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Maryland’s 0.05 Percent Solution

Originally Published in the Daily Record

By Thomas A. Firey
Published on Friday, April 29, 2005
OP-EDS

It is estimated that as many as 700,000 Marylanders—12.7 percent of the state’s population—have no health insurance. That statistic represents both a private and a public concern: private, because the uninsured are exposed to serious medical and financial risks if they become ill or are injured; public, because unpaid medical expenses often are reimbursed with funds from the public fisc.

Given the magnitude of Maryland’s uninsurance problem, it is understandable why so much attention has been given to the so-called “Wal-Mart bill” that currently lies on Gov. Ehrlich’s desk awaiting either his signature or veto. The bill would force the giant retailer to increase its spending on health care coverage for its Maryland employees. According to published reports, 80 percent of those employees are eligible for health benefits, but only about 52 percent of the eligible employees choose to enroll in company-sponsored insurance (for which they pay part of the premium). Wal-Mart officials have told state lawmakers that the firm currently spends between 5 and 7 percent of its Maryland payroll on health coverage; the legislation would force the retailer to raise that to 8 percent or else pay the difference to the state.

Back-of-the envelope calculations suggest the Wal-Mart bill would extend coverage to 1,000–3,000 people, thereby lowering the state’s uninsurance rate by, at best, about 0.05 percent. To achieve that gain, Wal-Mart will have to up its health insurance spending by $2–$5 million a year. That’s not a small sum, to be sure, but the retailer can free up the necessary money by cutting employee hours and skimping on raises, bonuses and other perks. Regardless of whether it is in the form of wages or benefits, employee compensation is employee compensation—if the law requires an increase in the percentage of compensation that is in the form of health benefits, an employer will simply lower the percentage of compensation that is in the form of wages. The tradeoff between wages and benefits likely explains why, during the battle over the Wal-Mart bill, there was little advocacy by its supposed beneficiaries—the store’s employees.

Disappointingly, the Annapolis lawmakers and state health care activists who worked hard to advance the bill have not shown much interest in other measures that would have a far greater effect on lowering Maryland’s uninsurance rate. The root causes of the state’s uninsurance woes are well known: Maryland has some of the most questionable (and expensive) insurance mandates in the country, various state medical regulations are designed to increase health care providers’ profit levels (the state’s Health Care Commission boasts that it works to protect providers’ profits and restrict patient access to care), and Maryland applies a special tax to health care premiums. Those causes result in high health insurance costs and reluctance by Maryland employers and individuals to purchase coverage. Hence, the state’s high uninsurance rate.

Despite all of the attention it has received, the Wal-Mart bill does precious little to expand health insurance coverage in Maryland. Meanwhile, scant effort is being made to effect policy changes that would significantly lower the state’s uninsurance rate. Perhaps, once proponents and opponents of the Wal-Mart bill are finished with their political machinations, they can begin serious work on improving residents’ health insurance coverage.

Thomas A. Firey, senior fellow at The Maryland Public Policy Institute, is author of the chapter on medical malpractice reform contained in the new book Health Care in Maryland: A Diagnosis.