February 27, 2020 | Updates

ICYMI: ‘The Public Option Is Not An Easy Fix For Health Care’

WASHINGTON – As some candidates continue to paint new government-controlled health insurance systems namely the public option and Medicare buy-in as “moderate” proposals, Dr. Joseph Antos and James C. Capretta of the American Enterprise Institute explain in The New York Times that “starting up a new public insurance plan is easier said than done.”  In their op-ed, entitled “The Public Option Is Not An Easy Fix For Health Care,” they write:

Recent efforts to establish public-option plans on a small scale – in Washington State and Colorado – demonstrate some of the challenges of trying to create a nationwide public offering.  In both states, officials were forced to scale back their ambitions because of financial concerns and industry opposition.

… A public option would operate alongside existing private plans, with consumers deciding which offering is best for them.  That requires fair competition, with the public option subject to the same rules as private insurance. Politicians will be tempted to bend the rules for the public plan with special subsidies or other favors, but that runs the risk of taking choice away from the votersBeneficiary premiums cover only one-fourth of the cost of physician services and do not include the cost of hospital care.  Private plans have no choice but to charge premiums sufficient to cover all of their expenses.  A public option that is an extension of Medicare could drive out private plans, but only because taxpayers would shoulder huge new costs.

… Interest in the public option is predicated on lowering costs, which is where the link to Medicare is most informative.  Mr. Buttigieg does not specify how the public option would pay hospitals and doctors, but similar plans tie payments to Medicare rates.  A public option with payments set equal to Medicare rateswould be highly controversial.

As The New York Times previously reported, the public option “could shake up the private market and also wind up erasing some current insurance arrangements … There’s also the possibility that linking public-option coverage to Medicare could cause some doctors to stop accepting Medicare patients, [Sherry Glied, the dean of the N.Y.U. Wagner Graduate School of Public Service, and a former health official in the Obama administration] said.  That would be another form of politically risky disruption.   

As Chris Pope, a senior fellow at the Manhattan Institute sums up in National Review, “[t]he more a public option is able to achieve the increases in coverage and benefit generosity promised by single-payer, the more it is likely to yield the associated disadvantages of tax increases or cutbacks in access to quality medical services.”

Studies and economists agree that the public option would burden American families with unaffordable costs.  A study by Tom Church, Daniel L. Heil, and Lanhee J. Chen, Ph.D. of the Hoover Institution with support from the Partnership for America’s Health Care Future reveals that the public option “could require tax increases on most Americans, including middle-income families” and could “add over $700 billion to the 10-year federal deficit, with dramatically larger losses in subsequent years.”  The study finds:

  • The public option could require a new 4.8 percent payroll tax on American families over 30 years – far higher than the combined Medicare payroll tax Americans pay today.
  • Over 30 years, the public option would become the third most expensive government program behind only Medicare and Social Security – both of which are at risk for the seniors who rely on them.
  • While proponents try to claim the public option could reduce costs by reimbursing providers at Medicare rates, recent history at both the federal and state levels demonstrates that putting politicians in control of a new government health insurance system could lead to higher costs and tax burdens for American families.
  • The public option could add as much as $700 billion to the federal deficit in its first 10 years.

“The public option would cause premiums for private insurance to skyrocket,” Dr. Scott Atlas of Stanford University writes in The Wall Street Journal.  “A single-payer option is not a moderate, compromise proposal.  Its inevitable consequence is the death of affordable private insurance … Massive taxation would be needed to expand Medicare, whether optionally or not,” Atlas continues.

  • The public option “could also lead to a 10 percent increase in premiums for the remaining pool of insured people.” (Reed Abelson, “How A Medicare Buy-In Or Public Option Could Threaten Obamacare,” The New York Times, 7/29/19)
  • “[A] government buy-in that attracted older Americans could indeed raise premiums for those who remained in the A.C.A. markets, especially if those consumers had high medical costs.” (Reed Abelson, “How A Medicare Buy-In Or Public Option Could Threaten Obamacare,” The New York Times, 7/29/19)
  • “[A] government plan that attracted people with expensive conditions could prove costly.” (Reed Abelson, “How A Medicare Buy-In Or Public Option Could Threaten Obamacare,” The New York Times, 7/29/19)

Meanwhile, an additional study, conducted by Navigant for the Partnership, which finds that the public option could put more than 1,000 rural U.S. hospitals in 46 states “at high risk of closure.”  These hospitals serve more than 60 million Americans, and as Kaiser Health News and NPR report, hospital closures can have “profound social, emotional and medical consequences,” while RevCycleIntelligence also reports, “[p]atient access to care suffers when a rural hospital closes its doors for good, and consequently, patient outcomes can deteriorate.”

  • A study by KNG Consulting, which was supported by the American Hospital Association (AHA) and the Federation for American Hospitals (FAH), found that “[f]or hospitals, the introduction of a public plan that reimburses providers using Medicare rates would compound financial stresses they are already facing, potentially impacting access to care and provider quality.”

An earlier study by Navigant found that government-controlled health insurance systems such as “buy-in” or “public option” could force hospitals to limit the care they provide, produce significant “layoffs” and “potentially force the closure of essential hospitals.”


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