Health Care For America Now

The argument conservatives use against a public health insurance plan is essentially a "slippery slope" argument. If we create a public health insurance plan, the thinking goes, it will eventually become so big as to swallow up all other health care plans. Never mind that this is the same argument conservatives made about Medicare and SCHIP and it didn't happen. That's the line and it always will be.

In the past, these arguments had a whiff of reality to them. Health care reform proposed by Bill Clinton, for example, did have restrictions on people's choices, giving these arguments purchase. But Barack Obama changed that by running on a health care plan that was different. By starting with the premise that you can keep your health insurance if you like it, individual choice is not threatened.

That fact won't stop conservatives and insurance industry status-quo defenders from trying out the argument anyway. They say, so what if you can technically keep your private insurance. The public health insurance plan will be so powerful, private insurance won't be able to compete, meaning that people will be moved onto the public health insurance plan whether they want to be or not.

First, they complain that a public health insurance plan would pay doctors too little, like Medicare. Today, Joseph Paduda, the principal of Health Strategy Associates and an expert in the health insurance field, deftly destroys that argument:

First, physicians don't have to accept Medicare or Medicaid, and wouldn't have to agree to any 'public option' pricing. In fact many docs don't accept Medicare today. As participants in the free market, they are able to opt out if they feel the compensation is too low - and many do.

The other factor is just as simple - pricing is but one component of the health cost equation. The others are utilization and frequency. 'Utilization' is the number of a specific type of services used by a patient, while 'Frequency' is the percentage/number of patients that use that type of service.

Here's an example. For MRIs, the total cost calculation might be 10 million patients (frequency) X 1.2 MRIs per patient (utilization) X $800 per MRI (price).

Sure, price is a factor - but it is not the most significant factor - not by a long shot. By keeping patients out of the hospital, a private plan would eliminate utilization and prevent price from ever becoming a factor. So, even if a service area was dominated by a public plan, a private plan that did a really good job of keeping members healthy and out of the hospital would deliver lower costs - even if their hospital stays, when they did occur, were more expensive.

Those lower medical costs would enable the private plans to offer lower premiums, which in turn would attract more members, and those members' dollars. The private payers that could deliver better health would also deliver better returns to their investors, while taking share from both the public plan option and other, less successful private plans.

In other words, it would be possible for a private health care plan to run a business with lower costs than government, even if government were paying a lot less for care. All the private plan would need to do is, as Paduda says, be so good at keeping its customers healthy that it keeps them out of the hospital. Now, this would require innovation on the part of the insurance industry, and a realigning of their chief objectives from defending their turf to keeping their customers healthy. Seems like that's something Americans would want to see.

Next, Paduda goes further, pointing out that the "health care market" right now doesn't really function like one:

As noted previously, there's another reason the arguments against a public plan don't stand up. Opponents complain that the government's market power would allow it to dominate a market, thereby making it impossible for a private plan to compete.

The reality today is that almost every market is already dominated by a very few health plans, so much so that in most markets, there really is very little market competition amongst health plans.

Paduda concludes that, "If anything, a robust public plan would add competition to many markets, competition that would, if anything, increase consumer and provider choice."

And that's exactly the point. Yes, regulation on the insurance industry is necessary, but if we're looking for an American solution to the health care crisis, shouldn't we be looking for something that increases choice and competition?

Really, the insurance industry is most worried about a strong competitor, a plan that would force them to run leaner operations and (gasp!) keep their customers healthier. Like any business, they are opposing that competition by any means necessary. That doesn't mean we should accept their spin, however. These are inefficient businesses that have gotten away with monopoly power for way too long. It's time they were forced to earn their keep.