Gov. Timothy M. Kaine wants to create a state-subsidized medical insurance program to make health care more affordable for the working poor. A pilot plan under consideration would feature low-cost premiums with no deductibles and a $50,000 annual cap on benefits, secretary of health and human resources Marilyn Tavenner said at a recent meeting of the Fredericksburg Chamber of Commerce.

The plan, similar to one outlined in September by the Health Reform Commission, would be a “three-share” model, reports Jim Hall with the Free Lance-Star.

It would be offered to workers who earn less than 200 percent of the federal poverty level and whose employers do not offer health insurance. Private insurance companies would administer the plan. The cost of the monthly premium would be shared equally by the state, the employer and the employee.

The pilot program could cost an estimated $20 million. But, as Tavenner acknowledged, that may not be affordable given the fact that the state faces a $650 million revenue shortfall this year.

If the state has any funds free to pursue new initiatives in Fiscal 2009, this should be at the top of the list. (Personally, I would rate it higher than Kaine’s pre-K initiative — the social payback is quicker and more certain.) Virginia has more than one million uninsured citizens, and the number is growing. By any measure, the unaffordability of medical insurance is one of the most pressing social problems in the state. Not only are uninsured medical bills a leading cause of personal bankrutpcy and financial insecurity for the uninsured, the system costs the rest of us: When uninsured patients fail to pay, health care providers jack up rates for private insurance plans to make up the difference.

I don’t know if Kaine’s idea will work or not. There may be problems that no one has considered. But $20 million seems like small change to test the idea. We have three broad options: (1) We can do nothing, and the problem will get worse; (2) We can roll out a massive, full-scale program to tackle the problem, crossing our fingers and praying we get it right; or (3) we can run pilot programs, see what works, and make adjustments before ramping up to a larger scale. I pick the third option.

An inexpensive insurance program would offer benefits to enrollees all out of proportion to its costs. Here’s why: Insurance companies can negotiate much better terms from health care providers than individual patients can. An example: My wife recently had a medical procedure for which the hospital charged $1,227. Her PPO paid $115 and she paid $91. The hospital discounted the rest — about $1,000! Some poor, working class stiff would have been billed the entire amount. A failure to pay would have gone on his credit report, and he’d be well on the way to bankruptcy.

Because of the massive discounts they can negotiate, insurance companies provide enormous benefit to their customers even if they don’t pay out a dime. How expensive would it be to offer an insurance policy that provided subscribers the discounts, perhaps wrapped around some catastrophic coverage? For a nominal cost, subscribers would receive 50 percent to 90 percent deductions on their medical bills, depending on the procedure. There is lots of room for innovation in this area, and Virginia should get cracking!