Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, July 19, 1994 TAG: 9407220092
SECTION: EDITORIAL PAGE: A5 EDITION: METRO
SOURCE: NEIL HOWE and BILL STRAUSS
DATELINE: LENGTH: Long
Politicians don't discuss it, the media don't cover it, but This multisyllabic catch-phrase threatens to move at least $40 billion a year out of the wallets of young adults (under age 35) and into the wallets of the middle-aged (age 45-64).
If strict community rating is enacted, you can ignore the talk about all the special ``winners and losers'' of health-care reform. The real issue will be generational. The big winners will be Clinton-aged boomers now entering midlife; the big losers will be the young men and women now entering the labor force.
Community rating is a much-heralded reform that would prohibit insurers from charging different premiums for different individuals. In its ``modified'' form, it would simply ensure that no one can be charged higher premiums solely due to poor health or pre-existing conditions. This reform appeals to our sense of fairness and entails no systematic income transfer. But in its ``stricter'' form, it would require insurers to ignore all distinctions among individuals - including age - and charge a single community-wide fee.
Is this fair? Only if you think the federal government ought to enact a large new social-insurance program that would tax the young to subsidize the middle-aged. Today, the typical 25-year-old consumes about $1,000 per year in health-care services while the typical 60-year-old consumes about $3,500. The premiums an individual pays out of pocket, or the health costs companies take out of a worker's compensation, generally reflect this differential.
After strict community rating is enacted, however, people of all ages will pay the same premium - probably, around $2,000 per year for a single person. Presto! The 25-year-old pays 100 percent more and becomes a $1,000 yearly loser. The 60-year-old pays 40 percent less and becomes a $1,500 yearly winner. For family heads, the gap will be even wider.
If applied to everyone, strict community rating would mandate a total income transfer of at least $40 billion yearly - flowing away from the 55 million adults under age 35 and enriching the 49 million pre-Medicare adults over age 45. This ``reform'' would be equivalent to a 7 percent tax on a typical young couple's combined wages. That would make it about as large as their personal FICA tax (through which the young are already subsidizing the health costs of seniors).
Though not all the plans before Congress agree on this measure, the general outlook for young people is bleak. The Clinton, Kennedy, Gibbons and McDermott plans all prohibit any age-based variation in the premium or taxes payable for all insurance policies covered by their plans. Average price tag: $1,000 per young adult. The Chafee and Michel plans allow a little variation, but would still cost young workers about $700 each. The Moynihan plan would allow an age variation up to a multiplier of two, thereby extracting roughly half as much ($500) per young worker. The Rowland plan and the Dole plan (which allows premiums to vary up to a multiplier of four, close to the actual cost variation) are the only major proposals that would hold the young harmless.
Few national leaders have bothered to bring this massive youth tax to the public's attention. President Clinton has said that premium variations are unjust. If so, why for health insurance alone? Teen-age boys pay four times more than their parents for auto insurance because they're four times as reckless on the road - and nobody says that's unjust.
Some politicians argue that community rating, like Social Security, won't take anything from the young that they won't get back as they grow older. But this argument assumes that such young-to-old income transfers are forever sustainable. (something most twentysomethings already don't believe about Social Security). (who incurred no corresponding cost when they were young). And it implies that most 60-year-olds are economically needier than most 25-year-olds, which is patently false.
Given the political invisibility of today's young adults, strict community rating could well pass Congress. If so, brace for three consequences:
Today's young will become even poorer than they are now in relation to the old. Already, according to the Census Bureau, the real median income of households headed by people under age 30 is 15 percent lower than it was when boomers were their age two decades ago. With strict community rating, their purchasing power could fall by another 7 percent.
The new health law could defeat its own primary goal: universal coverage. Since adults under age 35 are currently the least-insured age group in America, this goal will only be achieved if young people start purchasing more insurance. Huge premium hikes will have exactly the opposite effect. (Over the past 15 months, a New York experiment in community rating has caused a 30 percent rise in policy cancellations by young males.)
Those who taxed the young to enrich the middle-aged could get run out of office. Right now, few young adults are paying attention to health-care reform. But once community rating becomes law and young wallets are emptied, that will surely change. Come 1998, people born in the '60s and '70s will comprise America's largest generation of voters. Once mobilized, they will start deciding elections.
Everyone knows our health-care system needs change. Costs must be controlled. Poor families must gain access to doctors. Insurers must be barred from discriminating against the sick. All this can be done without forcing all younger workers to pay far more for health care (and all older workers far less) than what they actually consume.
Neil Howe and Bill Strauss are co-authors of ``Generations.''
The Washington Post
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