Re: Public Plan: No Option For Health Reform

On May 16, 11:39 am, Sordo  <sordo @recdep.com> wrote:
Public Plan: No Option For Health Reform

By PAUL HOWARD AND DAVID GRATZER
Posted Friday, May 15, 2009 4:20 PM PThttp://www.ibdeditorials.com/IBDArticles.aspx?id=327284039906292

House Speaker Nancy Pelosi has declared that any health care reform must
include a new government-run health plan, modeled after Medicare.
Democrats contend that no one would be compelled to choose the
government-run plan, and that a "public-plan option" would improve
choice and competition in health-insurance markets.

Choice and competition — traditional Republican buzzwords — give the
idea an aura of common sense. But Republican Sen. Mitch McConnell states
that this idea is a deal-breaker: Republicans can't support any
legislation that contains it in any form.

Given the public momentum that exists for health care reform,
Republicans and moderate Democrats won't be able to oppose everything
that comes their way. They'll have to draw a line in the sand somewhere.
Still, as modest as it may sound, the Democrats' "public-plan option" is
worth fighting against.

Such a proposal will make things worse by reducing (not increasing)
competition, increasing red tape and exacerbating inefficiencies.
Indeed, it could spell the beginning of the end of private insurance.

From a distance, allowing the public and private sectors to compete
seems perfectly reasonable. Outside of health care, a variety of
thriving government-financed organizations compete with the private
sector.

Consider the state university systems, many of which boast world-class
institutions. Students have the freedom to choose between state colleges
and private universities. At the end of the day, postsecondary education
is better for the choice — Harvard is strengthened by UCLA.

Choice, of course, isn't the only factor. Well-run public institutions
have (relatively) strong, independent leaderships that are not
micromanaged by centralized bureaucrats. They also compete with
private-sector rivals. When a public or private university
underperforms, it loses out, in talented professors, in students (and
their tuition dollars), and in research grants.

No one doubts that health care needs competition. State markets are
often dominated by one or two health-insurance carriers. Offering people
more options would be useful.

As HHS Secretary Kathleen Sebelius pointed out in her confirmation
hearing, some states already offer government-run plans for state
employees that compete with private insurance. It's worked in Kansas,
she assured members of the Senate Finance Committee, and it can work for
the country.

Administration officials are clear that the "public plan" would operate
like Medicare, and therein lies the problem. Medicare isn't bound by
market pricing — it sets prices, it doesn't negotiate them. Medicare
pays fees to physicians, hospitals and other providers based on an
agreed-upon list of services and compensation drawn up by a committee
mandated by Congress.

Conservatives often joke about central planning in health care. With
Medicare, it's no joke: There really is a government committee, the
Medicare Payment Advisory Commission (or MedPAC).

Private health insurers, by contrast, negotiate directly with providers.

Let's return to the university analogy. Remember that universities are
bound by certain market realities: UCLA needs to pay a good wage for a
talented professor. After all, a particularly bright chemist or nuclear
engineer can always find work at Harvard or other universities if the
California institution doesn't pay up.

Under the Democrats' Medicare-like public-plan option, that competitive
dynamic wouldn't exist.

What's more, since Medicare's regulations make it very difficult for
hospitals to refuse Medicare patients, it's not as though providers can
rebel. The incredible power of the federal government to impose pricing
on providers — as opposed to state governments — renders meaningless the
comparisons between a national public-plan option and experiments in,
say, Kansas. If Washington is paying below-market rates to providers, it
could charge artificially low premiums. Talk about a competitive
advantage: The much cheaper public-plan option would become a magnet for
enrollment, swelling public rolls.

In April, the Lewin Group, one of the nation's most respected health
care consultants, reviewed the potential enrollment of the public-plan
option. Its study notes: "Medicare premiums would be lower than private
premiums because of the exceptional leverage Medicare has with
providers." The result, according to the group's vice president, John
Shiels: "The private industry might just fizzle out altogether."

Conservatives and moderates should support reforms that expand access to
affordable, portable, high-quality private health insurance. So far, one
promising idea has attracted bipartisan backing: reforming the tax
treatment of health insurance by changing the bias in the tax code
toward employer-based insurance.

Jason Furman, deputy director of the National Economic Council, has
backed it — as has Douglas Holtz-Eakin, former policy director for Sen.
McCain's presidential bid.

But such proposals are only a beginning. More broadly, supporters of
market solutions to the nation's health care crisis must make clear that
any plan that strangles private health insurance will not advance the
cause of reform.

Howard is director for the Center for Medical Progress at the Manhattan
Institute.

Gratzer, a physician, is a senior fellow at the institute. This piece is
excerpted from an article that appears in the spring issue of The New
Atlantis (TheNewAtlantis.com).

Isn't it fantastic that we all agree there has to be some kind of
nationalized health care for all of us?
.

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