State Health Care Reforms Need National Leadership

Several states are trying to extend health coverage to the growing number of uninsured, but all of them are struggling with where to find the revenues to pay for subsidizing health insurance for those least able to afford rapidly rising insurance premiums. So far, however, the states appear to be looking in all the wrong places, and it's not clear how they can solve this without progressively raising income taxes and challenging the role and costs of insurance companies.

This post Monday discussed the effect of using mandates to force companies to offer or individuals to purchase health insurance. I noted the incentives companies and individuals have to move to the state subsidized insurance pools, creating much higher state funding requirements than states anticipated.

As Tuesday's New York Times article also explains, Massachusetts is facing an additional $150 million in costs for subsidized insurance coverage, and it's not clear where the Legislature will find the funds. In California, Governor Schwarzenegger and Assembly Speaker Nunez are proposing a much larger version of Massachusetts's mandatory insurance approach, while seeking approval for a variety of funding sources:

It would raise money to subsidize policies for low-income residents through what Mr. Schwarzenegger calls shared responsibility -- a tax on hospital revenues, a hefty increase in tobacco taxes and assessments on employers who do not contribute to their workers' health care.
In a California innovation, the assessment rates would be graduated according to the size of the company. If the Senate passes the measure, voters will be asked to approve the revenue measures in a November referendum that would become the truest test of public support for change.
While California's funding approach remains uncertain, plans in other states are already blocked by opposition to higher taxes:
Illinois' Democratic governor, Rod R. Blagojevich, got nowhere with his proposals to pay for universal access to insurance by taxing gross business receipts and assessing employers who do not offer coverage to their employees. He then instigated a fight with his legislature and provoked a lawsuit by using his executive authority to widen eligibility for state-subsidized insurance programs.
In Pennsylvania, Gov. Edward G. Rendell, also a Democrat, failed to persuade his politically divided legislature to cover the state's 900,000 uninsured through an employer assessment. Like the California leaders, Mr. Rendell has now proposed increasing cigarette taxes, as well as raiding the surplus in a state fund designed to help doctors pay for malpractice insurance.

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