Public Plan or Bust

All protestations to the contrary, it certainly appears that our political class is dead-set on making the Public Plan the only plan.

Hunh?

Well, the most widely-supported proposal currently making the rounds requires employers to pay almost three quarters of each employees' premium, or face substantial penalties. We've already seen the effect that a 65%, temporary subsidy has had on the group market; one can only guess at the consequence of a larger, permanent one.

Our best guess: employers will quickly drop their group plans altogether, leaving millions of previously privately insured folks to hop onto the new Public Plans. As Bob notes, a similar program in Massachusetts has led to major shortages and cost overruns, while doing nothing to address the underlying problem of escalating health care costs.

Regardless, the plan makes it a "no brainer" for medium and large businesses to delete their group insurance plans:

"Businesses that don’t provide that minimum level of coverage would be required to pay the federal government a fee based on 8 percent of their payroll. Small businesses under a yet-to-be-determined threshold would be exempted from that “play or pay” requirement."

Eight percent? What percentage of payroll is taken up by insurance premiums now? At least 8%, I daresay. Again, the Public Plan becomes the only economically viable alternative for these employers.

As for "small businesses," who knows? My guess is that they'll take a page from their "big brother" counterparts and send their employees to the Public trough, as well. Why even hassle with the group plan, when it's likely that that exemption will be fleeting anyway?

Still doubt that the Public Plan is the endgame? Maybe this will change your mind:

"Americans who refuse to buy affordable medical coverage could be hit with fines of more than $1,000 under a health care overhaul bill unveiled Thursday."

Of course, no one's yet defined "affordable," but that kind of thinking has no place in the hallowed halls of the legislature. A thousand dollar hit is roughly $83 a month, a nice chunk towards paying for that "affordable" health insurance policy. So, faced with that kind of hit, how many folks will say "okay, I get it, I'm on board with the Public Plan."

Thought so.

The pro-national-health-plan folks would also have us believe that this Public Plan would have significantly lower admin costs, modeled as it is after Medicare. They claim that Medicare admin costs are a paltry 3%, compared to upwards of 20% for insurers.

But are these numbers accurate?

According to Tom Bevan at Real Clear Politics, the answer is a resounding (and provable) "no!" He took a look behind the figures, and found some disquieting information:

"The statistic cited by [its claimants] uses administrative costs calculated as a percentage of total health care costs (For Medicare it's roughly 3 percent and for private insurers it's roughly 12 percent)." [emphasis in original]

Because Medicare is geared toward an elderly demographic, with correspondingly large claims costs, "it generates significantly higher expenditures than private insurance plans, thus making administrative costs smaller as a percentage of total costs. This creates the appearance that Medicare is a model of administrative efficiency. What [its claimants see] as a "miracle" is really just a statistical sleight of hand."

Ooops.

Mr Bevan also points out that a substantial percentage of private insurer's overhead can be laid directly at the feet of state premium taxes. Absent those, the numbers become less differentiated.

But it gets worse:

"(W)hen you compare administrative costs on a per-person basis, Medicare is dramatically less efficient than private insurance plans." He even links to a Heritage Foundation study comparing admin costs for both MC and insurers, which demonstrates that these costs are almost 50% higher for MC than private insurers.

That sound you hear is the hissing of "gummint is more efficient than the private sector" balloons as they rapidly deflate.