The prospect of millions of Americans losing their health insurance is a looming national tragedy. Congress should start from the proposition that every American resident will have affordable health insurance coverage, and its corollary that nobody be ruined financially by health care costs. Every other major democratic nation accomplishes this, and so should we. I suggest a two-pronged approach involving major political compromise.

One prong is a Federal Health Insurance Program ("FHIP") to cover everyone not covered in some other way. The FHIP would not be aimed at transitioning to a single-payer system, and it would not be tied to income. Premiums would be set to enable the FHIP to break even financially if there were no subsidies, but it would include income-related federal subsidies limiting premiums to a congressionally determined percentage of personal income; e.g., 15 percent to 20 percent, roughly health care's share of the economy. If more efficient, Medicaid-provided health care could be retained, but fully federally funded.

The second prong is to phase out federal funding of other Medicaid services. Thus, public subsidy of health care would be a federal responsibility and other Medicaid services a state responsibility.

The FHIP should have the same coverage as the Affordable Care Act requires. FHIP services would be delivered by private-sector providers. FHIP enrollment, premium payments and subsidies could be handled through the income tax system. There could be a revenue bonus from improved income tax compliance, as it would be easier to catch tax cheaters.

Exactly how the FHIP should operate is not for me to say. My points are that this is a national issue, really a national scandal; that every American should have, and be required to have, affordable health insurance with such subsidies as are needed coming from the federal government; that the income tax system could be deployed to make the premium collection and subsidy processes administratively efficient, with the side benefit of improved tax compliance; and that Congress should seize this opportunity to let the states be laboratories of democracy testing whether our private-insurance-dominated health care system can produce sensible results.

Private insurance policies would be federally required to provide catastrophic coverage, but beyond that each state would have great flexibility in deciding what would best suit its residents who are not covered by the FHIP. If desired to promote interstate competition, Congress could set minimum standards for insurers and authorize interstate competition, subject to states' rights to set coverage standards. The states would become laboratories of experimentation on how best to make health insurance markets work. Premiums might plummet for healthy people in states that allow narrow benefit sets or exclude pre-existing conditions, making congressional Republicans happy. But everyone would have affordable coverage, making congressional Democrats happy.

Cost-reduction efforts could include nudges in the form of premium reductions for people to engage in healthy behaviors, especially in dealing with the chronic conditions that are a huge part of health care costs. Some could be enacted by Congress and apply throughout the FHIP.

The current individual market crisis could be addressed for the next year or two prior to FHIP implementation by either or both subsidies to insurance companies or refundable income tax credits for premiums higher than a specified percentage of income.

Health care is needed by every American. The FHIP would produce the undeniably good outcome of every American having affordable health care insurance. It would not penalize people for not having insurance, but simply require that they have it. Auto insurance is required. Health insurance should be, to reduce the costs of uncompensated care that losing gamblers on health care force on the rest of us.

Repealing federal funding of other Medicaid programs is not a clearly good thing, but states no longer would be helping to fund health care through Medicaid. The other Medicaid-funded services include nursing-home care, residential care for the disabled, assistance in remaining independent for the disabled and elderly, and other social services. These are important, but none affects every American. They are not as important to the national economy and probably not as expensive compared with other countries as health care, and they could be funded and carried out at the state and local levels. Federal funding of social-services programs other than through Medicaid might also be repealed to help pay for the FHIP. This compromise would set the stage for future debate and political campaigning on federal vs. state social safety net funding and operation.

John P. James is a senior fellow with the Center for Policy Studies and an attorney who was Minnesota's commissioner of revenue from 1987 to 1991 under Gov. Rudy Perpich.