Democratic presidential nominee Joe Biden has made protecting Obamacare a cornerstone of his campaign. He’s cited that position to rebut Republican claims that he’s a socialist in disguise, intent on nationalizing the country’s health insurance system.
But voters shouldn’t be fooled. Biden’s plan for health reform will lead to a government takeover of health insurance — just on a different, slower timetable than that desired by his party’s progressive flank.
Biden wants to lower Medicare’s eligibility age from 65 to 60. He’s also calling for the creation of a public health insurance option that anyone could purchase through Obamacare’s exchanges. An initial version of the Affordable Care Act passed by the House included a public option, but the Senate stripped it from the bill before it became law in 2010.
Under the Biden plan, those who currently shop on the individual market, those who are eligible for coverage through their employer — anyone could go into the exchanges to buy the new public plan. And they wouldn’t have to pay more than 8.5 percent of their income for whatever plan they choose. For some low-income people, there’d be no premium or deductible.
The path by which this plan devolves into single-payer health care isn’t hard to see.
For starters, reducing the Medicare eligibility age could put another 23 million people into the program, including more than 18 million people not currently enrolled in government plans.
The public option would also have significant financial advantages over private insurance plans. As an organ of the federal government, it wouldn’t have to cover its costs. The federal Treasury could plug any losses.
Second, the public option would almost certainly pay providers rates similar to Medicare’s. Those rates are much lower than the rates private insurers pay.
Indeed, Medicare has long underpaid hospitals and doctors. According to a recent report from the American Hospital Association, Medicare pays just 87 cents for every dollar of care the program’s beneficiaries consume. In 2018 alone, these underpayments added up to a nearly $57 billion shortfall.
Healthcare providers make up for those losses by charging private insurers more. A recent analysis by the RAND Corporation found that private insurers pay hospitals an average of 247 percent more than what Medicare pays. In Florida, Tennessee, and Alaska, private insurers face rates that are more than 325 percent greater than Medicare’s.
Armed with those structural cost advantages, the public option would be able to underprice private plans. People would understandably flock to the cheaper public plan. Some would be uninsured. But many would drop their private coverage, whether they purchased it on their own or got it from their employer. According to one study, more than 40 million Americans would enroll in the public option during its first year of availability.
That’s bad news for private insurers, of course. But it’s also bad news for healthcare providers, whose patient mix would now include many more people with low-paying public plans — and fewer with higher-paying private plans.
Providers would likely respond by raising rates for the privately insured patients they still have. Insurers would in turn pass those rate hikes along in the form of higher premiums. More and more privately insured individuals would react by quitting their coverage and opting out of the public plan.
This cycle would repeat until private insurers left the market because there was no one for them to cover. The public option would be the only option. The United States would have a single-payer plan, with the government as the lone insurer.
Joe Biden is promising to “protect” and “build on” the Affordable Care Act. But his healthcare plans would set in motion a process that could lead to the end of the Affordable Care Act — and of private insurance — in this country.
Sally C. Pipes is president, CEO, and Thomas W. Smith fellow in healthcare 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.