Conservatives Against Consumer Choice
Over at the Health Care For America Now blog, Jason Rosenbaum reports on a new study about the proposed public option in the Obama health care plan.
The Lewin study found that if such a plan were open to all employers and individuals, and if it paid doctors and hospitals the same as Medicare, the government plan would quickly grow to 131 million members, while enrollment in private insurance plans would plummet.
"The private insurance industry might just fizzle out altogether," said John Sheils, a Lewin vice president and leading author of the study.
By paying Medicare rates the government plan would be able to set premiums well below what private plans charge. Monthly premiums for family coverage would be $761 in the government plan, compared with an average of $970 in private plans, the study estimated. Employers and individuals would flock to the public plan to cut costs.
Mr. Sheils, you talk like that's a bad thing. Conservatives (like Sheils) always point to the glories of the free market, and how it will bring the best efficiencies to business and consumers. That's all anyone's talking about. A public option competing with the private market could only win on cost and quality, like any other competition in the marketplace. What conservatives argue for is a monopoly for the health insurance industry. They fear a public option on the belief that people might LIKE it.
The New York Times endorsed the idea yesterday.
…What many critics seem to fear most is that a new public plan would sweep away its private competitors and evolve over time into a full-fledged single-payer system (sometimes called Medicare for all). No matter how fair the competition between public and private plans might be at the start, they warn that the government would find it irresistible to rig the outcome through its regulatory and pricing powers and its ability, in a pinch, to subsidize the public plan with taxpayers’ money.
That fear seems overblown. Innovative, nimble private plans with well-integrated service systems might outperform any government plan, just as some now outperform Medicare through better coordination of services, stronger preventive care and broader benefits.
A new public plan is neither the cornerstone of health care reform nor the death knell of private insurance. It should be tried as one element of comprehensive reform. If, over time, a vast majority decides the government plan is superior, so be it.
My fear is that the public option enacted will bear little resemblance to the ones discussed here. If a "level playing field" public option is not allowed to use Medicare bargaining power, it will not be able to drive price and quality in the same fashion. While it would offer a counterweight to the insurance monopoly in the same way that union presence drives up wages in an industry, it would act more like a non-profit, not a faithless insurance company-eating machine changing the paradigm of health care. We need not only a public option, but a strong one.
...King of All Health Wonkery Ezra Klein essentially corroborates my fear.
The Lewin Group modeled a couple different versions of the private plan. One version, which I've previously called the Single Payer Lite version, attaches itself to Medicare's payment rates. That allows it to offer premiums that are 32 percent lower than those of private insurers. That's what you're seeing in the graph atop this post. In such a world, the private plan is expected to see enrollment of 131 million, 119 million of whom would be refugees from private insurance. When private insurance executives stay up at night worrying about a public plan, this is what they're worrying about.
Then there's the level-playing field option. Here, the public plan doesn't get to use Medicare's set payment rates and instead needs to negotiate with hospitals and drug companies just like any other insurance plan. Its rates end up proving similar to private insurance. Lewin assumes a certain set of administrative advantages here that still allow the private plan to offer premiums nine percent lower than private insurance, but the difference is modest. Under these assumptions, the public plan sees enrollment of 20 million, only 12 million of whom are coming for private insurance.
The difference between zero and 20 million is a lot smaller than the difference between 20 million and 131 million. What the Lewin report is actually showing, then, is that the key question is not whether there is a public plan, but whether the government can set its payment rates.
Something to keep in mind.