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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:

• Uninsured pregnant women, without the resources 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 benefits threatened each time they go to the bargaining table;

• Families whose emotional and financial resources are exhausted from providing long-term care to frail parents or disabled children.

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

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.

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.

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.

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.

"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

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.

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.

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.


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.

"[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

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.

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?

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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.

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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.

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.

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

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.

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.

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


U.S. Bipartisan Commission on Comprehensive Health Care




FORTNEY PETE STARK, California, Vice Chairman MAX BAUCUS, Montana, Vice Chairman
BILL GRADISON, Ohio, Vice Chairman




HENRY WAXMAN, California

DAVE DURENBERGER, Minnesota, Vice Chairman
JOHN HEINZ, Pennsylvania

EDWARD M. KENNEDY, Massachusetts


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Robyn I. Stone

Dessa Vrtikapa
Judith G. Waxman
S. Mitchell Weitzman
Joy Johnson Wilson

Dear colleague,

In P.L. 100-360 the Congress called upon the Pepper Commission to recommend legislation that would ensure all Americans coverage for health care and long-term care. With this report, the Commission fulfills that charge and calls upon you-our colleagues in the Congress, the President, and the American people-to turn its recommendations into law.

The Commission's intensive efforts to develop recommendations have not been an academic exercise. This report presents a workable plan of action to address the rapidly growing crisis in health and long-term care. To agree on that plan, Commission members have had to make hard choices and compromise strongly held positions. Members who believed action was critical refused to allow their personal vision of the best to become the enemy of the good.

In health care, a workable plan means we have no choice but to build universal coverage by reforming and extending the job-based and public coverage we now have to make it work well for all Americans. In long-term care it means we must establish priorities to build the protection we now lack. And in both areas, we must build deliberately, a step at a time, to allow all parties to adjust and to ensure a sound and stable structure.

Some will say that it is naive to pursue even such worthwhile social investments in the current fiscal environment. But there will never be a day when the answers become easy or cheap. There will never be a day when all of us can have our first choice or ideal solution. There will never be a day when some of us will not have to make some sacrifices to achieve what is best for all of us.

As the nation's political leaders, we face a choice: we can continue to duck our heads and hope this issue will not bring the nation to its knees, or we can use the Commission recommendations as the rallying point for the political consensus that can make universal

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