NCPA - National Center for Policy Analysis


May 12, 2009

The next major battle in Congress this year will be over the "public option," a government health insurance plan akin to Medicare, but open to all ages and all incomes.  This new entitlement would quickly crowd out private insurance as people gravitated to heavily subsidized policies, eventually leading to a single-payer system, says the Wall Street Journal. 

A "soft" public option would limit enrollment only to the uninsured or those employed by small businesses, or include promises that the plan will pay market rates.  As recently proposed by Chuck Schumer, it would pay claims entirely with premiums and co-pays.  But if the plan can't force down reimbursement rates through brute force, and doesn't get taxpayer dollars, why bother to "compete" with private plans?  Democrats know that any policy guardrails built into health care reform this year can be dismantled once the basic public option architecture is in place.  The White House strategy is to dilute it just enough to win over credulous Republicans.  That is what has always happened with government health programs, says the Journal.

When Medicare was created in 1965, benefits were relatively limited and retirees paid a substantial percentage of the costs of their own care.  But the clout of retirees has always led to expanding benefits for seniors while raising taxes on younger workers, says the Journal:

  • In 1965, Congressional actuaries expected Medicare to cost $3.1 billion by 1970.
  • In 1969, that estimate was revised to $5 billion, and it actually came in at $6.8 billion.
  • That same year, the Senate Finance Committee declared a Medicare cost emergency.
  • In 1979, Jimmy Carter proposed limiting benefits, only to have the bill killed by fellow Democrats.
  • Things have gotten worse since, and Medicare today costs $455 billion and is rising.

Medicaid was intended as a last resort for the poor but now covers one-third of all long-term care expenses in the United States -- that is, it has become a middle-class subsidy for aging parents of the Baby Boomers. Its annual bill is $227 billion, and so far this fiscal year is rising by 17 percent.

The State Children's Health Insurance Program (SCHIP) was pitched a decade ago as a safety net for poor kids, and some Republicans helped sell it as a free-market reform: 

  • But SCHIP is now open to families that earn up to 300 percent of the poverty level, or $63,081 for a family of four.
  • In New York, you can qualify at 400 percent of poverty.

Any new federal health plan will inevitably follow the same trajectory, no matter how much Republican Senators might claim they've guaranteed otherwise, says the Journal.

Source: Editorial, "Republicans and the 'Public Option,' A case in which compromise means government health care," Wall Street Journal, May 11, 2009.

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