For a health-care model, look to Social Security

Robert Kuttner

June 15, 1993|By Robert Kuttner

IT IS time to stop attacking "entitlements." And as the Clinton administration completes its health reform blueprint, its architects should keep in mind the political lessons of America's most expensive, efficient, and popular entitlement program -- Social Security.

At the pinnacle of Ronald Reagan's popularity, conservative Republicans dared not tamper with Social Security, though it is could be our most socialist program. Indeed, theorists on the Reagan White House staff who had advocated privatizing Social Security, like Peter Ferrara, were kept under wraps. President Reagan even approved a Social Security extension that required higher taxes.

Social Security is untouchable for one very simple reason: Virtually everyone carries around a Social Security card, and virtually everyone expects to benefit from it. It is more efficient administratively than any private pension plan, because there are no marketing costs and nobody is skimming off a profit.

The political moral for health reform is simple: Keep the program as universal and unfragmented as possible.

My own preference would be a Canadian-style "single-payer" system, with every American in the same basic pool. But this would require a hefty tax increase, and one can understand why this administration -- or any administration -- would find a massive new "health tax" a daunting political prospect.

The Clinton administration's second-best approach of "managed competition" could work, but only if it looks and feels to the consumer like a comprehensive system -- like Social Security. The administration plan proposes that all or most health premiums be channeled through a new system of regional authorities, to be called Health Alliances, which would supervise health plans open to everyone.

One key decision yet to be made is whether large employers could opt out of the system and sponsor their own plans. If the administration allows that, the comprehensiveness will be spoiled and there will still be a patchwork of multiple plans with multiple rules and fragmented members.

It is also important that everyone have the same basic health card. This may seem a minor cosmetic detail, but both the symbolism and the substance are very important.

Having everyone in the same system, with the same basic health package and the same card, sends a powerful signal that you and I are entitled to health care, not as employees of General Motors or as subscribers to Blue Cross, but as American citizens.

That Social Security card in your wallet doesn't say Prudential or Aetna. It says that as an American citizen, who pays Social Security taxes during your working life, you are guaranteed a pension upon retirement by the United States government. This is an "entitlement" -- a dirty word to in some quarters -- in the very best sense.

The subtext of that little Social Security card is that the government is actually doing something valuable, and doing it ,, competently. Despite a lot of blather about the deficit driving the Treasury into bankruptcy, the government is a lot less likely to go broke than any private company. No wonder Social Security is so well bolstered politically.

Any of several compromises would fatally flaw health reform. One would be a stripped-down, minimal program that left most middle-class people paying extra money for full coverage. Another fatal outcome would be to give in to budget pressures, and begin cost-containment now and add universal coverage only later.

In either case, the average middle-class voter would conclude (correctly) that the administration's health reform was mainly raising middle-class taxes and cutting benefits, in order to provide coverage to the uninsured. This would offer a divisive politics -- exactly the opposite of Social Security, which emphasizes what we have in common as citizens.

To be sure, Social Security does give more generous pensions to people who earned more money during their working years. Consumers in a universal health system would be free to buy supplemental coverage.

The administration also needs to take great care in how the new health system is financed. President Clinton reportedly has decided to pay for universal coverage through a premium charge calculated as a percentage of employer payrolls. Low-income wage earners would be guaranteed that their total premium would not exceed a certain fraction of their income.

This is an astute way of keeping everyone in the same system while partially subsidizing insurance costs of workers with low wages. It also keeps the additional cost to the Treasury relatively low.

As part of the reform, Medicaid should be folded into the new system so that there is no longer a separate system for the very poor. And the Senate, in dealing with the budget, should resist the temptation to cut Medicare -- which would remove needed funds from the comprehensive health care pot.

In dealing with the intricate details of health reform, the administration needs to keep in mind the big picture: To succeed politically and fiscally, the system needs to be universal and comprehensive -- just like Social Security. We are entitled to no less.

Robert Kuttner writes a syndicated column on economic matters.

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