The final irony, of course, is the peculiar conviction that contributory government plans are not run by the government at all. In each case, one's right to coverage is intrinsically linked to one's contributions. Instead, we get a bewildering patchwork of job-based coverage, mandated private insurance, and maybe expansion of public programs. So where does this leave us? In the current debate, the social insurance ideal is so triumphant that any hint of general benefits based on general revenues (public education anyone?) is a nonstarter. Although current health reform pays homage to the American system of job-based coverage, "covered workers" have been almost entirely displaced by "consumers" and "individuals." Premiums for family coverage have risen over 130 percent in the last decade, a rate three times the growth of wages. Indeed job-based health plans were slow to add dependent coverage and quick to retreat. This burden was always resented by employers. In turn, it never made much sense to funnel family health coverage through job-based insurance. But they were pounding a square peg into a round hole. The passage of Medicare and Medicaid in 1965 replicated the split between contributory and general revenue programs. Reformers clung to the political and fiscal appeal of social insurance. This meant, as the American Medical Association and others argued tirelessly, that healthy contributors might see little return while the sick and the malingering claimed the lion's share of benefits. Public health insurance would not and could not work like social security. As it did, the logic of social insurance collapsed. Over time, health insurance began to cover the growing costs of medical care and hospitalization. Before the 1940s, health insurance offered indemnity coverage, simply replacing the wages of those who were sick. The social insurance idea is even more troublesome for health care. Ronald Reagan's "welfare queen" was condemned not because she defrauded the system, but because she did not contribute to it. Their recipients were unequivocally deserving.īut those programs financed through general revenue were always vulnerable. Those Social Security programs financed through contributions (such as the old age pension program), became untouchable. The social insurance idea opened a political chasm between two tracks of social policy. with those taxes in there, no damn politician can ever scrap my Social Security program."įDR was right, but perhaps not in the way he intended. "We put those payroll contributions in there so as to give the contributors a legal, moral, and political right to collect," Franklin Roosevelt observed, ". The same notions were at the heart of the New Deal. "The wage earner," as one reformer argued, "has a more real basis for feeling that the benefits he receives are rights to which he as a citizen is entitled." And the "contributory" model was easy to reconcile with American ideals of self-help and small government. At the time, the American state was ill-equipped, fiscally and constitutionally, to offer much more. Social insurance was embraced by American reformers early in the last century. The on-ramp to that toll road is a "covered job," the point at which revenues are collected and benefits are disbursed. It works, in other words, more like a toll road than a public right-of-way. These contributions are then returned in the form of benefits (funeral expenses, pensions, unemployment insurance). This "social insurance" system is organized around regular contributions from wage earners. And, while appealing to moderates in both parties, it's an assumption that's going to doom health care reform. This may be good politics, but it's bad public policy. House and Senate Democrats hammering out the health care bills share the conviction that only those who pay into the insurance system are deserving of its benefits.
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