After the Exchanges – Health Care Reform, Step 2

In Budget Politics, Health Care Reform, Inequality, Liberalism, Politics of Policy, Poverty, Progressivism, Public Policy, Social Democracy, Social Policy, Social Security, Unions, Welfare State on October 29, 2009 at 2:11 pm


This last week has given us something of a denouement for the public option – we came just short of the “robust” public option set at Medicare rates plus 5% in the House, but we’ve got an opt-out negotiated rate public option in the Senate. Chances are, going forward, that the eventual legislation will end up with something in-between the House and Senate’s version.

While this is certainly a disappointment to those of us who favored “Medicare Part E,” it’s important to keep in the forefront of our minds, that the objective of health care reform is universal coverage and affordability, not the specific vehicle by which this happens. And a close examination of the House bill shows they way forward.

The House Bill, dissected:

There’s a huge amount of information that needs to be mined out of the House bill, which you can find here. And, because I’m focusing on a particular argument here, I’m going to skip some of the really important issues, like the premium subsidies, the surtax on the rich, and other issues to focus on the question of coverage.

The Exchanges:

In Title III, the House Bill sets up the National Health Insurance Exchange. And as people like Ezra Klein have been saying for months, access to the Exchange is critical, because it sets the limit for how many people will have a choice to choose the Public Option. Under the House’s version, the Exchange starts small in the first year of operation (2013), including only firms that employ 25 people or less, and people who don’t get employer-based health care even after the mandate – which includes (explicitly) the self-employed, less than full time workers (an important group to add, given the fact that they tend coverage even when their employers offer health care to their workforces), and the like. In year two, this expands to firms that employ 50 people or less, and in year three, all firms with 100 or less. Importantly, the Insurance Commissioner can give firms with 100 members of more a waiver to get onto the Exchange – which means, among other things, that it is imperative that Commissioner be appointed by a Democratic administration in 2013.

In other words, the Exchange will not necessarily be limited to a minority of the population – potentially, 100% of the population not covered by Medicare or Medicaid could get access to the Exchange, and thus the public option. However, as I’ve pointed out, what this means is that the progressive community will need to mount an employer campaign to move people onto the Exchange, and then onto the Public Option. Luckily, the American labor movement knows how to do employer campaigns – that’s what Justice for Janitors was all about – and thus has the potential to push their own employers to move their health care plan onto the Exchange and the Public Option through the normal process of contract negotiation, potentially dramatically improving the “competitiveness” of unionized firms against their non-union competitors. The issue, as I’ve shown elsewhere, is that this will require a fair split between workers and management of the labor savings this involves.

Medicaid Expansion:

However, it may turn out that the Public Option is the least radical change included in the Affordable Health Care for America Act. In Title VII, anyone making less than 150% of poverty will be eligible for Medicaid – which works out to $16k a year for an individual, and $33k a year for a family of four. What most people don’t realize is that as households, which average about 2.5 persons per household, 28% of American households make less than 150% of poverty per year.

Thus, in one stroke, a third of the population is shifted into a government-run health care program. But that’s not all.

The House bill also has the Federal government picking up the tab for 100% of the added costs, essentially shifting Medicaid from a roughly 50/50 Federal-State split to a 75/25 Federal-State split. At the same time, Medicaid reimbursement levels are gradually shifted to 100% of Medicare level; this step is critical for expanding health care access for the poor and working class – many doctors do not accept Medicaid patients due to the low levels of reimbursement, but do accept Medicare patients.

What we are seeing here is the beginning of a process – also seen in the changes to Unemployment Insurance in the stimulus – to Federalize the remaining elements of the social welfare state that are run by the individual states, and to establish uniform levels of eligibility and benefit.  In other words, Medicaid is the future of single-payer health care in America.

The Next Step(s):

The breathtaking audacity of our House managers, in essentially conceding a step on the public option while grabbing one-third of the population for Medicaid, I think shows us the way forward. Now, I have long argued that there is a great virtue in taking the long view when it comes to health care reform, but I think we can now see the particular mechanism by which the normal amendment and re-authorization process can be used to push the process forward.

Medicaid – following the House Bill, the next step here is clearly to push the program from 75% Federal to 100% Federal, taking the states out of the equation (which provides fiscal relief for progressive states, while getting poor people in red states out from under the thumbs of Republican legislatures and governors who have an ideological reason to be as restrictive and incompetent as possible). Afterward, a smooth path is available to move from 150% of poverty to 200%, then to 250%, then to 300%, and so on, changing the program from one for the poor to one for the poor, the working class, and the middle class.

Medishield -in addition to Federalizing/expanding Medicaid, we can also consolidate SCHIP and the like into a new Federal program that covers all children under 18, as well as pre- and post-natal care for pregnant women – and critically does so as a non-contributory program. Moreover, by separating the health care of children and mothers from health insurance, we are reinforcing the idea that health coverage exists as a right of citizenship, and that the state has a responsibility to protect the health of its most vulnerable members.

Medicare – in addition to shifting nursing home coverage from Medicaid to Medicare (thus, removing the need for elderly people to divest themselves in order to get coverage), we can also keep pushing towards single-payer by reducing the age qualification of Medicare from 65 to 60, and then from 60 to 55, and then from 55 to 50, until we reach the point where Medicaid coverage and Medicare coverage overlap.

Medicare Part E -finally, there will be the eventual change to shift the Public Option from negotiated rates to Medicare + rates. While this will be difficult, as the current struggle continues to show, the changing political context, with more and more Americans being covered by public programs in different walks of life, as well as the pressures of budget balancing versus medical costs, will make the struggle easier.


In the end, the ultimate objective is to get to universal health care, not any particular legislative outcome. Hence, despite whatever initial feelings of frustration we might feel in the moment, we have to keep our eye not just on the present but ten or twenty years from now.

  1. […] I’ve stated on previous occasions, one of the most fundamental changes that comes with the passage of […]

  2. […] I have repeatedly discussed, the single most important change that the Affordable Care Act made was to expand Medicaid to […]

  3. […] by 5-7% and create a permanent economic incentive to create middle class jobs on the employer side. Expanding access to public health insurance by raising income limits on Medicaid and lowering the age limit on Medicare could save middle class […]

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