Don’t be fooled by public option for health care

In recent months, support for the government takeover of health insurance championed by Sens. Bernie Sanders and Elizabeth Warren has dropped, according to the Kaiser Family Foundation. Voters are now split nearly down the middle.

Meanwhile, another form of government-run health care is gaining ground. Nearly three-quarters of Americans now support a “public option.” Advocates claim that a government-sponsored health plan can ensure that everyone has access to affordable coverage without disrupting the private insurance that millions of Americans currently have and like.

But a public option would eliminate private health insurance as surely as Medicare for All would. It’d just do so more slowly.

The public option seems straightforward. The government sponsors a low-cost health plan to compete against plans offered by private insurers. That extra competition, in theory, leads to lower overall costs for consumers.

But the public option has two significant — and unfair — advantages on private insurance. First, it can reimburse doctors and hospitals at rates dictated by the government.

It doesn’t negotiate with providers so much as tell them what it’s willing to pay.

Most advocates of the public option envision paying little more than Medicare does. But they’d have to, as Medicare pays hospitals just 87 cents for every dollar they spend caring for the program’s beneficiaries. All told, Medicare underpaid hospitals by $54 billion in 2017.

The public option’s second advantage is that it wouldn’t have to cover its costs. The government could simply draw on the federal Treasury to support the public option’s artificially low premiums. Private insurers don’t have the luxury of losing money in perpetuity.

Doctors and hospitals charge private insurers more, to offset the money they lose treating Medicare patients. In 2017, private insurers had to pay more than twice as much as Medicare for the same services, according to research from the Rand Corp.

A public option would reproduce this dynamic. Americans are sure to flock to a low-cost public option. According to one study, more than 40 million people would enroll in just the first year.

Providers’ revenues would decline as enrollment in the public option increased. Hospitals and doctors would likely raise prices for private insurers to compensate. Insurers would pass those costs onto beneficiaries in the form of higher premiums, deductibles and co-insurance. That would nudge even more Americans towards the public option.

The cycle would repeat. Employers would eventually find it cost-prohibitive to offer health benefits — and would send their workers into the individual market, where they’d likely end up on the public option. In time, private insurers would find it impossible to match the public option’s prices and would go out of business.

In the end, only the government-sponsored health plan would remain — just like under Medicare for All.
That’s exactly what several prominent public-option supporters have in mind. Democratic presidential hopeful Pete Buttigieg has promised that his public option plan “will create a natural glide-path to Medicare for All.”

Former Texas Rep. Beto O’Rourke, a former candidate for the Democratic nomination, called for a public option so attractive that “people who have private insurance migrate over to the Medicare system.”

Make no mistake — advocates of a public option want to shift every American into a government-run, single-payer healthcare system.

They know that doesn’t poll well — and so they’re trying to bring about Medicare for All by sleight of hand. Don’t be fooled.

Sally C. Pipes is president, CEO, and Thomas W. Smith fellow in healthcare policy at the Pacific Research Institute. Her latest book is “The False Promise of Single-Payer Health Care” (Encounter). Twitter: @sallypipes

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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