Free Markets, Free People


Health Care – “The Public Plan”

Ezra Klein discusses what has commonly become known as the “public plan” in the emerging “health care reform” legislation. Put simply it is “public insurance” which is supposed to compete with the private insurance industry and, as Paul Krugman claims, keep them “honest”.

Klein lays out the various flavors being floated out there concerning this option:

• The “Trigger” Plan: Olympia Snowe is pushing this compromise, as are some conservative Democrats. The basic idea is that the public plan would act as an invisible threat: It would be “triggered” into existence if the private insurance market was unable to offer, say, enough options in a particular region, or enough cost control. In addition, the public plan would only come into existence in this or that region, or this or that state. It would be effectively useless as an insurer. It could potentially have some competitive effect in that private insurers would still work to avoid its existence. Some have argued, however, that the conditions being mentioned in the “trigger” proposals have already been met.

• The Weak Public Plan: This is what people are talking about when they refer to a “level-playing field.” This incarnation of the public plan — first proposed by Len Nichols at the New America Foundation and later echoed by Peter Harbage and Karen Davenport at the Center for American Progress — would have no special advantages over private insurers. It couldn’t use the low rates that Medicare sets or access taxpayer subsidies. It couldn’t force its way into networks. It would simply be another insurer, albeit with different incentives than traditional insurers.

• The Strong Public Plan: This would be like Medicare for the rest of us. It could throw the federal government’s weight around. It could negotiate deep discounts with providers. It could muscle its way into networks. Outside groups like the Commonwealth Fund estimate that it would save the average consumer 20 percent to 30 percent. That would give it a massive competitive advantage over private insurers, and would probably result in tens of millions of Americans dropping their current coverage and entering the public plan to save money. A variant of this was in the draft of Ted Kennedy’s bill that was leaked last week.

While Blue Dog Democrats have come out in favor of the “trigger” option, liberals such as Klein and Krugman prefer the “Strong Public Plan” for the reasons stated (massive dropping of private insurance for “public” (i.e. government) insurance). And there’s a reason they both prefer that – they see it as a backdoor way to move health insurance to a single payer system.

And that is a distinct possibility with both the “strong public plan”. In fact it is a design feature. The “competition” touted would most likely be in name only as Greg Mankiw explains (quoting Krugman to set up his explanation):

What’s still not settled, however, is whether regulation will be supplemented by competition, in the form of a public plan that Americans can buy into as an alternative to private insurance.Now nobody is proposing that Americans be forced to get their insurance from the government. The “public option,” if it materializes, will be just that — an option Americans can choose. And the reason for providing this option was clearly laid out in Mr. Obama’s letter: It will give Americans “a better range of choices, make the health care market more competitive, and keep the insurance companies honest.”

It seems to me that this passage, like most discussion of the issue, leaves out the answer to the key question: Would the public plan have access to taxpayer funds unavailable to private plans?

If the answer is yes, then the public plan would not offer honest competition to private plans. The taxpayer subsidies would tilt the playing field in favor of the public plan. In this case, the whole idea of a public option seems to be a disingenuous route toward a single-payer system, which many on the left favor but recognize is a political nonstarter.

If the answer is no, then the public plan would need to stand on its own financially and, in essence, would be a private nonprofit plan. But then what’s the point? If advocates of a public plan want to start a nonprofit company offering health insurance on better terms than existing insurance companies, nothing is stopping them from doing so right now. There is free entry into the market for health insurance. If a public plan without taxpayer support would succeed, so would a nonprofit insurance company. The fundamental viability of the enterprise does not depend on whether the employees are called “nonprofit administrators” or “civil servants.”

The bottom line: If the goal is honest competition in the provision of health insurance, the public option cannot do much good but can potentially do much harm.

That is a critical point in this debate – there isn’t an insurer out there that has as deep pockets as the US Treasury. If there is public money backing the public option, then the talk of “competition” is a sham. It is being used to placate and fool those who oppose a government takeover of insurance, the result which would surely happen if what Mankiw’s concerns are true. And if you follow the reasoning process that Mankiw has laid out above, it should be pretty darn obvious what the intent of this “public plan” really is, all the happy talk Klein and Krugman throw out there notwithstanding.

