Let’s Can the Public Plan

President Barack Obama wants to sign a health “reform” bill by October. Democratic congressional leaders are doing their part to satisfy the president, promoting bills that threaten to government’s role, at the expense of patients and doctors.

Apparently, though, they didn’t consult the American public.

It’s not that ordinary Americans aren’t looking for reform. They simply don’t want what the Democrats have effectively proposed – a government take-over of their health care.

Just look at the results of a recent survey from prominent pollster Frank Luntz. Half of Americans are put off by “healthcare rationing.” A third is not in favor of “one-size-fits-all health care.” But under the Democratic plan, rationing and one-size-fits all coverage are exactly what the American people are going to get.

Take, for instance, the Democrats’ plan to expand Medicaid, the joint federal-state health program for the poor, to any American making up to 150 percent of the federal poverty line.

This is an incredibly inefficient way to expand coverage. Medicaid costs are already ballooning out of control. The Department of Health and Human Services estimates that the program’s expenditures will increase by about 8 percent every year until 2017 – well above the expected rate of inflation. In the four decades since its creation, Medicaid’s share of the national health budget has fattened from 5 percent to nearly 20 percent. Expanding Medicaid would push the program even closer to insolvency.

Worse, Medicaid is already a prime reason for the increasing cost of private insurance. Because Medicaid routinely underpays doctors and hospitals – by about 43 percent and 33 percent, respectively – prices for everyone else have gone up. Such cost-shifting inflates private premiums by an estimated 15 percent.

Medicare shifts costs, too – not only to private payers but to our children, as well. Despite this, the Washington politicians seek to create a so-called “public insurance plan” (actually a swamp of new, bloated government agencies) to “compete” directly with private insurers. Proponents of the idea claim that a “public option” would keep private insurers honest by forcing them to cut down on administrative waste and reduce premiums.

In truth, though, the new plan would eventually crowd out all choice of health insurance.

A government-run insurance program would immediately go to the front of the line for perpetual taxpayer bailouts – a luxury that private insurers (which pay higher taxes than most other businesses, because of state insurance laws) don’t have. As more Americans who prefer private coverage suffer the increasing taxes required to feed the beast, many will have to give up the unequal struggle, and fall into its maw.

According to the Lewin Group, an economic consulting firm, a government-run insurance program would motivate two-thirds of Americans to drop the private coverage they already have. That certainly won’t help reduce the number of uninsured.

A third plank in the Democratic plan is the implementation an employer mandate, under which employers would be forced to either buy insurance for their workers or pay a tax.

Given the state of the economy, it’s astounding that lawmakers would even consider such a move, saddling businesses with a job-killing tax at a time when many are struggling to stay afloat. Obama opposed the idea during the presidential campaign for just this reason.

Instead of spending and regulating with impunity, legislators should grant Americans greater control over their healthcare dollars. One way of doing so? Allow Americans to buy insurance policies across state lines. After all, there’s no reason a 26-year old man in New York should have to pay four times as much as a 26-year old man in Indiana for a similar policy.

Lawmakers should also permit all workers to purchase insurance tax free, just like businesses do. Americans lack choice in health benefits because the government forces us to get health “benefits” dictated by our companies’ HR departments. Level the tax treatment would solve this problem.

Personalized health care, lower prices, and increased consumer choice — that’s what the American people really want.

John R. Graham is Director of Health Care Studies at the Pacific Research Institute.

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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