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Lotterman: States step up to the plate to take a swing at providing affordable health care

One of the advantages of our federal system of government is that states can take the initiative when Washington does not. Congressional paralysis — at least in terms of substantive issues — certainly is the case right now. So we are seeing a spate of state action in areas that otherwise might fall to the federal government.

For example, some weeks ago British Prime Minister Tony Blair came to California to sign an agreement with Republican Gov. Arnold Schwarzenegger on climate change. In April, Massachusetts enacted a measure to achieve universal health coverage for that state's residents.

In the same vein, Blue Cross and Blue Shield here in my home state of Minnesota recently issued its proposal on how we could achieve the same goal of universal coverage. Our situation is similar to that of other states where traditional agriculture and natural resources industries co-exist with modern and growing urban areas based on high tech goods and services.

At 7.4 percent, Minnesota has a low rate of uninsured people. Still, that is higher than it was in 2000, and further restrictions in Medicaid are widening the gap. In human terms, nearly 400,000 people are uninsured out of a population of 5.1 million.

Some question the need for any action. Libertarians and others who emphasize personal responsibility and minimal government argue that health care is just another good that households can opt to buy or not with their resources.

Business owners are concerned about higher taxes, particularly on payrolls, in an era of sharp competition. This is especially true for small businesses with little power to set prices. Moreover, economists know that payroll taxes are a disincentive to new job creation.

Still, there are good arguments for universal coverage. One is on the grounds of fairness. Health care is different from iPods or clothing. A wealthy society like ours should be able to provide all its members with some basic level of health care. I think the majority of Americans agree with this argument.

There also is an argument on the grounds of economic efficiency. The uninsured do not go without any health care. Many eventually receive it at emergency rooms and are unable to pay, leaving counties or other consumers to absorb the costs one way or another. And the lack of insurance often keeps people from seeking care in a timely manner. Society ends up spending a lot of resources to achieve minimal levels of care.

Moreover, spending on basic health care usually pays off in improved productivity and in reducing work time lost to sickness or care of family members.

As the Blues' proposal and public debate in Massachusetts emphasized, some uninsured actually are eligible for Medicaid or other existing programs with partial federal funding. Public information efforts to get the uninsured enrolled can secure greater inflows of federal money for a state.

Some uninsured are young people in good health but without many assets. They choose to forego buying insurance because they don't expect to get sick and because they know that with low net worth, they might qualify for Medicaid or other public resources in case of accident or injury. They are free-riding on the system, maximizing their current income while implicitly shifting health risks to society as a whole.

Then there are those people who would like to have health insurance but don't qualify for any existing program or cannot afford to pay for coverage on their incomes. They simply are not going to have coverage without some public subsidy.

Exactly how universal coverage can best be achieved is complicated, but the Massachusetts law and this new proposal from the Blues are good starting points.

Some skeptics question what is in it for Blue Cross and Blue Shield.

A spirit of social concern might be primary, but the health insurance industry also has an interest in forestalling more radical single-payer government-administered plans that would eliminate any role for the Blues and other private insurers.

The medical establishment, including the American Medical Association and the large insurers, has always been very protective of its turf and its financial interests whenever major changes are proposed in government health policies. That was particularly evident in the debate leading to the establishment of Medicare in 1965 during which the AMA exerted extreme pressure on Congress to eliminate proposals doctors disliked.

The Blues across the nation always has protected its nonprofit status and campaigned for a role in carrying out programs like Medicare. So there may be an element of self-interest in this recent initiative.

But that is the way our political system works. After adding a drug benefit to Medicare, the federal government seems unable to act in health care reform. The ball has been tossed out at the state level. It is time for legislatures and governors to step up to the plate.

Economist Edward Lotterman teaches and writes in St. Paul, Minnesota. Write him at