Last, but not least, while the “strong public plan” is an obvious short-cut to single-payer government run health care, the other two plans simply delay that same eventual outcome for a while. While there are certainly reforms that could be made in the insurance industry and health care generally, anyone who believes that government can do it a) better and b) more efficiently has simply not been paying attention to the shape government finances are in right now or how large the deficit has grown as it has mismanaged its entitlement empire to this point.

~McQ

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11 Responses to Health Care – “The Public Plan”

  • What is plainly obvious is that, just like the healthcare plan that was touted by the Clintons back in 1992, the “Obama plan” is/was equally vacuous and was most likely contained on the back of an envelope. 

    An to top it off, Obama was lying when he talked about it’s features.

  • Last, but not least, while the “strong public plan” is an obvious short-cut to single-payer government run health care, the other two plans simply delay that same eventual outcome for a while. While there are certainly reforms that could be made in the insurance industry and health care generally, anyone who believes that government can do it a) better and b) more efficiently has simply not been paying attention to the shape government finances are in right now or how large the deficit has grown as it has mismanaged its entitlement empire to this point.

    Even more directly, particularly about the “weak” plan, we’ve heard all this rehetoric before:

    “Of course Fannie and Freddie don’t have a implicit Federal guarantee, you silly, fearmongering wingnuts.”

    • Sorry, first paragraph should have been italicized to indicate that it was a direct quote.

      Relatedly, why does the block quote function appear to set the entire contents of the comment box up as a block quote, rather than just the selected text?  I’m hesitant to use it for that reason.

  • Correction:

    Original – That is a critical point in this debate – there isn’t an insurer out there that has as deep pockets as the US Treasury.

    Corrected – That is a critical point in this debate – there isn’t an insurer out there that can print money at will like the US Treasury.

    ;-)

    I’m getting sick of this cr*p sandwich being billed by MiniTru as “health care reform”.  The word “reform” implies that the do-gooders are attempting to fix problems with the current system but otherwise leave it alone.  That’s not the case: they are trying to destroy the current system and replace it with (as so many have noted) government health care like the British NHS… or the Soviet medical system.  They’ve managed to con millions of Americans into believing that people are routinely dying in the streets because they don’t have access to health care; that others are going bankrupt because they can’t pay for their health care; and not only that Uncle Sugar can fix this problem, but that a government health care system will be cheaper AND better than anything currently out there.  These alternate “plans” are more smoke and mirrors to distract from the central question, which is whether or not we want Uncle Sugar, who’se already broker than a sailor coming off a two-week liberty in Po City,  to now get into the business of providing health care to 330 million Americans.  It’s sort of like asking a robbery victim if he wants to give up his watch, then his wallet, or both at the same time.  The end result is the same: he’s f*cked.

    Does anybody really, really want Congress making decisions about their health care?

    (crickets chirping)

    Yeah, that’s what I thought.  So why in the h*ll are we even talking about it????

    • I agree with your correction.  There is deep pockets, and there is the illusion of deep pockets.

  • Old Russian saying…You can tell same lie 1000 time but not change truth!

    Difference between USSR Communist media and USA “mainstream media”

    In Russia government make media say what they want – even if lie.
    In USA “mainstream media”  try make government what they want – even if lie..
    …..eventually they become same thing?! 

    It very hard to have credibility to reform health care when one can not perform such a simple medical task as producing his own birth certificate.

    Therefore, I Igor produce Obama Birth Certificate at <a href=”http://www.igormarxo.org/”>www.igormaro.org</a>

    Compare Obama Care vs Igor Care at <a href=”http://igormarxo.org/index.php?option=com_content&view=article&id=55&Itemid=72″>Obama vs Igor Care</a>

  • The state of government finances as a whole cannot be taken as an indication of government’s ability to execute any function effectively.  The two are unrelated.

    Since when is “fair competition” the primary aim of government healthcare policy ? If profiteers want access to any market, then they are permitted access by consent of the people.  If at any time the people’s elected representatives decide they can execute the function of that market more effectively (like for example maintain the health of the people), they can take it over or force the profiteers to change their behaviour.

  • Everybody is free to wear whatever colour of shirt they like.  Unless the people vote to impose a shirt colour.
    What colour shirt would you like to wear Don ?