The end of private health insurance in the US?

Democrats this year want to institute a "public option" – an insurance programme financed by taxpayers, managed by government and open to everyone, much like Medicare. This new middle-class entitlement is the most important debate in Congress this year, because it really is the last stand for anything resembling private health insurance, says the Wall Street Journal.

This public option will supposedly "compete" with private alternatives. Although President Obama says those who are happy with the insurance they have now can keep it, the reality is far different. Not only will the new programme become the default coverage for the uninsured, but Democrats intend to game the system to precipitate – or if need be, coerce – an exodus to government from private insurance. Soon enough, that will be the only "option" left, says the Journal.

A public programme won't compete in a way that any normal business would recognise, explains the Journal:

  • As an entitlement, Congress's creation will enjoy potentially unlimited access to the Treasury, without incurring the risks or hedging against losses that private carriers do.
  • As people gravitate to "free" or heavily subsidised care, the inevitably explosive costs will be covered in part with increased outlays to keep premiums artificially low or even offer extra benefits.
  • Lacking such taxpayer cash, private insurance rates will escalate.

    Much like Medicare, overall spending in the public option will be controlled over time by paying less for medical services, drugs and technology. With its monopsony purchasing power, below-market fees will be dictated on a take-it-or-leave-it basis – an offer hospitals and physicians won't be able to refuse. Medicare's current reimbursement policies pay hospitals only 71 per cent of private rates, and doctors 81 per cent, according to the Lewin Group:
  • In a recent analysis, Lewin estimates that enrolment in the public option will reach 131 million people if it is open to everyone and pays Medicare rates.
  • Fully 119 million people will shift out of – or lose – private coverage; everything depends on the payment levels that Congress adopts, as well as the size of the eligible pool.
  • But even if a public option available to all takes the highly improbable step of paying at some midpoint between private and Medicare rates, nearly 68 million people will still be crowded out of private insurance.

    Source: Editorial, The End of Private Health Insurance: When government 'competes,' guess who always wins? Wall Street Journal, April 12, 2009.

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    For more on Health Issues:

    FMF Policy Bulletin/ 21 April 2009
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