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Executive Summary

Our health care system still inspires awe—and rightly so. Americans should be proud of a system that can provide the best care in the world.

But our system also creates fear-among the millions already excluded from it and the increasing numbers at risk of exclusion:

To develop these recommendations, the Commission intensively investigated the problems and alternative actions to address them. It listened to numerous witnesses in public hearings held in the nation's capital and around the country. It heard from experts in health and long-term care. In the process the Commission gathered a wide range of views from consumers, employers, workers, providers, insurers, and numerous organizations and groups. Then its members met in a series of working sessions to consider all these views, clarify their own objectives, and develop recommendations to achieve them.

• Uninsured pregnant women, without the re

sources to seek prenatal care; • Workers who are ill, with preexisting conditions

that may cost them their health insurance if they

change jobs; • Workers in small businesses, for whom a sudden

illness can put insurance premiums out of reach

for the entire firm; • Workers with good coverage, who see their ben

efits threatened each time they go to the bargain

ing table; • Families whose emotional and financial resources

are exhausted from providing long-term care to frail parents or disabled children.

Based on a shared view that current conditions are unconscionable and that public action is urgent, the Commission unanimously agreed that all Americans should have access to affordable health and long-term care coverage in an efficient and effective system.

Finally, our system breeds frustration-among the many who seek ways to reform it and resolve its problems.

"Allowing these health and long-term care problems to persist not only deprives millions of Americans of what they ought to be able to have ... it diminishes our economy. ... [and] ... the United States of America. I don't think it's possible to say ... that we are a civilized nation when so many of our people... do not have long-term care, do not have health insurance."

- Senator John D. Rockefeller IV

Most reformers agree that our health care system should cover all Americans. But to do so, some would replace the system. Others would reshape it, often in dramatically different ways. People and institutions criticize and ultimately reject initiatives that differ from their ideal or that-in their view—move too fast or too slowly. If their first choice is unattainable, the second choice for many is to do nothing.

Public policy is paralyzed. The fear and the flaws continue.

After further intense debate, the majority of the Commission adopted specific recommendations to achieve this goal. These recommendations reflect the view that we must begin to build universal health care coverage now. We must pursue the workable rather than the ideal. We must secure and improve the health care system for all Americans, including those currently left out. And we must create a longterm care system that serves our nation's severely disabled and addresses the deepest fears of Americans-elderly and nonelderly—about their future should they become disabled and need long-term care.

The Pepper Commission calls for action to end that paralysis with recommendations for legislation that would guarantee all Americans coverage for health and long-term care within a system that both ensures quality and contains costs.

This report lays out the problems the Commission believes the nation must solve and the Commission's blueprint to guarantee all Americans affordable, highquality health care and long-term care when they need it. With this blueprint before us, we can build universal coverage a step at a time.

Consequently, almost 32 million Americans under 65 lack health care coverage of any kind. That's nearly 15 percent of our nonelderly population. Another 20 million have inadequate coverage. And the proportion who are uninsured was 20 percent greater in the 1980s than in the 1970s.

Because today's system works differently for health care (primarily physician and hospital services) than for long-term care, the discussion and the recommendations address each separately. Although health problems cannot be so neatly segmented, this is simply the most pragmatic way to discuss building a system based on what we now have.

WHY DO WE NEED HEALTH CARE REFORM?

Anyone can become uninsured-regardless of age, income, or employment status. A close look at the problem shows what kinds of people are falling through the cracks (see Figures 1 and 2): • Many of the uninsured are young. In 1987, nearly

half were under 25, and more than 28 percent

were under 18. • Most of the uninsured are poor or near-poor. In

1987, one-third were in families with incomes below the federal poverty level ($11,611 for a family of four). Two-thirds were in families with

incomes below twice the poverty level. • Most of the uninsured are directly or indirectly

attached to the work force. Three-quarters of the

uninsured are workers or their dependents. These characteristics of the uninsured raise two key questions about our country's health care coverage. • Why doesn't job-based health insurance reach all

workers and their families?
Why does the public safety net fail to protect the
poor?

