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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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A broad expansion of the the government run program would be a disaster for the viability of our health care system as we know it today. There are really two problems with this idea. First as previous posters have noted is the likelihood that their will be explicit subsidies in the government option. The second and more significant problem are the implicit subsidies. The private insurance companies already subsidize government health care through the higher prices they pay for health care costs (vs. government reimbursement rates). Reducing the pool of individuals who subsidize the current government system while at the same time increasing the number of subsidized recipients would spell financial ruin for health care providers and hospitals across the country.
Posted 4 June 2009, 18:01 by Tim Yost
Of course the government has a key role to play in our health care system. That already exists (running county hospitals, setting patient safety standards, providing coverage for certain groups for certain services including low-income and over-65, etc.) The focus on minimizing government role has left us with such a flawed non-system (the example of care in Miami being much more expensive and poorer quality than Minneapolis is just one example).
On a generally accessible public health plan for those under-65, the benefits of having it in the mix seem to outway the risks. We need to ensure access to quality basic health care for more people, regardless of their changing job status, employers’ dropping subsidies and other factors.
In the current economy, when so many people are personally experiencing the downside of our current links between health care coverage and employment, I hope the old canards about the need to avoid government roles in health care can finally be overcome.
Posted 4 June 2009, 17:39 by John Manning
There are Three facts that no one ever brings up in the debates regarding the CURRENT government health care plan – MEDICARE.
a) The plan is a defined benefit plan – not comprehensive. Fact the plan limits coverage in hospital to specific number of days. You go over you PAY. Up until 2004 it did not cover RX, thus thank you George for PART D coverage.
b) The fact is, if one wants Medicare to work like a true health insurance plan, one must go out and purchase a SUPPLEMENT plan from an insurance company. These plans can run a couple up to $600 a month.
c) Private insurance SUBSIDIZES Medicare. Current health care facilities could not operate at a break even if 100% of their income was derived from the current government reimbursements.
The conversation needs to be clarified much more than the current
Rob Stehlin – Cash Doctor.com
Posted 1 June 2009, 09:15 by Rob Stehlin
I get a sense that we are comparing apples to oranges.From the context of a citizen who’s dependent-someone who’s 65 plus, there is no doubt with the fact that the federal/government needs to have a protectionist view.It would indeed be the responsibility of the state and not the private.However, considering the current cohort population of choice, there needs to be a deeper thinking on a public-private approach.A hybrid approach that guards the citizen from the fear of uncertainty over reimbursement and the priviledge of paying a lower premium.It’s indeed wiser to avoid
burning the federal budget to a lower level by weaving a partnership with the private players.This strikes a well balanced approach of being competitive and outcome driven.
Posted 29 May 2009, 04:29 by Vijaya Raaghavan N
In my opinion this debate needs to be viewed through the prism of risk management. What has the greatest impact to our country. The risk (i.e a potential problem) of a bloated and inefficient public health care system or the issues (an actualized, or real, problem) and risks we faced with our current system. The primary issue of our current system is the 40 plus million Americans without health coverage and the additional cost that adds to the health care system. The primary risk is all those who face the real possibility of losing their health insurances and all the consequences that follow.
The analysis then boils down to one simple equation (simple to calculate, once you find the difficult data), what has the greatest negative impact? No Public Health Insurance Plan[the potential impact of bloated public health insurance] or a Public Health Insurance Plan [the Impact of the Issue of 40 million uninsured + the potential impact of the risk of more uninsured].
Empirically, I say a Public Health Insurance Plan has less of a negative impact, because I believe it will provide quality basic health care to more people.
Posted 27 May 2009, 18:22 by Dave Teixeira
1. The government has no business providing healthcare.
2. Employers have no business providing healthcare. It is a leftover from our post WW II recovery.
3. Lawyers do not belong in the healthcare business.
4. Individuals should have the right and ability to choose the healthcare that fits their family needs.
5. Individual costs for healthcare can legitimately differ based on lifestyle choices.
Posted 25 May 2009, 17:56 by JR Gordon
Someone can say, “The system is already socialized, with every evil trick of price control steadily lowering access and reducing quality. Try finding a decent primary care doctor. Virtually extinct.” without citing facts, but this sort of rhetoric is not helpful. Over forty million people in America go without healthcare; many more cling to miserable jobs out of fear of losing the crummy coverage they have. Liberty? We are the only industrialized nation in the world without universal healthcare. We must do something. Mr. Free Market himself George W. Bush and his Republican Congress slammed through legislation to prevent Medicare from negotiating volume discounts from pharmacutical companies. Our own tax dollars don’t count the same way any other dollar adds up? Wal-Mart negotiates volume discounts it’s about time the taxpayers did too.
