ICYMI: Creating New Government-Controlled Health Insurance Systems Could Increase Costs

Studies show proposals like the Public Option and Medicare at 60 could lead to higher costs and negative consequences for patients.

WASHINGTON – While policymakers continue to discuss proposals like creating the public option and opening up Medicare to younger Americans, research shows government-controlled health insurance systems could result in unaffordable costs and negative consequences.

The public option could add new costs and unintended consequences for working families, according to recent research:

• One report revealed the public option “would have significant impacts on America’s future fiscal condition,” and either “increase the federal debt or require higher taxes,” on American families. (Lanhee J. Chen, Ph.D., Tom Church, and Daniel L. Heil, 2/3/21)

• In the event of a future economic recession, the long-term cost of the public option could balloon by an additional $1.4 trillion, placing an even greater financial burden on working families.  As a result, Congress could force working families to pay an additional $300 per year, from $2,533 to $2,833 in 2050. (Lanhee J. Chen, Ph.D., Tom Church, and Daniel L. Heil, 2/3/21)

• And, if health care expenditures increase quicker than currently forecasted, working families could see their payroll taxes increase by an additional $1,600 a year under the public option. (Lanhee J. Chen, Ph.D., Tom Church, and Daniel L. Heil, 2/3/21)

In an op-ed, Janet Trautwein, CEO of the National Association of Health Underwriters, explains the impact of the public option on the private insurance market, disrupting Americans’ current coverage:

• The “public option could simply offload its administrative costs onto federal taxpayers. Private insurers don’t have that luxury.” (Janet Trautwein, A public option will destroy private insurance, Boston Herald, 6/5/21)

• “The public option “would also prompt some employers, particularly smaller employers, to drop the plans they sponsor for their employees … Workers may be worse off, as they’ll have to use post-tax wages to pay for a public plan, rather than the pre-tax compensation they currently use for employer-sponsored coverage. An analysis of one public option plan introduced in the House in 2019 found nearly one in four workers would lose their health coverage through work by 2023. By 2032, that figure would rise to one in three.” (Janet Trautwein, A public option will destroy private insurance, Boston Herald, 6/5/21)

Patients and taxpayers could also see unaffordable costs and negative consequences if Medicare is opened up to younger Americans:

• Another report found that “under Medicare at 60, gross Medicare expenditures could rise by $82.9 billion in 2022 while the federal deficit could rise by $32.2 billion in 2022 and $393.9 billion over the next ten years.” (Lanhee J. Chen, Ph.D., Tom Church, and Daniel L. Heil, 6/23/21)

• Congress could raise the additional Medicare tax rate by 285 percent in 2022, setting it at 3.5 percent in addition to the 2.9 percent for the standard Medicare payroll tax. (Lanhee J. Chen, Ph.D., Tom Church, and Daniel L. Heil, 6/23/21)

• Congress could also raise the standard Hospital Insurance (HI) tax, which would impact many more Americans. In 2022, the tax rate would need to be 3.25 percent—a 12 percent increase in the current rate. (Lanhee J. Chen, Ph.D., Tom Church, and Daniel L. Heil, 6/23/21)

• Enrolling in Medicare could result in high costs for 60 to64-year-olds that could otherwise be avoided in the current health care system. (Lanhee J. Chen, Ph.D., Tom Church, and Daniel L. Heil, 6/23/21)

• Economists at the Committee for a Responsible Federal Budget (CRFB) also found that lowering the Medicare age to 60 would cost $200 billion over 10 years. (Committee for a Responsible Federal Budget, 8/31/20)

The Washington Post editorial board has also urged policymakers to consider Medicare at 60’s potential unaffordable costs and consequences:

• “Lowering the Medicare eligibility age would likely benefit mostly higher-income people, because Obamacare covers needy people at low or no out-of-pocket cost.” (The Washington Post, Editorial, 8/29/21)

• “Taking the just-fund-everything approach, the trillions add up quickly. The Committee for a Responsible Federal Budget estimates that the alleged $3.5 trillion outline would really cost more like $5 trillion to $5.5 trillion, when adjusting for the accounting gimmicks. Along with the $1 trillion bipartisan infrastructure bill the Senate recently passed, that could add some $4.3 trillion to the debt over a decade.” (The Washington Post, Editorial, 8/29/21)

• The American Rescue Plan Act (ARPA) “temporarily strengthened Obamacare, enabling more people to afford their insurance premiums and bringing the nation even closer to providing universal, affordable access to health coverage. Those changes, too, should become permanent.” (The Washington Post, Editorial, 8/29/21)

There is growing evidence that proposed government-controlled health insurance systems are unaffordable. During this critical time, policymakers should focus on building on and improving what is working in health care, not starting over.

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