Kaine Pondering Subsidized Medical Insurance for the Poor

Gov. Timothy M. Kaine wants to create a state-subsidized medical insurance program to make health care more affordable for the working poor. A pilot plan under consideration would feature low-cost premiums with no deductibles and a $50,000 annual cap on benefits, secretary of health and human resources Marilyn Tavenner said at a recent meeting of the Fredericksburg Chamber of Commerce.

The plan, similar to one outlined in September by the Health Reform Commission, would be a “three-share” model, reports Jim Hall with the Free Lance-Star.

It would be offered to workers who earn less than 200 percent of the federal poverty level and whose employers do not offer health insurance. Private insurance companies would administer the plan. The cost of the monthly premium would be shared equally by the state, the employer and the employee.

The pilot program could cost an estimated $20 million. But, as Tavenner acknowledged, that may not be affordable given the fact that the state faces a $650 million revenue shortfall this year.

If the state has any funds free to pursue new initiatives in Fiscal 2009, this should be at the top of the list. (Personally, I would rate it higher than Kaine’s pre-K initiative — the social payback is quicker and more certain.) Virginia has more than one million uninsured citizens, and the number is growing. By any measure, the unaffordability of medical insurance is one of the most pressing social problems in the state. Not only are uninsured medical bills a leading cause of personal bankrutpcy and financial insecurity for the uninsured, the system costs the rest of us: When uninsured patients fail to pay, health care providers jack up rates for private insurance plans to make up the difference.

I don’t know if Kaine’s idea will work or not. There may be problems that no one has considered. But $20 million seems like small change to test the idea. We have three broad options: (1) We can do nothing, and the problem will get worse; (2) We can roll out a massive, full-scale program to tackle the problem, crossing our fingers and praying we get it right; or (3) we can run pilot programs, see what works, and make adjustments before ramping up to a larger scale. I pick the third option.

An inexpensive insurance program would offer benefits to enrollees all out of proportion to its costs. Here’s why: Insurance companies can negotiate much better terms from health care providers than individual patients can. An example: My wife recently had a medical procedure for which the hospital charged $1,227. Her PPO paid $115 and she paid $91. The hospital discounted the rest — about $1,000! Some poor, working class stiff would have been billed the entire amount. A failure to pay would have gone on his credit report, and he’d be well on the way to bankruptcy.

Because of the massive discounts they can negotiate, insurance companies provide enormous benefit to their customers even if they don’t pay out a dime. How expensive would it be to offer an insurance policy that provided subscribers the discounts, perhaps wrapped around some catastrophic coverage? For a nominal cost, subscribers would receive 50 percent to 90 percent deductions on their medical bills, depending on the procedure. There is lots of room for innovation in this area, and Virginia should get cracking!

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3 responses to “Kaine Pondering Subsidized Medical Insurance for the Poor”

  1. Groveton Avatar

    This idea seems well-intentioned. However, as always, the devil is in the details. The first detail is that “federal poverty level” is not indexed to cost of living (as least as far as I can tell).


    Real poverty, unfortunately, is indexed to the cost of living. And poor is poor – whether you are living in a trailer park in Fairfax County or a run down house in Wise County. While the percentage of poverty varies from place to place the pain of poverty knows no geographic boundary. Jim Bacon has often quoted wealth in terms of cost of living. In fact, it is one of the hallmarks of his Economy 4.0 as I understand that philosophy. Therefore, I’d hope he would also link poverty to cost of living and would support the use of different thresholds for poverty based on a person’s place of residence.

    Another big question is immigration status. Can an illegal immigrant get coverage if their family is poor enough? What about a family where the parents are in the country illegally but the the children were born here? Can the children get coverage?

    This is a good idea but it needs that bit of extra thinking so often missing from legislation.

  2. While something needs to be done, I don’t think this is the solution. First, it talks about the ‘under-employed’, meaning the person has a job. So if he is so poor while he is working, how/where the heck is he going to manage to scrap his share of the insurance money up from? Add to that, that you are now putting his employer on the hook for additional funds. If the employer has to start coming up with more money to help with the insurance (for X amount of workers), how long before the employer decides that he needs to let one, two or more employees go because he needs that money to pay the new, extra insurance costs.

    Which leads me to the last point, be the fellow a newly unemployed person (see above) – or someone who wasn’t employed (and for whatever reason can’t find a job). How, what, why and where are these folks going to get health insurance??

    I know what use to work – we use to have a county hospital which the vast majority of medical interns and residents did their education at. The county subsidized some of the costs, the doctors were paid a small amount of money and in turn got some of their education loans. Anyone could go to the hospital, my knowledge is because my mother use to work there for many years (admitting clerk). Bottom line, a need was taken care of and everyone won in the end. This plan WON’T work.

  3. Larry Gross Avatar
    Larry Gross

    this is a really, really good subject to discuss the difference between what a subsidy is and what a core taxpayer-funded service is.

    We say that education is a core-service that we all pay for regardless of whether we have kids or not.


    tell me why then we characterize health care as a “subsidy” for those that cannot afford it?

    What if we treated kids this way?

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