Posted 24 May 2009, 23:31 by Neal A. Lampi
Surely an issue that will define our generation for years to come. It is greatly satisfying to know that this kind of heated discourse is taking place, and that advocates from all sides of the issue are presenting their ideas to those that really matter. I, like many of you, feel relatively powerless in my ability to effect any eventual policy solutions.
One area that I think should recieve more attention in the current debate is the issue of transparency as it relates to pricing of healthcare products and services. In the area of medications within commercial/private health insurance plans, I wonder if there could be some work to do here. For example, in cases where manufacturers offer rebates directly to insurance companies, to what degree are these rebate dollars making thier way back to the actual payers of care (e.g., employers, private citizens, etc.) One could defintely see the incentive that this system creates for private insurers to develop medicine coverage policies that become profit generating (to the managed care plan/middle man) at the expense of increasing net cost to the actual payer. Removal or better accounting for the medication rebates paid to private insurers would remove such perverse incentives and perhaps create a more efficient market.
I would like to see more discussion about the externalities associated with the various plans and ideas floated by each side of the debate. For example, what would be the effect of greater price competition (and therefore lower prices) for medicines upon pharmaceutical innovation… or innovaitn in medical technology? How will a reduction in physician payments effect the supply of physicians/number of specialists? Would this be the beggining of the end of gene-based therapies (which are extremely expensive to develop and may benefit those with rare conditions)? Would less venture capital be going into Health Care R&D in general and how will this effect the lives of our children and grandchildren?
Posted 21 May 2009, 15:59 by waiting and listening...
How much discussion on the subject of healthcare centers on the “rights” one believes everyone should be entitled to? Especially from the American point of view.
It is good to remember, from time to time, that healthcare looks like, acts like, a BUSINESS!! So is “insurance”. Until we accept that as a foundation, people will emotionally debate what ought to be.
It is a fact that American brand healthcare is at least 50% more expensive per capita than any other country on the planet. The goal should be to force the system to the level of efficiency that other businesses much achieve. The AMA cannot continue to limit the supply of doctors. Doctors cannot go into medicine wiht the aim of paying off school loans asap and becoming millionaires in short order. We need the right to die as a mechanism to stop spending scarce resources on hopeless causes. We need to halt the opaque billing practices that pervade the entire system. We need every healthcare professional to recognize how much of their daily work is the unproductive feeding of an obscenely inefficient system. We need to remove the confrontational dynamics from providers and payers. Personally, I’m sick and tired of getting $6,000 medical bills that are settled for $1,100 by an insurer. Tells me the submitted bills are fiction….or outright fraud.
I’m of the opinion that much of malaise in healthcare is self-inflicted by the industry and reinforced by unreasonable expectations (primarily around cost and value) of consumers. Is government intervention the answer? Given it’s own track record, I’d have to say no.
Posted 21 May 2009, 09:58 by Ed Hare
In my view, the concept of medical science and services needs to be re-looked differently. There is a need of paradigm shift in thinking of providing efficient & affordable health care system to citizens. The objective of any medical professional should be of keeping the citizen healthy & fit for productive life. The focus should be on providing healthy life rather than treatment. The doctor and the para-medics should be paid on the basis of keeping the citizen healthy. This of course requires more of imparting education, administration and creating awareness about medical science. The insurance premium paid by individual should be used for monthly or regular services provided by medical professional for keeping him / her healthy and fit. In case of individual falling sick, the treatment is provided free of cost. In case of any accidental injury due to negligence, natural calamity or any unforeseen or foreseen reasons, the treatment should be provided immediately and money recovered thru the insurance premium. This calls for a greater need of federal agency or governmental body to come up with compulsory health and accident insurance for every citizen and there should be a co-funding mechanism by individual and the government. The ratio of funding can vary based on the income level of an individual. This means, higher the income, lower the subsidy or grant and the charge could be done during levying the advance tax on earnings for the year. This does not mean in any way that of differential treatment mechanism for cure and providing health care support.
Second point, which is more critical and will help in advancement, is of focusing on research and development in the field of medical science. Federal government should allocate certain budget for such investments and fund the private agencies that will carry out such research in a given timeframe.
I know that by putting such absurd thoughts, the debate is set and quite a few will out rightly reject this thought. However, if we carefully get in to details, I am sure this will benefit all in long run – medical profession, citizens and administrative authorities.
Posted 20 May 2009, 00:50 by Ajay Kulkarni