WILLIAM GALSTON SEPTEMBER 23, 2009
Of the more than 500 amendments offered to Senator Max Baucus's "chairman's mark," one of the most important is surely Senator Ron Wyden's proposal to allow everyone access to the plans offered in health insurance exchanges. Under his plan, employers offering group health coverage would have two options. They could choose to offer their workers two or more plans, at least one of which would have premiums no higher than those of the most affordable high-quality plans in their area. If they don't want to do that, they would be required to offer all eligible employees a voucher equal to the amount they contribute to their employees' coverage under the plan they sponsor. Workers could either return the voucher to the employer and remain within the sponsored plan or use the voucher to purchase coverage through the local health exchange. Workers who select plans costing less than the value of the voucher would be able to keep the unspent amount as cash.
Wyden's plan would offer more choice for both workers and employers, and it would encourage cost containment by encouraging consumers to select lower-cost options. CBO scores the plan as roughly deficit-neutral; the Lewin Group believes that it would actually lower the deficit by reducing the amount of revenue the federal government foregoes because of the tax exclusion for employer-provided health benefits.
As Jonathan Cohn pointed out in an article in July, this approach faces two principal challenges. One is political: Many employers would resist because they want to keep control over their employees' health coverage. The other is substantive: By giving workers the choice to opt out of the employer's pool, younger and healthier individuals would be likely to choose bare-bones coverage, leaving the older and sicker in the employer's plan, whose price—already high—would be driven still higher.
In a recent New York Times op-ed, Senator Wyden argued that his plan "would actually strengthen the employer-based system by making it possible for even more employers to afford coverage than can today." Perhaps. What seems more likely is that it would set in motion a dynamic that over time could unravel much of the employer-based system.
That's one reason why Wyden's proposal is so significant: It raises broader questions about the future shape of insurance provision. Those who believe that the employer-based system served us better in the past half-century than it would in the next will welcome the prospect of a transition to a more individual-based alternative. Those who fear that such a change would end up reducing overall funding for health insurance will resist it.
For what it's worth, my own view is that the current system badly distorts incentives by making the real cost of employer-based health insurance so opaque. If employees come to realize that employers look at total compensation, not just wages, they will understand why soaring health care costs have put a lid on wage increases. And if Senator Wyden has his way, employees will be able to do something about it by deciding for themselves how much of their compensation they want to receive (or spend) in the form of health insurance subsidies. In the long-run, that's probably a good thing. And it's one reason why Ezra Klein is able to argue (rightly, in my view) that the Wyden amendment "might be the difference between a bill that delivers on its promise of reforming the health care system and a bill that merely expands health insurance coverage."
So here's the question Wyden has forced into the open: Will Democrats be the party of reform, or just the party of more? A lot is riding on their answer, both for them and for the country.