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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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- Change.org
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A solution for our current health care reimbursement and uninsured challenges is very complex, hence so many arguments, so many proposals. Bottom line, as long as the public and private sectors are “competing” options, each restricting what they will pay for, no meaningful resolution can be reached. What is needed is a partnership between these two sources based on a concept of good health care for every citizen. Fundamental to that is the notion that even the uninsured are and will continue to receive health care (I work in a very effective safety net hospital system). Unfortunately the 45 – 50 million who are not insured in many ways are precluded from contributing to the costs because of the entry level barrier of too costly a premium for their income level. We have an actuarial disconnect in healthcare funding. The simple solution is to have the low income worker, beneficiary contribute to his/her health cost consistent with their means – A Burger King employee pays $50/month towards health care. This would provide a significant increase in the funds available to deliver healthcare. This is a healthcare tax scaled to income levels would replace current insurance premiums and if managed effectively lead to a high quality of care for all citizens at a reduced current cost to all who are current shouldering the healthcare costs.
The monies generated are then pooled into a healthcare fund that is privatized, overseen but not run by the Government. It is managed along the lines of a utility with knowledgeable healthcare providers, managers and public persons responsible for the allocation of the funds and the standards of care to be achieved. Insurance companies would compete to manage the operation and distribution of these funds in accordance with the policies of the privatized entities. This single payer, privatized system would be efficient, allocate resources effectively, and meet the needs of our citizens far more effectively. It would take the Government out of the business of running healthcare and the private sector out of the business of denying access to citizens in need.
Tinkering, competing, bickering, politicizing are all recipes for failure. Get the Government out of the business, get the business out of the business.
Posted 7 May 2009, 17:26 by Clyde Nash, M.D.
For all of you “keep the government out of business” I have one question: why do we have almost 50 million people without healthcare coverage under our free-market approach? The answer is simple: greed! I don’t necessarily think the government could efficiently run a health plan (look at Medicare) but I do think something needs to be done to address the embarassing lack of concern for our citizens. The commercial insureres could have created a ‘pool’ to fund basic coverage for the uninsured long ago but they’re happy raking in record profits and leaving the less fortunate to the government or out altogether. I would prefer that we make basic coverage for every citizen the responsibility of the commercial payors and not the government. That would be how the free-market economy is supposed to work!
Posted 7 May 2009, 14:37 by Vince Vitali
Neither of these approaches seems to address the core issues the country faces with respect to health care. The USA spends twice as much per capita on health care than the next highest spender, Sweden, which has a socialized system. Yet despite the level of spending we are not at the top of the list when it comes to infant mortality, longevity, medical errors and other crucial metrics. On top of that healthcare costs are increasing alarmingly and we still have a large (by international standards) portion of the population who are uninsured – and by the way, who cost the system more to treat when they do show up at the hospital. Finally, a hidden cost that is rarely mentioned is the administrative costs born by every employer who provides health care coverage for their employees. Here I don’t mean the direct contribution to health care plans but the indirect costs of administering and managing multiple plans. In centralized (i.e. government run) systems, such costs are very much lower.
So first of all, the current system clearly does not provide value for money – regardless of whether you view it as a private system or a semi-private/government system. Secondly, without some significant change the situation will get worse rather than better. Who can create the necessary change? Clearly government must play a central role in whatever outcome is pursued.
I grew up in and spent almost half my life in the UK and for the past 20+ years I have lived in the USA. Consequently I have an understanding of both socialized and private health care systems. On the socialized side there rationing and lack of choice are definitely issues. On the private side, fraud, waste and abuse (representing approximately 20% to 25% of all healthcare costs) and lack of standardization are also very big and expensive issues.
Given the natural tendency to want to stay with the status quo, versus making radical changes, the initial approach should be to look at ways to standardize as many aspects of healthcare as possible. There are about 400 large healthcare systems across the country each with their own systems and procedures, codes and policies. Each system interfaces with numerous payer organizations (including Medicare) supplier organizations, partner organizations and so on. The net result is not a highly competitive industry at all but rather a complex web of expensive and limited choices where it takes on average about 7 staff to support each family doctor.
