compared to an estimated 60,000 who were previously
uninsured. Among covered businesses, roughly 20 percent have chosen to use
the city´s public option for at least some of their employees. But
interestingly, in a recent survey of the city´s businesses, very few (less
than 5 percent) of the employers who chose the public option are thinking
about dropping existing (private market) insurance coverage. The public
option has been used largely to cover previously uninsured workers and to
supplement private-coverage options.
Through our experience working on health-care-reform efforts in California and Washington (one of us worked for President George W. Bush´s Council of Economic Advisers), we have seen how concern over employer costs can be a sticking point in the health care debate, even in the absence of persuasive evidence that increased costs would seriously harm businesses. San Francisco´s example should put some of those fears to rest. Many businesses
there had to raise their health spending substantially to meet the new requirements, but so far the plan has not hurt jobs.
As of December 2008, there was no indication that San Francisco´s employment grew more slowly after the enactment of the employer-spending requirement than did employment in surrounding areas in San Mateo and Alameda counties. If anything, employment trends were slightly better in San Francisco. This is true whether you consider overall employment or employment in sectors most affected by the employer mandate, like retail businesses and restaurants.
So how have employers adjusted to the higher costs, if not by cutting jobs? More than 25 percent of restaurants, for example, have instituted a "surcharge" — about 4 percent of the bill for most establishments — to pay for the additional costs. Local service businesses can add this surcharge (or raise prices) without risking their competitive position, since their competitors will be required to take similar measures. Furthermore, some of the costs may be passed on to employees in the form of smaller pay raises, which could help ward off the possibility of job losses. Over the longer term, if more widespread coverage allows people to choose jobs based on their skills and not out of fear of losing health insurance from one specific employer, increased productivity will help pay for some of the costs of the mandate.
The San Francisco experiment has demonstrated that requiring a shared-responsibility model — in which employers pay to help achieve universal coverage — has not led to the kind of job losses many fear. The public option has also passed the market test, while not crowding out private options. The positive changes in San Francisco provide a glimpse of what the future might look like if Washington passes substantial health reform this year.
William H. Dow, who was a senior economist for President George W. Bush´s Council of Economic Advisers, is a professor of health economics at the University of California, Berkeley, where Arindrajit Dube is an economist at the Institute for Research on Labor and Employment and Carrie Hoverman Colla is a doctoral student in health economics.
Published: August 21, 2009
TWO burning questions are at the center of America´s health care debate.
First, should employers be required to pay for their employees´ health
insurance? And second, should there be a "public option" that competes with
private insurance?
Answers might be found in San Francisco, where ambitious health care
legislation went into effect early last year. San Francisco and
Massachusetts now offer the only near-universal health care programs in the
United States.
The early results are in. Today, almost all residents in the city have
affordable access to a comprehensive health care delivery system through
the Healthy San Francisco program. Covered services include the use of a
so-called "medical home" that coordinates care at approved clinics and
hospitals within San Francisco, with both public and private facilities.
Although not formally insurance, the program is tantamount to a public
option of comprehensive health insurance, with the caveat that services are
covered only in the city of San Francisco. Enrollees with incomes under 300
percent of the federal poverty level have heavily subsidized access, and
those with higher incomes may buy into the public program at rates
substantially lower than what they would pay for an individual policy in
the private-insurance market.
To pay for this, San Francisco put into effect an employer-health-spending
requirement, akin to the "pay or play" employer insurance mandates being
considered in Congress. Businesses with 100 or more employees must spend
1.85 an hour toward health care for each employee. Businesses with 20 to
99 employees pay $1.23 an hour, and businesses with 19 or fewer employees
are exempt. These are much higher spending levels than mandated in
Massachusetts, and more stringent than any of the plans currently under
consideration in Congress. Businesses can meet the requirement by paying
for private insurance, by paying into medical-reimbursement accounts or by
paying into the city´s Healthy San Francisco public option.
There has been great demand for this plan. Thus far, around 45,000 adults
have enrolled, compared to an estimated 60,000 who were previously
uninsured. Among covered businesses, roughly 20 percent have chosen to use
the city´s public option for at least some of their employees. But
interestingly, in a recent survey of the city´s businesses, very few (less
than 5 percent) of the employers who chose the public option are thinking
about dropping existing (private market) insurance coverage. The public
option has been used largely to cover previously uninsured workers and to
supplement private-coverage options.
Through our experience working on health-care-reform efforts in California and Washington (one of us worked for President George W. Bush´s Council of Economic Advisers), we have seen how concern over employer costs can be a sticking point in the health care debate, even in the absence of persuasive evidence that increased costs would seriously harm businesses. San Francisco´s example should put some of those fears to rest. Many businesses
there had to raise their health spending substantially to meet the new requirements, but so far the plan has not hurt jobs.
As of December 2008, there was no indication that San Francisco´s employment grew more slowly after the enactment of the employer-spending requirement than did employment in surrounding areas in San Mateo and Alameda counties. If anything, employment trends were slightly better in San Francisco. This is true whether you consider overall employment or employment in sectors most affected by the employer mandate, like retail businesses and restaurants.
So how have employers adjusted to the higher costs, if not by cutting jobs? More than 25 percent of restaurants, for example, have instituted a "surcharge" — about 4 percent of the bill for most establishments — to pay for the additional costs. Local service businesses can add this surcharge (or raise prices) without risking their competitive position, since their competitors will be required to take similar measures. Furthermore, some of the costs may be passed on to employees in the form of smaller pay raises, which could help ward off the possibility of job losses. Over the longer term, if more widespread coverage allows people to choose jobs based on their skills and not out of fear of losing health insurance from one specific employer, increased productivity will help pay for some of the costs of the mandate.
The San Francisco experiment has demonstrated that requiring a shared-responsibility model — in which employers pay to help achieve universal coverage — has not led to the kind of job losses many fear. The public option has also passed the market test, while not crowding out private options. The positive changes in San Francisco provide a glimpse of what the future might look like if Washington passes substantial health reform this year.
William H. Dow, who was a senior economist for President George W. Bush´s Council of Economic Advisers, is a professor of health economics at the University of California, Berkeley, where Arindrajit Dube is an economist at the Institute for Research on Labor and Employment and Carrie Hoverman Colla is a doctoral student in health economics.
Print
Email
