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A public plan would provide an alternative to people who mistrust private plans. And it would help keep those plans honest by serving as a benchmark for costs, benefits and premiums. -
The government would inevitably end up giving the public plan unfair subsidies. Like all government attempts to meddle in the market, it would institutionalize waste and raise costs for everyone.
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Len M. Nichols, Ph.D.
Why the U.S. needs a Public Health Insurance Plan
The question of whether a new public health insurance plan should be allowed to compete with private health insurance plans has polarized the health reform debate unnecessarily. Extremes from both political parties have tried to use the issue to prevent progress toward a bipartisan health reform package.
But health reform must be bipartisan to be sustainable over time. This means both sides' priorities must be reflected in the policy solution.
Allowing individuals to choose between public and private competitors serves two primary purposes. First, many Americans fear that private insurers, even those that operate on a nonprofit basis, will always restrict access to care (the mirror image of those who fear government involvement in any market). A public health insurance plan would reassure those who mistrust private insurance that their insurance product is accountable to elected officials and not to corporate stockholders or the proverbial bottom line.
Second, a public health insurance plan could serve as a valuable benchmark and enable consumers (and market managers) to compare the premiums, benefit design, and administrative efficiencies of different health plans. This benchmark would be especially valuable in the first year of the new insurance marketplace.
At the same time, the public health insurance plan must not be allowed to bankrupt private insurers unfairly nor should it be permitted to pave the way for governmental control of the health system.
The following three conditions are absolutely necessary for public and private health plans to compete fairly:
- All insurance market rules must apply to all plans equally.
- The authority governing the insurance marketplace cannot also manage the public health insurance plan.
- The public health insurance plan cannot leverage Medicare or other public insurance products to administer prices or claim an unfair advantage.
Real-world experience is instructive. More than 30 states offer their employees a choice between privately insured products and a product for which the state bears the insurance risk. Under this scenario, the state picks the managers of the self-insured product, which then competes with traditional private insurers. In her recent testimony before the Senate Finance Committee, Secretary of Health and Human Services Kathleen Sebelius pointed to state employee benefit plans as examples wherein "public and private plans compete on the basis of benefits, innovation, and cost" without destroying the marketplace.
Yet, this type of public plan alone will not be sufficient to control costs. Therefore, cost growth control must be addressed through a systematic approach that includes a health information infrastructure, best practice information, decision support tools, and realigned provider and patient incentives. Medicare can and must lead the way with some of these transformations. But simply using Medicare's pricing power to control costs without addressing the underlying reasons health care costs are growing so rapidly will not fix our problem.
Some people question why a public plan is necessary if competition is actually fair. A public health insurance plan would help restore consumer confidence in our health system and provide a valuable benchmark for competition. Buying power is not what makes a plan "public" and a private-only marketplace is not a prerequisite for competition. Americans should be allowed to choose between public and private health insurance plans that compete on a level playing field.
Michael F. Cannon
A Level Playing Field? Don’t Make Me Laugh.
No. Competition between a government program and private insurers could never be fair. Government would assume control over an ever-increasing share of the market, drive health care costs higher, and depress quality.
Consider what would be necessary to create and sustain a level playing field between government and private insurers. First, a new government program would have to be completely self-financing. No special subsidies for start-up costs or operating costs, and it would have to maintain real reserves just like private insurers. Second, Congress could not leverage its market power to favor a government program by adopting Medicare's payment rates or requiring providers to participate as a condition of Medicare participation. Third, Congress and federal bureaucrats cannot be allowed to enact any regulations favoring the new program either deliberately or inadvertently. That means there cannot be even an implicit guarantee that the government would bail itself out. Fourth, no future Congress and no future bureaucrats can be allowed to do any of these things, ever.
These conditions will never be satisfied because public-plan supporters do not want them to be. Indeed, they want to violate every single of them from the get-go. They want a new program to build on Medicare's infrastructure, to use Medicare's payment rates, and to receive special subsidies.
In fact, if a government program were to be stripped of any special advantages it would cease to be a government program. It would be just another private insurer. Take away the violence and intimidation, and Tony Soprano is just an eccentric and earthy businessman.
