Flawed on arrival

The poor, the not-so-poor and hospitals across the U.S. all stand to be hurt by two White House health-care policies

Americans naturally assume that the White House thoroughly examines a major new policy before wheeling it out for public consumption. But that doesn't seem to have been the case with President Bush's proposal to give millions of Americans a big tax break if they pay for health insurance, in an attempt to lessen the number who can't afford coverage. Unveiling the plan during his State of the Union address last week, the president made no mention of a different but related initiative: Cutting the amount of money that the federal government gives hospitals to defray the cost of charity care that the health centers provide.

Had officials in the executive branch put the two proposals together, they might have noticed quickly what hospital administrators and advocates for the uninsured noted soon enough. First, many of the uninsured are in such straits because they make too little to afford the premiums -- so little, in fact, that they pay no federal taxes of any consequence to begin with.

Bush's "tax break" thus would provide them no incentive to buy a health insurance policy. A member of the president's own Republican Party, North Carolina's Senator Burr, calls the tax break proposal "flawed" for that very reason.

But second, while those uninsured people would continue trekking to emergency rooms for what should be routine care provided in a doctor's office, the hospitals would lose billions that now subsidizes free care for the poor.

Changes to a rule that regulates how hospitals are reimbursed for free care, set to take effect this fall, would save the federal treasury $4 billion nationally. But in North Carolina, 43 hospitals qualify today for such reimbursements, including WakeMed and Duke University Health System. The new rule could cut that to just one or two, according to the N.C. Hospital Association.

The hospitals that lose out still would have to pay their nurses and their electricity bills. How would they make up the revenues? Likely the same way they make up millions in unreimbursed charity care and bad debt costs today: They charge more to patients who have insurance.

The adequacy of revenues is a constant cause of concern for hospital executives and a sign of the nation's deepening crisis in health-care financing.

For example, declining government reimbursement rates were mentioned as a major issue by leaders of Duke University Health System during a recent meeting with News & Observer staffers. Dr. William L. Roper, head of UNC Health Care, said in a separate meeting that he has asked the state attorney general to take action when insurance companies underpay for services. And Raleigh-based WakeMed is locked in a dispute with one of the nation's largest insurers, UnitedHealthcare, over prices. The hospital system insists that it needs more for its services than the insurance company is willing to pay.

Under the Bush plans, hospitals would fall further behind financially. Meanwhile, the poor would be in little better shape and ordinary American families would be forced to absorb higher costs when they go to the hospital. It's a case of bad policy leading to worse medicine.