NCPA - National Center for Policy Analysis


March 26, 2009

Can Congress fashion a public health plan option so that it does not blow up health care reform this year, asks the National Journal?  Nearly all Democratic health reform proposals would create a public health plan that would compete alongside private insurers.  The idea is for uninsured people to gain access to a variety of health plans, including one public plan option.

According to Len Nichols, Director of the Health Policy Program for the New America Foundation, there would be a level playing field between a new government health plan and private plans if "all rules of the marketplace -- benefit package requirements, insurance regulations, and risk adjustment processes -- apply to all plans equally, whether public or private." 

But this is a false assurance because Washington can continue to change the rules that dictate how the private marketplace must operate, says Grace-Marie Turner, President of the Galen Institute.

According to the Health Policy Consensus Group, while there may be initial assurances of a level playing field, a government health plan would have special advantages over private health insurance:

  • Private plans would be forced to match the more expensive benefits promised by the government plan, but only the government plan would be able to impose price controls and draw on government policing and taxing authority.
  • This will result in government using regulatory, pricing and taxing authority to favor its plan.
  • The new government plan inevitably will underprice private plans and drive them out of this one-sided "marketplace."

The government plan would cause millions of people to lose the coverage they have now and leave them no option but the new government health plan, says Turner.  Massive crowding out of private health insurance coverage would undermine the employer-based coverage that most Americans under age 65 have and prefer today."

Research by the Lewin Group concluded that if all workers and their families were eligible for enrollment in the government insurance plan and providers received Medicare payment levels that as many as 119 million people would lose or be switched out of private health coverage.  This certainly defies President Obama's assurance that people will be able to keep the coverage they have now, says Turner.

Source: Grace-Marie Turner, Response to " The Public Plan: Time Bomb?" National Journal Online, March 23, 2009.

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