by Greg Chartier, Ph.D, SPHR

   This article was originally published in The Productivity Institute (PI) Newsletter

One of the key challenges in enacting a health care reform plan is how to finance it among government, employers, and individuals.  Of particular concern to policymakers is what effect a health reform plan would have on government spending and the federal budget.  President Obama and Congressional leaders have said that any health reform plan should not add to the budget deficit over a 10 year period.  This means that the added federal budget spending that resulted from any reform efforts would be fully offset by new revenues or savings in existing government programs like Medicare and Medicaid.

For employers, however, the primary concern is; “Will there by new taxes?”  The answer is not clear.

By far, the largest component of the new health care plans is subsidies to the uninsured.  These could be provided through coverage expansion of Medicaid and Children’s Health Insurance programs.  While they would add to the federal budget, there would be some presumed savings in transferring costs to these individuals.

What should concern us, however, is the Congressional Budget Office predictions that any new health plan would cost “on the order of $100 billion” per year in current dollars.  Where will the money come to pay for these programs, especially in light of the administration’s claims that there must be no additional budget impact.

The plans approach these costs in three ways: 

1. Savings from existing programs.  This would mean reduced Medicare payments, almost certainly.
2. New revenues from business and the insurance industry.  For example, a “pay-for play”requirement on employers to either provide health coverage or pay a fee to help government pay for it.
3. New revenues from changes in the tax code. Two possibilities are a “lifestyle” tax on alcoholic beverages and an excise tax on incomes over $280,000 for single taxpayers and $350,000 for families.

There are two key issues that we should be concerned about:

1. How sustainable are these new sources of financing? And
2. What is the balance of financing among individuals, employers and the government?

The answers to these questions will only be answered as we get closer to some definitive plan.

The Kaiser Foundation provides a side-by-side comparison of the major health care proposals.  It is an interesting exercise, especially if you are concerned about the impact of these proposals on your own health care costs.

The interactive side-by-side compares the leading comprehensive reform proposals by the President and members of Congress across a number of key characteristics and plan components.  The Foundation also has prepared summaries comparing the Medicaid and Medicare provisions in the House Tri-Committee bill and the proposal before the Senate Finance Committee. Follow the link:   www.kff.org/healthreform/sidebyside.cfm .

Greg Chartier is Principal of The Office of Gregory J Chartier, a Human Resources Consulting firm and is a well-known management consultant, educator and speaker.  His practice consists of two broad areas:  Human Resources management and outsourcing for firms of less than 100 employees and Management Training. His business experience includes management positions with Pfizer, The Chase Manhattan Bank, The Bank of New York and Johnson and Johnson.  He is also a Board Member of the Job Service Employers Council (JSEC) of the New York State Department of Labor.  Greg can be reached at greg.chartier@att.net and by phone at 914-548-1689.