The American health care system is approaching a breaking point. Rapidly rising medical costs are increasing the numbers of people without health coverage and straining the system's capacity to provide care for those who cannot pay. The gap is widening between the majority of Americans, who can take advantage of the best medical services in the world, and the rest, who find it hard to get even basic needed care. As the gap increases, the weight of financing care for those without adequate coverage is undermining the stability of our health institutions. Even for the majority, the explosive growth in health care costs is steadily eroding the private insurance system-the bulwark they count on as their defense against financial risk in case of illness.

Uninsured Workers-Firms of all sizes have uninsured workers, but workers in smaller firms are much less likely to get insurance through their jobs (see Figure 3). In 1987, just over half of uninsured

Figure 1 Distribution of Nonelderly Uninsured,

by Family Income as a Percentage
of Poverty, 1987

"[The American health care system ... [is] a paradox of plenty and of want, a system where some receive the benefit of the most advanced medical technologies in the world, yet many poor women can't get decent prenatal care and families can't get help to keep a frail parent from having to go into a nursing home."

- Senator Dave Durenberger

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Who Is Uninsured and Why?

Most Americans of working age get insurance for themselves and their dependents through their jobs. But not all of us work—and not all employers provide insurance. People who fail to obtain job-based coverage may also be excluded from Medicaid and other public programs because of restrictive eligibility rules.

Below 100% of poverty 100-199% of poverty

200-299% of poverty O 300% + of poverty

SOURCE: Lewin/ICF analysis of Current Population Survey data, March 1988.

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MIKE MCGARVIN/HOLY CROSS CLINIC AT POVERELLO HOUSE

Almost 9 million children are uninsured - more than one- quarter of all those without public or private protection.

workers were in firms with fewer than 25 employees. Even though most small firms provide insurance to their workers, large numbers do not—increasingly because they are disadvantaged in the insurance market.

rating, others must follow suit or risk losing all but the highest-cost groups. Without reform of the insurance market, the problem will only get worse.

Small firms must pay more for insurance than large firms because they have fewer employees among whom to spread administrative costs and any losses for extremely costly enrollees. Small firms thought to present high risks pay even higher rates, and are often forced to exclude certain employees or certain conditions. They are sometimes unable to obtain coverage at any price.

Coverage of the Poor-Coverage for the nation's poor is largely the responsibility of the Medicaid program, a federal/state entitlement program administered by the states under broad federal guidelines. Medicaid has accomplished a great deal. But Medicaid does not reach more than a fraction of the lowincome population. In 1987, the program assisted only 42 percent of those with incomes below the poverty line. Even among the extremely poor (family incomes below 25 percent of poverty) nearly a quarter are not covered by Medicaid or any other program.

Insurance practices that make it hard for small employers to obtain coverage are the byproduct of today's competitive market. So long as any insurer engages in assessing the risks of each individual in a group (medical underwriting) and group-specific

The poor must meet two kinds of tests to receive Medicaid assistance. First, they must fall into one of the categories of persons traditionally eligible for cash

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assistance or welfare: the aged, disabled, or members of families with children. Completely omitted from the program, even if they are literally penniless, are single people and childless couples under 65 who do not meet disability tests. Second, applicants must meet financial standards imposed by the states. For many covered groups there are no federal requirements to prevent states from setting shockingly low standards. In Alabama, for example, a family of three qualified for Medicaid in 1990 only if its income was less than 13 percent of the federal poverty guidelines.

Moreover, because states have failed to increase their income eligibility levels to keep pace with inflation, Medicaid programs are covering smaller proportions of the poor. Even recent congressional efforts to expand coverage for pregnant women and young children-severing eligibility for Medicaid from eligibility for cash welfare-appear to have been largely offset by declining coverage among older children and other groups. Finally, in an effort to control costs, states frequently limit both the services covered and the payments made to providers for covered services. The result: inadequate access to service.

EARL DOTTER

Some states have tried to fill in with programs of their own. But funding limitations and other problems have prevented these programs from reaching more than a few of the millions of poor people lacking health coverage.

Faced with costs they cannot pay, the uninsured delay or do not get medical care.

or

Without major changes in public policy, Medicaid and supplemental programs will never reach all the poor. Protection will vary considerably from state to state. And many low-income Americans will go without health care coverage even in the more generous states.

Often the uninsured delay care for minor chronic problems until those problems become serious or acute. To the human costs of being uninsured, then, must be added the economic costs of the patterns of care that result.

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