Government programs do not contain health care costs; they shift, increase, and hide them. Government shifts the cost of my consumption to you. Costs rise overall, as they always do in a commons: nobody spends other people's money as wisely as they spend their own. Government hides the cost of its programs with price controls that extract wealth transfers from providers and that impose nonmonetary costs on patients, such as when 12-year-old Deamonte Driver died tragically in 2007 because his mother could not find a dentist willing to accept Medicaid's controlled prices. Raising $1 of government revenue costs society as much as $2, but that second dollar never shows up in any budget.
Comparing government to private spending growth is a nonsense metric. The employer-sponsored insurance system—a creature of Congress—bears more resemblance to a government program than a free health insurance market. And even private payers must use a delivery system shaped by government purchasing.
Government's greatest hidden costs come from forgone innovations in medical delivery. Medicare has rewarded waste, uncoordinated care, duplication, and medical errors, and penalized providers who try to solve those problems, for more than four decades. Some health plans do coordinate care, use electronic medical records, and strive to eliminate waste and error. And what happens when those plans try to compete in Medicare Advantage? President Obama proposes to kick them all out.
What was that about a level playing field?
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Another insurance company – government run or otherwise will not improve a broken system.
If there is to be one it has to be run profitably and as such is subject to the same economics of the current incumbents. To do that they have to create a profitable risk pool. So what’s different? Unless they decide to lose our (taxpayer) money.
I like the solution proposed in the Michael Porter book to create a regulated secondary insurance market to which all Health care insurers must belong. Each member would have to maintain their risk within a certain band by buying and selling risk in the secondary market.
The result, hopefully would be that the insurers would be able then to find ways to make money out of conventionally risky segments and the consumer would benefit.
Posted 22 June 2009, 12:53 by Adrian Blakey
I’m missing the cost savings of implementing another health insurance plan.. this secured by the government. We should debate the impact of creating only one healthcare plan for everyone and the cost impact (savings?) of that on the delivery of care for the healthcare providers, payers, businesses and consumers.
it seems that we are not addressing new ways of managing healthcare in the US, only readdressing how to pay for the delivery of healthcare using the same formula that we have today.
healthcare is vital to our society and we must address why our system delivers such poor outcomes compared to other healthcare delivery systems that are implemented in other countries.
Posted 17 June 2009, 16:17 by Lou
When one sixth of the US population (50 million out of about 300 million) does not have health insurance, it should be obvious that we need to change our current model…SOON.
For-profit health care providers and insurance companies assure us that the market will take care of the problems, yet when asked, they admit that even if they adopt some sort of change, it will take years before most citizens (not everyone) has healthcare.
WE NEED A PARADIGM SHIFT
Before insurance issues can be effectively dealt with, we need a paradigm shift in our view of health care moving from. Until we change our view from healthcare-as-a-commodity to healthcare-as-a-necessity, insurance costs will not be held down.
WHAT THE BUSINESS OF HEALTHCARE HAS DONE IN WISCONSIN
In Wisconsin, healthcare costs and premiums are some of the highest in the country. There are a number reasons, yet it isn’t due to malpractice insurance. Wisconsin has caps on malpractice awards, but that has not led to a decrease in premiums or costs. It is due more to duplication of services and lack of control over the industry. Despite under utilized hospitals and empty beds, hospital systems have been allowed to continue to build more facilities, many of which duplicate services. The systems have co-opted most of the independent physicians, essentially setting up an elaborate billing machine: doctors spend only enough time with patients in order to send them to the systems facilities for tests and procedures. They no longer have enough time to know their patients. Those with computers in the exam rooms spend more time inputting into computers than looking at their patients. Hospital floors are short-staffed on nurses which impacts quality care. The list of “cost-saving” measures is long, but many of these cost-savings do not actually benefit patients. Much of the savings goes to the upper management of the systems who earn millions of dollars in salaries and bonuses.
