The Public Option: Medicare For All, Part One

The chaotic Iowa Caucus on February 3 had one clear winner—government-run health care. According to exit polls, nearly six in 10 Democratic caucus voters support eliminating private insurance in favor of a single-payer system.

A government takeover of the health insurance system is surprisingly popular outside Iowa as well. A recent Kaiser Family Foundation survey found that 56% of Americans are behind Medicare for All.

But an even greater percentage of voters wants a plan that makes health insurance more affordable without eliminating private insurance. Sixty-eight percent of voters favor a “public option,” which would allow the government to establish a low-cost health plan to compete against private insurers.

But asking voters whether they prefer Medicare for All or a public option is pointless. They’re one and the same. Both would result in a government takeover of the health insurance market.

Medicare for All’s proponents admit their plan would upend the healthcare system. It would eliminate private health coverage and enroll every man, woman, and child in a single, government-run insurance plan. That plan would cover everything from checkups to surgeries free of charge, and could add more than $40 trillion in new federal spending over a decade. The total tab for taxpayers could reach nearly $60 trillion over ten years.

Public option supporters—most notably Pete Buttigieg, the former mayor of South Bend, Indiana, who has an early lead in the race for pledged delegates over Bernie Sanders in the quest for the Democratic presidential nomination—try to position themselves as moderates. They claim their plan would guarantee consumers an affordable health plan but preserve private insurance for those who like and want to keep it.

But the public option is little more than a stay of execution for private coverage. In due time, private insurance would vanish.

The government would have the ability to artificially underprice private plans because it wouldn’t need to collect enough in premiums to cover its claims costs. It could just draw on the federal Treasury to make up any deficiency.

Private insurers can’t lose money in perpetuity. They need to take in premiums sufficient to cover the costs of their beneficiaries’ care, as well as their own operating expenses.

In addition, the public option would reimburse doctors and hospitals at rates similar to those for Medicare, which are about 40% lower, on average, than what private insurance pays, according to Charles Blahous of the Mercatus Center. Hospitals received just 87 cents from Medicare for every dollar they spent treating its beneficiaries in 2017.

A low-cost public option would understandably attract droves of customers. One study estimates that public-option enrollment would top 40 million people in its first year.

Healthcare providers would likely respond to the rise of low-paying publicly insured customers by raising their prices for the privately insured. Their insurers would pass those increased charges on in the form of higher premiums. The privately insured would respond by dropping their coverage and enrolling in the public option.

And the cycle would repeat, until private insurers found themselves without enough customers to stay in business. Within three decades, according to a study from FTI Consulting, people in 34 states wouldn’t have access to private insurance at all.

At that point, the United States wouldn’t be that far off from a single-payer system. It’s no wonder Buttigieg has called his public option plan “a natural glide-path to Medicare for All.” Even Rep. Alexandria Ocasio-Cortez, one of Medicare for All’s most prominent supporters, has admitted that she’d be fine with a public option. “Is that a nightmare? I don’t think so,” she told HuffPost February 13.

Like Medicare for All, a public option would strain the nation’s supply of healthcare providers. It would put over 1,000 hospitals in 46 states at “high risk of closure,” according to a study by Navigant Consulting.

Patients in countries with Medicare for All-style systems already must grapple with shortages of care. Canadians were waiting for over 1 million medical procedures in 2019. Assuming one procedure per patient, nearly 3% of the population was waiting for care.

The public option may sound more reasonable than Medicare for All. But the former is little more than a stepping stone to the latter. Both would destroy American health care.

Sally C. Pipes is president, CEO, and the 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.

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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