The lack of standardization means that information technology, which should be used to automate most of the administrative work, is hard to develop, requires significant customization and is consequently expensive to deploy. The result, paper records and manual methods still predominate and the electronic records that do exist are not widely used or accepted. On top of that, manual methods and uncontrolled treatment regimes clearly lead to significant waste and abuse.
For those who maintain that choice is an important component to maintain, consider that most employers have reduced the choices of plans available to employees considerably over the last few years. For many the choice is now about how much you contribute up front versus pay later if you are sick. Shifting the burden onto employees may make them more aware of the health care choices they make, but it does little to address the underlying issues.
Ultimately, as has been pointed out in other comments, the most cost effective and fair outcome maybe a two-tier system including universal coverage where everyone gets access to a “basic” healthcare plan but where a variety of “top up” plans can also be purchased. Whether administered by the government or privately, the basic plan would use standardized approaches and processes to limit costs while providing quality treatments. Top up plans would be more affordable to many because the coverage would be much more limited and because insurance companies could tailor the policies towards specific market segments. Thus those who like and can afford better coverage/choice might actually see their costs go down too.
Given the high cost of healthcare, I don’t see “basic” universal coverage equating to the plans provided to members of congress, senators and the president however.
Posted 7 May 2009, 13:30 by Ray Wright
Simple facts:
1° the US are propably the nation where health care costs are the highest in the world, both as a% of GDP and in absolute terms,
2° the US are not the nation where people live the longer in good health. In a recent comparison I saw, they were 3-4 years behind developed European countries (at the level of Portugal, where costs per person are half) and 1 year ahead of Cuba where costs are something like 20 time lower.
The debate on the waste of money in public systems thus becomes very theoretical when facts are considered. One thing is certain, people in the health care business earn much more money in the US than in Cuba… does the US people benefit?
Posted 7 May 2009, 12:39 by Buster K
In this discussion ideas are frequently getting mixed up. There is no need for a government plan, but there is a need to create a broad and diverse population of insured people to diversify the risk and make health care affordable for all.
Some people argue that only the government is able to accomplish that. Current employer based insurance systems indeed fail to provide large parts of the population with access to affordable health care. Those that are not employed or employed in small companies need to insure themselves at a high cost as individual risks or go without insurance – which many people in the US actually do. Government, however, is probably not the best answer to this problem as examples such as the UK health care system with its waiting lists etc. demonstrate.
The best way out of this situation in my mind is to stipulate a general requirement of obtaining health insureance (similar to the requirement of getting car insurance) and leave it up to the private sector to compete for this business. The government could offer support for individuals and families that are not able to afford basic health care. Such a system exists for example in Switzerland – and overall it works pretty well there. This approach creates a broad insurance pool that is necessary to spread the risk and ensure affordability while at the same time employing the efficiency of the private sector to deliver the insurance products that meet consumer demand.
Posted 7 May 2009, 11:53 by Markus Hauser
Clearly, coming from the Netherlands, this debate in de US feels somewhat outdated. In my opinion it is clear that a modern society should provide for mandatory access to a basic health insurance policy for all its citizens. Private health insurers should be able to offer this type of insurance with voluntary supplementary insurance or services added to that. The government only needs to run a risk sharing fund, enabling the universal acceptance for the basis health insurance policy.
In the Netherlands we have introduced such a scheme in 2006, with positive impact on both quality of care and on innovation. Also costs are relatively well contained.
So, do not have unproductive debates on a public health plan, but look at examples abroad.
Posted 7 May 2009, 11:02 by Bas Leerink
Today’s health policy technocrats seem extraordinary myopic (or just blinded by the lobbies or conventional wisdom of the status quo.) They neglect two major macro issues while focusing on the philosophy/ideology of the existing system of ad hoc employer based for profit insurance operating in a market mode.