Of course, stakeholders in the trillion dollar healthcare industry will want to protect their financial interests. They are spending billions on lobbyists to do so. But should the government of the people allow them to continue their monopolistic hold on healthcare, keeping access from one sixth of the population?
Posted 17 June 2009, 10:05 by Marsha
The idea that private insurers currently subsidize things like Medicare is preposterous. Deciding to simply not negotiate with providers and pass on higher costs to the customer does not subsidize anything but their bottom lines.
If people flock to a low-cost, quality public option it’s because it truly is a quality option. It would be the responsibility of private insurers to actually give me either better service, higher quality coverage or other some such thing to make me want to choose them. Isn’t that the very definition of competition? I can see why this would be difficult for the insurance industry. But what reason do we have to support a broken industry that drives up cost and doesn’t insure every American. This seems like a no-brainer to me. There aren’t many folks on Medicare who complain about their coverage.
For those who complain that this wouldn’t be a level playing field. Tough. The field sure as hell isn’t level right now.
Posted 12 June 2009, 16:59 by Jason Laughlin
I would encourage those with an open mind to read the bipartisan bill introduced by Bennett and Wyden called the Healthy Americans Act. It provides basic health insurance for all Americans and provides for competitiveness by the health insurance companies. This is the direction we should be looking towards. For all of those complaining take an hour and read the bill. If you agree contact your Senator and ask their views on this Bill. For those too close minded……I guess just keep complaining!
Posted 11 June 2009, 09:24 by Jay Larson
Not watching your child die because of lack of access to medical treatment should be a basic human right. Universal health care, whether people can pay for it or not, should be accepted as part of living in a civilized society. High quality health care should be available to everyone.
Those who argue that government health care will be of poorer quality than private health care just has to look at other countries and check the health outcomes compared to the U.S. Child mortality is higher in the U.S. than in Cuba for God’s sake. And Cubans spend less per capita on their health care system.
Posted 9 June 2009, 18:14 by Terry W.
I think offering a public health insurance to all tax payers as a safety net is a start. At least providing that as a basic level of guarantee could help mitigate this system that just has too many stackholders and is inefficient.
Posted 9 June 2009, 07:45 by fasoola
I think this comes down to what we think about fundamental human rights…
Do we side with the UN and say that health and medicine are basic human rights?
Or do we side with others, and say that we do not have this right?
Both perspectives exist in the US, but I challenge the latter to tell your sick child that she doesn’t have the right do get better…
Posted 5 June 2009, 08:59 by Laura
There should be no health insurance; it just encourages abuse, price gouging, unnecessary procedures, and over-medication.
All Preventative Care, both medical and dental, should be free to everyone. If further care is needed, the individual should be able to access needed care in the medical system of her/his preference, which is paid for by a universal payment system. Malpractice and liability insurance should be underwritten by the government, which can exact punitive retribution on practitioners and doctors if their actions cause harm.
Most people do not need all the procedures that are prescribed, which usually makes their health worse. What is the virtue of being kept barely alive with machines and invasive procedures? Most people just die naturally, but the few who demand or have insurance for extraordinary measures are paid for by everyone.
People should be rewarded for healthy lifestyle choices and learn to take care of themselves if their poor choices result in illness.
Most of the environmental illnesses are the responsibility of corporations and the federal government, which should pay for the health consequences of their actions.
The whole system is broken and corrupt. Why tinker at the margins?
Posted 4 June 2009, 19:30 by S.Jamison
I turn 50 this year, I’m in good health, have had very few insurance claims other than basic maintenance. I paid for health insurance for over 20 years and each year my deductibles went up and coverage went down. It got so that I never reached my deductibles. I worked for one of the big 3 automotives and had ‘better coverage than most’.
I was let go in 2007, I can’t find work. No health coverage after paying into the system for over 20 years. In choosing between feeding my family, paying my mortgage or buying health insurance I choose to join the millions without health care. I simply can’t afford healthcare.
My children are on Medicaid and it is the best coverage I’ve had in over 15 years. The private system is broken. Dominated by lawyers paid to figure ways to deny people coverage.
God help you if you get sick in America.
Posted 4 June 2009, 18:03 by made in us