IN the battle over health reform, one issue has emerged as particularly divisive – the president’s proposed government health plan that would compete with private insurers. U.S. Sen. Charles Schumer recently promised that such a program would be immune to perpetual taxpayer bailouts because he would ensure that it would maintain the same solvency ratios as private health insurers.
Oh, please! Medicare and Medicaid, government programs that have existed for less than one person’s natural life span, would already be bankrupt if they were private insurers, despite decades of underpaying doctors and hospitals.
Instead of creating a new government program, politicians should eliminate existing regulations that reduce the health care choices of average Americans.
Reformers should first target the unfair tax treatment of privately purchased insurance.
Currently, an employee does not pay income tax on employer-based health “benefits.” That’s why more than 60 percent of Americans under age 65 have coverage that’s mostly laundered through their employer, although workers pay for it through lower wages.
Half of American workers are offered just one type of plan by their employer. Workers who would prefer a plan that’s different from the one offered by their employer must pay for it with money that’s already been taxed. The same is true for the unemployed and those who work at companies that don’t provide benefits.
The individual insurance market offers significantly more choice than the employer-sponsored market. For instance, as a resident of the San Francisco area, I can choose from nearly 120 private plans, according to the online insurance broker eHealthInsurance.com.
If Congress were to level the playing field by allowing all workers to purchase insurance tax-free, many more people could obtain affordable coverage that actually suited their particular needs.
Lawmakers should also lift their ban on buying insurance policies across state lines. Such a reform would vastly expand consumer choice by creating a national market for health insurance.
Reforms like these would do far more to expand competition in the insurance market than a public option. In fact, a new government-run health plan would likely require a government monopoly over health care in order to stay afloat.
Consider another industry in which the government supposedly “competes” with private providers: letter and package delivery.
Most Americans are satisfied with the government-owned Postal Service – 42 cents to send a letter across the country sounds like a great deal. But the Post Office can only sustain itself by rigging the game in its favor. USPS enjoys a statutory monopoly on letter and advertising mail and isn’t subject to property, corporate income and many other taxes. Ninety-four percent of the Postal Service’s volume comes from products where it faces no competition.
Despite its monopoly and legal advantages, the Postal Service has managed to lose nearly $8 billion in the last two years.
Lawmakers have not taken this fiscal catastrophe as a sign that the federal government may be ill-suited to deliver mail. Instead, they’re contemplating a new line of credit to the Postal Service and a modified bailout of the agency’s health and pension benefits fund.
We can expect even worse from a government-run health plan: Think Freddie Doc or Fannie Med. If Americans decide against enrolling in the public plan, because doctors won’t accept its meager payments, lawmakers won’t wave the white flag and shut it down. They’ll handicap the competition, most likely by declaring a monopoly on integral parts of the health care system, like primary care or in-patient care.
The president has already moved in this direction.
Increasing the already harmful role of government is the wrong way to go about effecting more choice in American health care.
John R. Graham is director of Health Care Studies at the Pacific Research Institute.