Commentary
'Public option' injures health reform efforts
Richard E. Blouse Jr.
While Congress struggles over its approaches to health reform, many are singing the praises of the "public option," a government-run health insurance plan to compete with private insurers. Supporters of the public option argue it will keep the private sector honest by acting as a "legitimate" competitor. As proposed, the public option is anything but a legitimate competitor and will have the disastrous effect of exacerbating cost shifting to the private sector and dismantling the employer-based system.
The public option would have tremendous advantages over private plans in the marketplace. Under the public option, private insurance companies would be forced to compete with an entity that both owns the competition and sets the rules for the insurance industry. The government would effectively act as team owner and referee.
The government also has obvious cost-of-capital and tax advantages. A government plan, unlike an employer-sponsored plan, can exempt itself from federal taxes and state regulations and compel hospitals to accept submarket reimbursements. I don't know any business that could survive this sort of "legitimate" competition.
The consulting firm Milliman found that annual employer premiums are almost $1,800 per family higher today because providers shift costs to the privately insured to compensate for underpayments by Medicare and Medicaid. A new government plan with artificially low rates would compound this problem due to a massive shift from the private sector to the public sector.
The Lewin Group, a leading health consulting firm, estimates that 114 million people would move from private to public insurance almost immediately because the government would use Medicare payment rates that are 20 percent to 30 percent below private payment rates. With fewer privately insured consumers to cover the real cost of health care, employer premiums will skyrocket, employers and employees will drop coverage, the employer system will evaporate and the government plan will quickly become the only affordable option for health coverage. With only a select few able to afford private coverage, those in the government plan would face longer waits and less access to care.
Real health reform needs to include reforms to the delivery system. Just as our automakers are innovating and reinventing themselves, our health care system needs the freedom to improve quality and rein in costs.
Government, usually with good reason, is not set up to move quickly in the marketplace. Legislative and regulatory processes, influenced by political pressure, can sometimes yield bizarre outcomes. In contrast, private health plans have the flexibility to respond quickly to changing market conditions and consumer demands.
We have an historic opportunity to make comprehensive health reform improvements. The public option would create an expensive, unnecessary new entity that would be a huge diversion from the needed goals of health reform: reining in the cost of health care, improving quality and expanding access. The most effective way to improve our health care system is to build on the employer-based system -- which already provides coverage to more than 160 million people.
Richard E. Blouse Jr. is president and CEO of the Detroit Regional Chamber. E-mail: letters@detnews.com
Find this article at:http://www.detnews.com/article/20090821/OPINION01/908210325/-Public-option--injures-health-reform-efforts
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