NCPA - National Center for Policy Analysis


October 27, 2009

In the Senate, there is growing interest in the idea of a state "opt-out" of the federal public plan, a government-run health plan that would "compete" against private health plans.  This latest Senate ploy creates the illusion of an "option" rather than making any fundamental changes to the controversial proposal.  While it is difficult to understand its true impact until legislative language is available, taxpayers who will bear the cost burdens of a new government health care entitlement should keep a few points in mind, says the Heritage Foundation.

States could only op-out of the public plan, not of the entire bill:

  • This is only an "opt-out" of one section of the massive health care proposal; there are literally hundreds of provisions that the states may find unacceptable, like the costly Medicaid expansion.
  • That, for example, would add millions of new people onto the Medicaid rolls, and aggravate the "crowd out" of private health coverage and guarantee higher taxpayer burdens for one of the nation's most poorly performing welfare programs.

A state opt-out does not eliminate the public plan:

  • The federal government would likely require the any state wishing to opt-out to still meet federal conditions.
  • It could come, for example, as an explicit requirement that a state set up a public plan "option" that mirrors the federal public plan or as a public plan masquerading as a "co-op" that is in effect controlled, funded and accountable to the government.
  • For those who wish to see a genuinely competitive insurance market, with all plans competing on a truly level playing field, a public plan requirement is a dangerous proposition whether administered at the federal level or the state level.

A true state "opt out" would allow states to opt-out of the entire health care proposal in exchange for making measurable progress in improving cost, quality and access to care for its citizens.  Any other opt-out is just another shell game that is intended to appear as a concession but in reality provides a pretext for greater federal control and blocks much needed structural changes, says Heritage.

Source: Nina Owcharenko, "The Senate's Public Plan "Opt Out" -- More Optics than Option for the States," Heritage Foundation, October 26, 2009.

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