Senate Democrats recently introduced two bills that would create a “public option” — a government-run health plan that would compete against private insurers for the business of shoppers on Obamacare’s exchanges.
Proponents claim that this would offer consumers an additional choice — and lead to lower prices. But a public option would eventually eliminate private insurance altogether — and result in the single-payer system that Democrats have long desired.
Less than a decade ago, Democratic senators thought a public option was too radical to include in Obamacare. The idea was included in the earliest drafts of the law but ended up on the cutting-room floor.
Instead, Democrats chose to build the exchanges around private insurers But they micromanaged those insurers with numerous mandates.
For instance, they required insurers to sell coverage to all comers, regardless of health status or history. They capped the amount that they could charge people. And they forced all policies to cover a suite of costly benefits.
Thanks to those mandates, insurers have lost billions of dollars. And those losses have caused them to pull out of the exchanges.
Aetna, the nation’s third-largest insurer, booked losses of more than $450 million on its exchange plans last year. It’s continued to lose money this year and will not sell exchange plans in 2018. UnitedHealth, Humana, and Anthem have also exited the exchanges or limited their participation to a few states.
It should not be surprising, then, that the exchanges in just over half of counties nationwide have only one insurer.
Democrats have responded by calling not for repeal of the mandates — but for an even larger role for the federal government.
The proposal, dubbed “Medicare-X,” would allow people with one or zero insurers on their local exchange to buy into the program first, in 2020. By 2023, any American could enroll. Small businesses could sign up in 2024.
Sen. Brian Schatz, D-Hawaii, meanwhile, has proposed his own state-based public option scheme that would permit individuals to buy into Medicaid.
In defense of his plan, Sen. Kaine said, “A public option would . . . make the markets more competitive”
Private insurers are already losing huge sums on the exchanges. A government-run insurance plan could operate at a loss indefinitely, as long as lawmakers kept funding it. The few remaining private insurers, unable to compete with an insurer with bottomless pockets, would be forced out.
We’ve already seen the government “crowd out” private coverage in similar fashion. In 1997, Congress created the Children’s Health Insurance Program, which provided public funding for kids whose families earned too much money to qualify for Medicaid. Sixty percent of those who enrolled in CHIP dropped private coverage that they previously had, according to an analysis by Obamacare architect Jonathan Gruber.
Even if the public option were nominally forced to make money, it would still have the full force of the federal government behind it. Consequently, it could dictate prices to healthcare providers — and thus offer artificially low premiums.
Payments from Medicare and Medicaid, for instance, generally don’t cover the true cost of their beneficiaries’ care. Physicians, hospitals, and drug makers charge private insurers higher prices to make up the difference.
Vermont officials estimate that Medicare underpayments forced providers to overcharge privately insured Vermonters by $173 million in 2015. Medicaid shifted $184 million in costs to individuals and businesses with private insurance.
Private insurers don’t have that kind of negotiating leverage with providers. Eventually, the public option would become the only option.
Sens. Bennet, Kaine, and Schatz are effectively looking to smuggle single-payer health care in through the back door. It’s no coincidence that the Senate’s leading advocate for government-run healthcare, Sen. Bernie Sanders, I-Vt., is a co-sponsor of Schatz’s bill. Sen Schatz, meanwhile, is a strong supporter of Sen. Sanders’s own Medicare-for-All legislation.
The Bennet-Kaine-Schatz troika may be selling their proposals as a way to boost competition in the exchanges. But make no mistake — their plans would result in a government monopoly over health care. And under that government monopoly, patients can look forward to long waiting lists, rationed care, and lack of access to the most cutting-edge treatments.