If national health reform is to accomplish its major objectives of improving the health of all Americans while, at the same time, containing the burgeoning costs of healthcare, then it is essential to move rapidly toward universal coverage and to address problems of underinsurance. Failing to address both of these issues will lead to unacceptable cost increases in the future. President Obama’s White House Council of Economic Advisers recently presented a cogentanalysis of this issue. The purpose of this commentary is to discuss potential financing strategies to address the costs of extending health insurance coverage to the uninsured and correcting problems of underinsurance. Some federal funds can be recycled from previous applications; other federal funds will need to be generated through new strategies.
The analysis presented below assumes that approximately 8 million children and adolescents are uninsured. It also assumes that all of the 72 million insured children and adolescents are underinsured for health promotion and disease prevention interventions (e.g., to address smoking) and that 40 million are underinsured for care of long-lasting serious illnesses, such as serious emotional disturbances or serious substance dependency.
For adults, the analysis assumes that 37 million persons lack health insurance on a continuing basis. All of the 183 million insured adults are assumed to be underinsured for health promotion and disease prevention interventions. The 100 million adults insured through private plans are assumed to be underinsured for long-term illnesses, such as serious mental illnesses or serious alcohol or drug dependency. Of the 83 million adults insured through public plans, all are assumed to be underinsured for serious substance use conditions.
The analyses reflect the entire population, including all persons in jails and prisons. The analyses do not address the “newly uninsured” as a result of recent job losses.
The following estimates are obviously approximations. As more refined numbers become available, these estimates can be refined.
To provide insurance coverage for the 8 million children and adolescents and the 37 million adults who are uninsured, one can estimate that approximately $180 billion will be required per year (45 million x $4,000 per person).
For underinsurance, approximately $137 billion will be required per year, as follows:
- Underinsurance of children and adolescents for health promotion and disease prevention interventions: $7.2 billion (72 million x $100)
- Underinsurance of children and adolescents for long-lasting illnesses: $20 billion (40 million x $500)
- Underinsurance of adults for health promotion and disease prevention interventions: $18.3 billion (183 million x $100)
- Underinsurance of adults for long-term illnesses: $50 billion (100 million x $500)
- Underinsurance of adults for serious substance use conditions: $41.5 billion (83 million x $500).
Hence, to address uninsurance and underinsurance, a total of about $317 billion will be required per year.
Potential financing sources
Required funds could be obtained through the following sources:
- Change employee health insurance payments from a pre-tax to a post-tax benefit for everyone, or for some portion of the working population based on income. (Pre-tax payments promote more use of healthcare.)
- Tax employer contributions to employee health insurance for everyone, or for some portion of the working population based on income.
- Update current U.S. Department of Health and Human Services programs that would no longer provide funds for services.
- Reprogram federal Medicaid funds previously spent on emergency room care.
- Create health insurance purchase exchanges for small employers who do not provide health insurance. This could be through either a public or private arrangement. (This issue is the subject of much current debate.)
- Reduce the costs of chronic illnesses by delaying their onset with health promotion interventions. (This is a long- term strategy.)
- Increase efficiencies in healthcare delivery through coordination and integration.
- General tax revenues.
To supplement this analysis, work undertaken by the Trust for America’s Health is also relevant. The Trust has presented informative analyses of how funds could be developed for a National Wellness Trust, including tax funds from alcohol and liquor as well as soft drinks.
National health reform does imply change, and it does imply that the changes introduced will need to be financed in a practical way. It is also clear, and President Obama has reiterated frequently, that the federal government cannot finance these changes through deficit spending. The choices clearly will be difficult. That is why all of us from the mental health and substance use fields must weigh in so that the best decisions possible are made.
Ronald W. Manderscheid, PhD, currently Director of Mental Health and Substance Use Programs at the consulting firm SRA International, Inc., worked for more than 30 years in the federal government on behavioral health research and policy. He is a member of Behavioral Healthcare's Editorial Board. To contact Dr. Manderscheid, e-mail firstname.lastname@example.org.