Public Option Kills Private Insurance

At the center of Joe Biden’s health-care proposal is the “public option”—a government insurance policy that would compete with private plans. Mr. Biden has obviously seen the polling. By 57% to 37%, Americans reject the idea, put forth by some of Mr. Biden’s Democratic rivals, of abolishing private insurance in favor of “Medicare for All.” The public option seems like an attractive alternative—enough so that Mr. Biden, in announcing his plan Monday, revived a discredited Obama slogan: “If you like your health-care plan, your employer-based plan, you can keep it.”

Yet the public option is a bad idea. Government insurance options mainly erode, or “crowd out,” private insurance, rather than provide coverage to the uninsured. Jonathan Gruber, the Massachusetts Institute of Technology economist credited with designing ObamaCare, showed in 2007 that when government insurance expands, six people go off private insurance for every 10 people who go on public insurance.

Consider the experience in Hawaii. Only seven months after offering Keiki Care in 2008, the country’s only statewide universal child health insurance, the state ended its optional program. Some 85% of those who signed up already had private insurance. Those costs were suddenly shifted onto other taxpayers.

The public option would cause premiums for private insurance to skyrocket because of underpayment by government insurance compared with costs for services. According to the American Hospital Association, annual underpayment by Medicare and Medicaid surged to nearly $76.8 billion in 2017, nearly doubling once ObamaCare’s regulations came into play. That added a burden of more than $1,500 a year on families paying private premiums.