Federalism and health system reform. Prospects for state action

To assess the prospect that the states, acting independently, would undertake health insurance coverage expansions that together would result in meaningful reductions in the extent of uninsurance nationally.

We use microsimulation methods to contrast the federal income tax payments needed to finance a national program covering the uninsured with the state income tax payments needed to finance a state-specific program for the same purpose. The contrast reveals the effects on the tax burdens of differences among states in uninsured rates and tax capacity.

Continental United States.

Observations from the 1990 through 1993 Current Population Survey (N =305 477 families), weighted to represent the population of each state.

Illustrative public health insurance program for families with incomes below 250% of poverty, not covered by current public or employer-sponsored health insurance.

Change in percent uninsured, change in per capita total tax payments.

The per capita cost of a state-specific program is directly related to current uninsured rates, $130 in states with low uninsured rates (10%) to $230 in states with high uninsured rates (21%). This would represent increases in state total tax effort of 10% to 19%, respectively. In contrast, equal tax effort to finance a national program would imply per capita yields of about $200 in the low-uninsured states and about $150 in the high-uninsured states.

Substantial state tax effort would be necessary to cover the low-income uninsured-especially in states with the highest uninsured rates, which also have the lowest tax capacity. Targeted federal financial assistance may be necessary, if policymakers wish to induce many states to provide health insurance coverage for their uninsured.