Health Care For America Now

National Journal's Health Care Experts blog has a discussion going on Obama's public plan. James Gelfand from the Chamber of Commerce led off:

I don’t think anyone is 100 percent positive what kind of effects or market distortions a new government health plan would bring about, but here is what we know for sure:

(1) The plan would be modeled after Medicare. Medicare is in dire financial straights. Listing the problems with Medicare would take a lot of space – but the question is, will Medicare be modernized and improved? Will the new plan include cost-saving efficiencies, or would it just be more of the same?

(2) The plan might have undue market advantages. Government is always able to “negotiate” the lowest rates – after all, they have the guns, the money, and the regulating authority. How much below market rates will the government plan pay – as bad as Medicare or Medicaid? Will the plan have to advertise at all? Probably not. This will make the government plan artificially cheaper than the other plans.

(3) Private plans might be too strangled to compete. The proposal to create a new Medicare-like plan is always coupled with strict regulations for private plans – they must accept all comers, charge similar rates to the sick and the healthy, young and old. They must cover a long list of specific drugs, services, and conditions. Are we, in essence, forcing the private plans to be the same as the public plan? And then artificially lowering the costs of the public plan? That kind of competition would not bode well.

Would a new public plan be the beginning of the end for private plans? Would this be creating a massive new debt to pass on to our grandchildren? Both of these questions will need very clear answers before many will support such a plan.

Fortunately, a lot of James's questions have already been answered. Here's my response:

Mr. Gelfand raises good questions that deserved to be answered.

Indeed, some of the answers are already apparent.

(1) Medicare is indeed in dire financial straights, because it operates outside the normal logic of insurance. In an insurance system, risk is spread over a large pool of people. In a good insurance system, those who are less at risk still pay into the system, in effect subsidizing those who are more at risk. Because Medicare is only available to Americans over the age of 65, it functions against this logic. It should come as a surprise to nobody that health care for older Americans is more expensive than health care for younger Americans. With no younger, healthier people in the Medicare system, risk is concentrated and costs rise. This ends up being a subsidy for private health insurance, which can make money insuring less costly, younger Americans, then dump them onto the public dole when they reach the age of 65. The solution for eliminating this subsidy and rising Medicare costs is to allow a public insurance plan to cover everyone, fairly sharing the risk.

(2) and (3) Senator Max Baucus (D-MT), one of the leaders in Congress taking charge of Obama's health care vision, specifically addressed this point in a letter to the editor of the Wall Street Journal last week.

According to Senator Baucus:

"[the public plan] will require affordability, but premiums will not be set. It will require a minimum level of benefits, but Congress will not prescribe specific packages or even require insurers to participate . . . The public option would not "offer generous packages . . . no private company could ever afford or justify." The Baucus plan specifically says a public option must offer benefits similar to private plans in the Exchange. Nor does the Baucus plan import Medicare's price rules into the public option. Rates would be determined by balancing the goals of increased competition and affordable access to quality health care.

Put simply, Barack Obama's vision for health care reform would force all players in the health insurance system - private and public - to play by the same set of fair rules. There would be no special advantages given to a public health plan, it would simply be created to compete with private insurance on a level playing field. If private insurers truly believe that their product adds value, they should not be afraid of a little competition.

The rest of the responses from the other conservatives, including Senator Mike Enzi (R-Wyoming) and John Goodman of McCain campaign fame, use similar strawmen for their arguments. As Senator Baucus made clear, a public health plan would compete on a level playing field with private insurance. There would be no unfair advantage. And as any one of our single-payer friends will tell you, Obama's plan is not single-payer health care.

Still, conservatives throw out the big-government boogeyman at every chance, because it's the only argument they have. Too bad it's not true this time around, and the public know it.

On a personal note, I was friends with James Gelfand in college, and I remember having many debates with him over politics. It's interesting that we find ourselves debating again, this time for real.