One of the favored buzz words in the current debate of health care and how to fund it is the "Public Plan." Simply stated, this would be a gummint-run, alternative system to private insurers, much like some states already use for their employees. On its face, it seems beign enough: offering a government-sponsored plan in competition with "regular" insurers would force the latter toward ever more competitive price points, while maintaining our choice of physicians and level of care.
I recently had the pleasure of "sitting in" (virtually, of course) on a panel discussion of this topic sponsored by the Heritage and New America Foundations and the Lewin Group. The panelists included representatives from all three "think tanks:" Stuart Butler (Heritage's VP of Domestic & Economic Policies), Len Nichols (New America's Director of Health Policy) and Lewin's John Sheils (Senior VP). Julie Appleby, Senior Correspondent for Kaiser Health News, moderated.
In this first of a two-part post, I'll recap some of the points made by the various panelists; in Part 2, we'll take a look "under the hood" to see what this plan is really all about.
John Sheils took point, explaining that the whole Public Plan (PP) idea is modeled on Medicare [ed: which is itself set to implode in less than 10 years.] The plan sets payment rates for providers much as Medicare does. Mr Sheils believes that Medicare currently pays about 68% of what private insurers pay for hospital expenses, and about 81% of private insurance rates for physicians.
He went on to explain that, unlike commercial insurance plans, Medicare doesn't require pre-certification for various procedures. He also stated that private insurers' admin expenses currently top out at about 13.4% [ed: we've long since debunked this particular canard, but the nature of the call was such that I could only listen, not respond]. Mr Sheils than talked about projected pricing levels for the PP.
Mr Sheils then explained that there are really two scenarios of how a PP could be implemented: a) for individuals (including the self-employed) and small firms or b) for all employers. He then went on to explain how each of these might work out for providers, but never really addressed the conundrum of "price" vs "cost (a consistent IB theme).
We then heard from Len Nichols, who opened by expressing concern over imposing Medicare pricing on all providers and care. The fundamental problem, he said, was that Medicare generally pays below cost [ed: no kidding?!]. He then blurted out that "people don't trust private insurance," but failed to provide any evidence for this assertion. Mr Nichols then picked up on the various states' plans, which are based on ERISA, which allegedly provide a "level playing field" because they must compete based on payment. Unfortunately, he failed to address the underlying problem of cost control, but we'll discuss this in Part 2.
Finally, we heard from Stuart Butler, who began by asking how each model would likely play out over time. He was particularly concerned over what he called "the down the road,"and wondered if government should manage health care. He said that the PPO option supposedly leveled the playing field, but that it is inherently unstable.
Mr Butler then turned to what he felt was a classic case of "bait-and-switch:" the Feds "wall of separation between the market and the Public Option couldn't hold," that Congress would eventually intervene [ed: cf: mortgages, cars], and that there's an inherent and insurmountable conflict of interest because, as he put it, "the government assumes the roles of both umpire and team manager."
He expressed further concern that what the electorate heard wasn't really what was said: that if one is already insured, for example, that wouldn't change. Of course that's not true, but we often hear what we want to hear. He also said that cost-shifting would increase the costs of private insurance [ed: something we've documented here at IB as regards Medicare]. He feared that the government would "cheat" later, and asked if the public was ready for a health system run by the same folks who brought us the Post Office, the DMV and the IRS. His greatest concern was that once we open the doors to congressional "oversight" there would be no "level playing field" as they required more and more benefits at lower and lower costs. He also dismissed the notion that one could argue that state and federal are comparable: no states are as powerful as the Feds. He argued that the Public Plan would control costs by controlling how much is paid.
In Part 2, we dissect what was said, and explain why the PP option isn't really about choice at all, but simply another name for government-run health care.
[Hat Tip: Elizabeth Carpenter]
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