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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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Many of the comments reflect a lack of understanding that the U.S. government has created the fragmentation and high costs that we see today. Currently, the U.S. government takes $9,000 from the average American family and gives it to employers to buy health benefits that employers choose. Many small employers are fed up with this responsibility (as indicated above). If the government gave that money back to American families as pre-tax dollars, allowing each family to buy a life-long policy of our own choice, U.S. health care would become more responsive to patients’ needs, the number of uninsured would fall drastically, and the problem of covering pre-existing conditions would wither away. See also http://tinyurl.com/cxnuso.
Posted 6 May 2009, 15:58 by John R. Graham
The UK is currently having significant discussions about the need for more clinicians in a leadership role in the running of their national health system. And one of the primary questions being debated is—to what degree should and do physicians focus on the economics of healthcare?
The UK economists are arguing that besides providing care to patients, physicians should also be thinking of a myriad of economic factors in making clinical decisions.
And a key issue is—is healthcare primarily economics with patient care as a nice afterthought, or the other way around?
In the current state of US healthcare, there are very few, including physicians and patients, who do not consider the economics of getting or providing healthcare. For many patients, the choice is get it by whatever means is available or don’t get it. And many physicians are restricting who or how they treat, because they can’t afford not to.
When the economics of the current system end up with people not getting healthcare they need, and providers not treating people thy could—that is clear evidence that something beyond our current system is required. And “more of the same” ain’t gonna do it.
Cannon argues that a government alternative would not be a “level playing field.” For whom? For insurers, who make money on restricting access, maybe not. But for many who can’t even get in the stadium door, let alone onto the playing field at present, a government program would offer an alternative to no healthcare at all.
Posted 6 May 2009, 15:47 by Joan McClusky
From my point of view, the key question is not whether the government should offer its own insurance plan to compete with private. It is about equal access to healthcare being a right, or personal responsibility. There is no definite proof that a public healthcare system is inherently more or less costly than a private one, rather than the fact that we spend on healthcare far more per capita and as a percentage of the GDP, compared to other OECD countries, with no real difference in outcomes. I recommend the Wikipedia article “Health Care Reform in the United States” (http://en.wikipedia.org/wiki/Health_care_reform_in_the_United_States), which can give you a lot of information about the arguments in ongoing discussion on universal healthcare, as well as about common myths we stick to.
Posted 6 May 2009, 15:38 by Alexander Saip
The best way to institutionalize mediocrity in medicine is to have the government fully control the health care dollar. The spirit and the success of twentieth century medicine has been predicated upon physicians, scientists and investors allocating capital and intellectual resources towards high risk high reward innovative and entrepreneurial activities. These activities have moved the ball forward in both incremental and quantum leaps.
Government run healthcare is predicated upon equal access of to healthcare resources for all members of the population. This sounds great however the PhD Nichols points out that the government will do this through cost control and “a systematic approach that includes a health information infrastructure, best practice information, decision support tools, and realigned provider and patient incentives.”
“Decision support tools”: Who decides and on what basis will decisions be made and monitored? Correct Answer: the government
“Realigned provider and patient incentives”: What on earth does this mean? This is policy speak for “spend less, consume less and you will be rewarded” But if healthcare cost less where is there and incentive to consume less? Correct Answer: When people are insensitive to pricing, utility curves are difficult to design. Lower the cost and health care utilization will sky rocket.
The net result of this overwhelming government intervention is that the innovators and entrepreneurs who work in the corners and the fringes of the medical markets will look for opportunities elsewhere. The return on their time and their intellect will no longer be rewarded by the system.
And who suffers when they leave? Yep you got it…the patients.
Posted 6 May 2009, 15:31 by Damian Alagia MD MBA
I prefer yes in this question because their are still large numbers of people in the US does not get or can not afford the enough health insurance.
Posted 6 May 2009, 15:31 by Keon
This is not the argument that needs to be considered. Reforming the system differs from who processes the bills. Start reform by not contracting with small basic inpatient hospitals hospitals near larger more capable institutions. Incent reimbursement for utilization of physician extenders. Risk adjust insureds as auto and life insurers. Reform is not changing claims processors or cutting reimbursement rates. The R word needs be considered. Prlong life not death.
Posted 6 May 2009, 15:29 by joseph wasserman
Can someone explain to Mr. Cannon that the VA has been doing all the things he claims government won’t do, i.e., coordinate care, use electronic health records, focus on preventive care and eliminate fraud and abuse, the past ten years? Having been in private insurance for over 20+ years the incentives are not there to provide quality care to individuals who likely will not be your customers in a year or two because their employer switched carriers. I find it truly ironic that conservatives who have for years said the government cannot do anything right now complain that a public option would be too formidable a competitor for the private health insurance market.
Posted 6 May 2009, 15:28 by Bill Sota
The foundational point that we somehow fail to acknowledge in this debate is the fact that over-realiance on a competitive health care market to provide health services always generates two negative health system results: a)escalating costs, b) huge gaps in coverage…it’s health economics 101 – and both these results have reached catastrophic levels in the US, and it’s just not sustainable. The health market isn’t the same as the market for bananas or other products that we consume. And a govt backed plan isn’t the solution unless stringent cost containment measures are put in place, number of players are reduced and a new set of incentives are negotiated for payers/consumers incl. the promotion of healthy living as opposed to a disease-care system that we got at the moment.
Posted 6 May 2009, 15:26 by Ummuro Adano
There is absolutely no reason to believe the US government can provide a cost effective solution for any social program. Just take a peak behind the financial condition and long-term viability of Social Security, Medicare, Medicaid, etc. That said, there are many causes for concern with the existing health insurance system and the for profit health insurance providers. Data and technology improvements, making health care facilities and providers more accountable for their performance, preventive based care, high costs and over perscription of drugs, legal liability costs, etc. all need to be addressed by the current medical system and health insurance providers. If these are approached intelligently and appropriate corrective action is taken we will go a long way toward improving the current system, reducing costs and eliminating the basic reason for even having this debate. Believe me when I say there is no basis or prior experience to suggest that bringing the US government into the equation will improve the process or fix any of the problems. Further, I suspect we all would agree that the opposite would be the case.
Posted 6 May 2009, 15:20 by Steven L. Brown
If I told you that 15 competitors are producing a higher quality product than you at half your cost would you want to know how they are doing it. Of course… unless we are talking about health care in other developed countries that have varieties of single-payer systems… in which case you would scream “socialism,” stick you head in the sand, and continue trying to tweak a dysfunctional, imploding, non-system.
Posted 6 May 2009, 15:14 by Jack Gilbert