Medicare-X deserves a third strike – Pacific Research Institute

Medicare-X deserves a third strike

Some ideas never die. Such is the case with the Medicare-X Choice Act, a bill just reintroduced by Sens. Tim Kaine, Virginia Democrat, and Michael Bennet, Colorado Democrat. The measure would create a public health insurance plan that would eventually be open to all Americans.

It’s the third time the duo have offered up their bid for a public option. This time, they have a sympathetic ear in the White House. During his campaign, President Biden called for building on Obamacare by adding a public option.

But the idea remains as misguided as ever. A public option would not create more choice in the health insurance market. On the contrary, it would eventually saddle all Americans with the same government-run coverage — whether they want it or not.

Proponents of Medicare-X present it as a more moderate alternative to the complete government takeover of the health insurance system championed by the Democratic Party’s progressive wing. Mr. Kaine and Mr. Bennet wouldn’t ban private health insurance, as Medicare for All would. They’d simply give a subset of individuals and small businesses the option to purchase a government-run “Medicare” plan on the Obamacare exchanges.

And they’d roll the plan out gradually, starting with counties where there are few insurers on the exchanges or where health costs are particularly high. Not until 2025 would the Medicare-X public option be available everywhere.

Such incrementalism merely disguises the legislation’s radical nature. A public option might begin as one choice among many. But it wouldn’t stay that way. That’s because private insurers can’t compete with a government-run health plan.

Private companies need to turn a profit — or at the very least, break even — if they’re to stay in business. A Medicare-style government health plan, on the other hand, would be able to run massive deficits.

A public option would also have the power to systematically underpay doctors and hospitals, just as Medicare and Medicaid have for years.

In 2019, Medicare paid 87 cents for every dollar of care provided by U.S. hospitals, according to an analysis from the American Hospital Association. Medicaid did only slightly better, remitting just 90 cents for every dollar of care. All told, the two programs underpaid hospitals by more than $75 billion that year.

Short-changing providers isn’t a cost-control strategy that’s available to private insurers. As the public option enrolls more and more low-paying beneficiaries, doctors and hospitals will be forced to up what they charge the privately insured in order to balance their books.

This kind of cost-shifting is already rampant in our health system. In 2018 alone, private plans paid 247% of what Medicare paid for the same care, according to one recent analysis. That figure is up from 224% just two years earlier.

By availing itself of both these strategies — deficit spending and provider underpayment — Mr. Bennet and Mr. Kaine’s public option would be able to keep premiums and deductibles artificially low.

With private insurers forced to make up the difference for providers, premiums would skyrocket. Individuals and businesses would respond by dropping their private coverage and jumping to the public option. The cycle would repeat, until private insurers exited the market for lack of customers. At that point, Medicare-X would be the only “choice” available.

Americans don’t want this. The majority oppose the elimination of private insurance. But nearly 7-in-10 at least “somewhat” support a public option, according to a recent poll from the Kaiser Family Foundation.

Mr. Bennet and Mr. Kaine are trying to capitalize on this dissonant view. But Americans deserve to know the truth. Medicare-X will lead to the destruction of private insurance — and put America on a path toward Medicare for All.

Sally C. Pipes is the president, CEO, and Thomas W. Smith fellow in Health Care Policy at the Pacific Research Institute. Her latest book is “False Premise, False Promise: The Disastrous Reality of Medicare for All” (Encounter 2020). Follow her on 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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