How Not to Fix Health Care

FOR THOSE WHO seek health reform that is effective, bipartisan and fiscally sound, the past few days have been unsettling.

First, Senate Majority Leader Harry M. Reid (D-Nev.) told Senate Finance Committee Chairman Max Baucus (D-Mont.) that his panel's plan to limit the tax-free treatment of employer-provided health insurance would not pass muster; too many Democrats would object. The ability of employers to offer unlimited health insurance to workers tax-free drives up health costs by promoting over-consumption; it benefits the well-off at the expense of lower-paid workers who are less apt to have insurance and, if they do, receive less value from the tax-free treatment of benefits. President Obama made a mistake during the campaign when he attacked John McCain for proposing to get rid of the exclusion. He is making an even bigger mistake by letting campaign positions be the enemy of good public policy.

Second, Democrats continued their insistence on a public option -- a government-run insurance plan to compete with private insurers -- as essential to effective health reform. Mr. Obama issued what amounted to a public rebuke of his chief of staff, Rahm Emanuel, for the apparently heretical act of suggesting openness to an alternative: having a "trigger" mechanism under which a public plan would be established if the private insurance market fails to provide enough competition. The president, from Moscow, restated his support for a public plan, though, thankfully, he continued to avoid drawing a line in the sand. As we have said before, it would be tragic if this issue were to drag down health reform or make it impossible to secure Republican votes. Restructuring the health-care system is risky enough that Democrats would be wise not to try to accomplish it entirely on their own.

Third, a new gimmick has been designed to pretend that health reform is fully paid for. The Senate Committee on Health, Education, Labor and Pensions adopted a measure, endorsed by the Obama administration, to have the government provide long-term care insurance in which workers would be automatically enrolled unless they opt out. Premiums would flow into the system beginning in 2011, but benefits would not begin to be paid out until five years later; consequently, over the 10-year budget window through which the Congressional Budget Office assesses legislation, the program would bring in $58 billion, according to CBO estimates. Thankfully, the committee also agreed to an amendment, offered by Sen. Judd Gregg (R-N.H.), to require that premiums be set at an actuarially sound level -- not so low that the program would end up further draining the federal treasury. Still, the money that flows in during the 10-year budget window will flow back out again. These are not "savings" that can be honestly counted on the balance sheet of reform.

Many With Insurance Still Bankrupted by Health Crises

Health insurance is supposed to offer protection — both medically and financially. But as it turns out, an estimated three-quarters of people who are pushed into personal bankruptcy by medical problems actually had insurance when they got sick or were injured.

And so, even as Washington tries to cover the tens of millions of Americans without medical insurance, many health policy experts say simply giving everyone an insurance card will not be enough to fix what is wrong with the system.

Too many other people already have coverage so meager that a medical crisis means financial calamity.

One of them is Lawrence Yurdin, a 64-year-old computer security specialist. Although the brochure on his Aetna policy seemed to indicate it covered up to $150,000 a year in hospital care, the fine print excluded nearly all of the treatment he received at an Austin, Tex., hospital.

He and his wife, Claire, filed for bankruptcy last December, as his unpaid medical bills approached $200,000.

In the House and Senate, lawmakers are grappling with the details of legislation that would set minimum standards for insurance coverage and place caps on out-of-pocket expenses. And fear of the high price tag could prompt lawmakers to settle for less than comprehensive coverage for some Americans.

But patient advocates argue it is crucial for the final legislation to guarantee a base level of coverage, if people like Mr. Yurdin are to be protected from financial ruin. They also call for a new layer of federal rules to correct the current state-by-state regulatory patchwork that allows some insurance companies to sell relatively worthless policies.

“Underinsurance is the great hidden risk of the American health care system,” said Elizabeth Warren, a Harvard law professor who has analyzed medical bankruptcies. “People do not realize they are one diagnosis away from financial collapse.”

3 Open Enrollment Tips

WITH ALL THAT'S going on in the market, it would be nice to think you could leave your health care on autopilot — but you'd be wrong. This October, as usual, 158 million American workers will have to make seemingly small but ultimately crucial decisions, as corporate America shifts more of its $537 billion health care burden onto workers. "People need to be more thoughtful about their choice than in the past several years," says Jay Savan, a principal with the professional-services firm Towers Perrin — especially if they don't want to get stuck with hefty bills. Some tips on being choosy:

Watch for hidden costs
Read the fine print: One trend Savan expects to see grow is surcharges — sometimes as high as $150 each month — for employees who opt to cover a spouse or child who could get benefits elsewhere. And the consultancy Mercer Health & Benefits estimates that 25 percent of large employers will offer prescription-drug plans that make employees pay a portion of drug costs instead of a simple copay. That'll sting if you're on, say, a $14,000 cancer drug.

Snag incentives
Being healthy can be good for a lot more than your waistline. In 2007 almost one in four large companies offered workers incentives for healthy behavior, a trend experts say will mushroom in 2009. Alexander Domaszewicz, a principal at Mercer, says he's seen perks such as lower deductibles and even a month of benefits for healthy decisions like losing weight. Don't lie, though: "That's like stealing from the company," Domaszewicz says, and can be a fireable offense.

Don't fear health-savings accounts
With caps on out-of-pocket costs and coverage for most preventive screenings, these plans can be a good deal, especially for the very sick or for very healthy consumers looking to sock away pretax funds. Balance the huge amount you'll save in premium costs against your exposure, Savan says. Many insurers' Web sites can help evaluate various plans.