Originally published in the
on January 18, 2006
By Assemblyman Adriano Espaillat and David Sirota
As legislatures meet in state capitals across America, lawmakers face a crisis: how to address the health care issue without breaking the bank. States are dealing with a double whammy of public outrage over health care prices and massive federal cuts to health care programs like Medicaid. In response, states should consider health care mandate bills requiring large employers to provide a certain level of minimum medical coverage to their workers, just as they are required to pay workers a minimum wage.
The fight so far on this issue has been predictable. Politicians who take corporate campaign contributions parrot the line of big business, saying the mandates will hurt business. This simplistic view, though, misses a critical point: regulations, when written properly, do not hurt the economy. Instead, they channel the energies of the free market into addressing society’s pressing problems.
In the very near future, America must find a way to stop the ceaseless increases in health care costs we are experiencing. Our current policy of pretending this health care crisis doesn’t exist will end in one of two results: The vast majority of Americans will be forced to go without health insurance because of the costs — a politically unacceptable solution. Or, the government will end up picking up the tab and increasing taxes to pay for it — a policy the public supports, but that is unrealistic in today’s political environment.
Health care mandates, then, represent the critical "third way" out of this seemingly polar debate. Government sets the minimum benefits that companies must provide to workers, and companies can find the ways to meet those standards on their own. That means all of corporate America’s talents for innovation, cost savings and streamlining are suddenly focused on driving down the overall cost of health care, rather than just eliminating workers’ medical coverage altogether.
To get an idea of what this means in practice, think of Wal-Mart. This company that has become the largest corporation in the world by using massive market share and tenacious cost cutting to drive down its own overhead as much as possible. So far, that cost cutting has resulted largely in lower wages and increased outsourcing.
But imagine how minimum health care standards would focus Wal-Mart’s most potent and brutal tactic — cost cutting — on health care. Forced to provide health care to its workers, Wal-Mart would suddenly look to apply its size and power to pounding down the prices that HMOs and insurance companies charge, because those prices would be new overhead for Wal-Mart. An HMO wants to raise its premiums? Sorry, says Wal-Mart, we have to provide insurance, and you either find a way to lower your prices or we’re going to find another insurance provider for our employees. The HMO will either be undersold by a competing insurance company, or will find a way to cut costs by cutting through its own internal red tape and possibly even by slashing the excessive salaries of executives.
This kind of interaction, which would be duplicated by other large businesses facing the mandate, would not only secure health care for millions of workers, but lower health care costs for all Americans. How so? Because the companies that will be forced to provide coverage to their workers are so large, the health insurance industry won’t be able to simply make exceptions for them. The industry will have to take actions to lower its own costs and end health care profiteering throughout the entire health care system — industry-wide moves that will benefit the entire economy.
It’s not like there’s no fat to be cut from HMOs and insurance companies either. In 2004, the health insurance industry made $11 billion in profits — up almost 11 percent in one year. In 2003, HMO profits rose by 80 percent. Meanwhile, industry executives make millions each year in salary and bonuses paid for by higher and higher premiums. With mandates creating employer demand on the health industry, there will be pressure to eliminate some of that excess and redirect it into providing better, lower-priced health care for ordinary citizens.
These mandates will also have some benefit for the health care industry. How? Because while HMOs will certainly feel cost cutting pressure from Wal-Mart and other large employers, they will also be guaranteed millions of new customers and thus billions in new revenues. It's the age-old volume model: health insurance companies will be guaranteed to sell much more of their product, meaning they can still remain very profitable while lowering their prices.
Minimum health care mandates are a serious solution for addressing America’s health care crisis. Because that crisis continues to be ignored in Washington, D.C., state legislators across America must lead in making these mandates a reality.
New York Assemblyman Adriano Espaillat is a board member of the Progressive Legislative Action Network (PLAN), a research and advocacy organization that supports state lawmakers. David Sirota is the co-chair of PLAN, and the upcoming author of the book Hostile Takeover, which analyzes how corporate interests have bought America's political system.