The first and foremost issue is SOCIAL JUSTICE. How can we have an honest public debate on reform which omits the 45 (?now 50) million uninsured residents of our country and the many millions more who are “underinsured” including those who are forced into personal bankruptcy by medical costs.Any step forward must start by promising secure access to medical services to all.(The effects of the current economic crisis in Europe is not so horrible because virtually all residents of the OECD countries continue to have access to health care.)
The second issue is ECONOMIC WASTE AND INEFFICIENCY. McKinsey’s own beautiful chart shows that we spend over $2000 per year per capita in excess of the GDP adjusted health expenditures of other advanced countries. Yet our health outcome vital statistics leave a lot to be desired.This economic waste comes from the economic burden imposed on medical providers by the complexities of the multiple diverse insurers with their independent rules and administrations, as well as their profit based, rather than social utility operating characteristics.Thus the secret to achieving a cost effective medical system is to change the funding/banking paradigm to a single payer/social utility mechanism. This is obviously the most politically difficult alternative – but the paradigm change is derived from the proper diagnosis of the problem and is the obvious way to go to create a real solution.
Posted 7 May 2009, 10:58 by Jeoffry Gordon, MD, MPH
Maybe because I’ve been residing for a lengthy period of time outside of the US, I get a bit surprised of the ongoing debate about the health insurance system there, which has been continuing for as long as I can remembers. Even this debate keeps me in somewhat of an awe, because there is are a sizable number of comments which tend to firmly stand against a universal health insurance plan, as if anyone of us is able to control when illness will strike them.
I am not surprised about the diverging opinions. I remember that during my business school years, financial market deregulation was the “in thing” to believe in. Now, a few years later, I am not sure I was right to support that argument. The analogy may not sound adequate, however I use it, because, if we are not able to rationalize our spending and investment habits, how is it that we expect illnesses to strike in a rationale manner?! Think of AIDS, Cancer and Swine Flu!
Health Insurance needs are universal. As such, coverage against health risks should be universal. It is to the benefit of all, if every American could go to work, with the peace of mind that their ill dependent is receiving the most appropriate treatment possible.
The cost of universal health insurance is not a big problem. It’s mostly political. If we really want universal coverage and cost is the only issue, than we should think of a way of stimulating the supply of health care services. Why shouldn’t we graduate more doctors and nurses, or even increase the immigration quota for foreign medical graduates? Stimulate investments in health care facilities? Emerging countries are struggling to transform their educational systems, which means that they graduate more medical professionals than needed (the reason why in Eastern Europe, medical graduates make a pittance of what a US gradute earns – PPP adjusted). We encourage competitiveness in every sector of the economy, why not health care?
Posted 7 May 2009, 10:11 by ramis ahmetaj
Having lived and worked in US, India, Germany and Canada, I had a firsthand experience on various healthcare systems and the difficulties the individual faces.
A low priced basic healthcare plan from the US government will provide a bargaining platform to everyone who currently can’t afford a healthcare insurance plan.
In a modern society, basic healthcare should fall in the realm of basic necessities such as food, shelter and clothing. The government should provide to its citizens access to this basic necessity with a basic healthcare plan that is affordable to all.
The reason why healthcare should be a basic necessity are many. A materialistic reason is that the change in everyone’s lifestyle, which benefits most the rich, has become a healthcare burden to the not so well off. Hence it is imperative that the society take a collective responsibility of the byproduct this changed lifestyle.
Posted 7 May 2009, 10:00 by Kallol Chaudhuri
Gentleman, both points are valid but the solution is in the middle. There are clear gaps in what the private sector is able to provide. Hence the 44 million uninsured. Mr. Cannon is correct that commercial insurers could not compete against the government. Thus the solution is not about competing but complementing. In my view the government would provide basic care, free to all. Beyond this basic coverage commercial insurers would provide the remaining coverage for those who could afford it. For those that could not afford commercial coverage a newly formed Medicaid/Medicare coverage would fill this void. If individuals did not choose either the worst they would have would be the free basic care as well as a government sponsored catastrophic coverage. This could potentially kick in at costs beyond $100k in a calendar year. Of course this is a high level framework but I think a logical start.
Posted 7 May 2009, 09:33 by Brian Barringer