Washington Senate Considers Health Care Mandate

Published May 1, 2008

Legislation that would radically alter Washington’s health care system is currently being debated in the state Senate.

Senate Bill 6221, the “Washington Health Partnership” bill, draws heavily from a 2007 Wisconsin program that was negotiated out of the state’s final budget last year and never made it into law.

Under SB 6221, every working Washington resident would pay a higher payroll tax–between 2 and 4 percent higher–and in return would receive a premium-free voucher for basic health insurance. This would apply to all Washingtonians not already covered by federal health plans, meaning it would exempt military service personnel and other people employed by the federal government.

Although the bill’s primary sponsor, state Sen. Karen Keiser (D-Kent), drew heavily from the 2007 “Healthy Wisconsin” proposal, she and other supporters of the bill maintain the proposal is unique because it uses a payroll tax to fund enrollment in semi-private health care networks and incorporates so-called “managed competition”–meaning it combines a plan to insure all Washington residents with what Keiser calls “free-market ideas.”

‘Worst of Both Worlds’

Under the bill, public and private boards would negotiate bids from different insurance carriers or networks before incorporating those carriers into the state’s system. Keiser said such a system of managed competition would lower insurance prices.

Opponents, however, point out the boards would mean fewer marketplace options for consumers. That, they say, would make competition for Washingtonians’ tax-funded business less open to outside providers who wished to enter, and provide competition in, the health insurance market by offering more competitive rates and coverage plans.

Thus analysts disagree with the claim managed competition–especially in the setting of state-run health care–is really competition at all.

Any competition in the program “would take place on a very constrained basis,” noted Michael Tanner, director of health and welfare studies for the Cato Institute. “For example, since all plans are required to offer the same core benefits package, there will only be marginal competition based on benefit design.”

The Washington plan “goes a step further” than its Wisconsin predecessor, Tanner added, by “combining managed competition with key features of a single-payer plan such as global budgeting, thereby borrowing the worst of both worlds.”

Unfunded Mandates

The bill also includes standards requiring health providers to incorporate technology such as telemedicine and online record-keeping into their practices. The bill does not elaborate on how providers would pay for the often-expensive modernizations it would mandate.

Keiser argues a legislative effort of some sort was absolutely necessary for the people of Washington. “We’ve got a broken system,” she said, “one that’s about to go over the edge. What are we going to do about it?

“The approach we’re taking will achieve a fundamental goal of, by the year 2012, health care for all Washingtonians in a way that they can afford,” said Keiser.

Several Washington state senators met in February to discuss how to incorporate what they viewed as the best elements of all government approaches to health care. As the proposal moves forward, legislators plan to meet with stakeholders, health care economists, and regular citizens to develop a strategy for passing the bill in the 2009 legislative session.

‘Shuffling Vouchers’

But key market analysts disagree with the legislators’ description of this plan as the best of both public and private worlds.

Greg Scandlen, president of Consumers for Health Care Choices, said the free market operates when customers express their wishes and values by purchasing one product over another, not by “shuffling vouchers” and acquiring services with taxpayers’ money instead of their own.

“Shopping without having any financial responsibilities is not consumerism, just like it’s not consumerism if you go to Disney World and someone buys you a free pass to go on all the rides you want,” Scandlen said. “There’s nothing consumerist about that.”

‘Workers Bear the Cost’

The tax increase for funding the program has caused controversy as well. The bill would require employees to pay between 2 and 4 percent in an additional payroll tax, and employers between 9 and 11 percent. Although residents would be taxed, said Keiser, they would no longer pay premiums–so “they would fork over less money for health care in the long run.”

Analysts have expressed concern about the impact such a significant payroll tax increase would have on the state’s economy and jobs.

A worker’s compensation, Tanner explained, is generally “a function of his or her productivity” and “mandating an increase in the cost of hiring a worker by adding a new payroll tax does nothing to increase that worker’s productivity.”

Moreover, Tanner said, the tax might cause employers to spiral into a long train of actions to supplement the cost of more-expensive workers by raising prices, lowering wages, reducing future raises, cutting benefits such as pensions, hiring fewer workers, laying off current employees, and outsourcing.

“In the end, one way or another, workers will bear the full cost,” Tanner said.

Empty Gestures’

The impracticality of a bill with little chance of passing has not escaped the notice of some health care observers. “Talk about empty gestures,” said Scandlen. “This has the support of almost nobody in the state–certainly not the governor, certainly not the House.”

But while analysts may agree this Washington state “universal health care” bill with its associated payroll tax increase is unlikely to pass the legislature, SB 6221 is expected to set the tone for future legislative sessions.

Jillian Melchior ([email protected]) writes from Michigan.