The Non-Competition Health Plan

May 17, 2009

This Op-Ed appeared in The Seattle Times and The Washington Examiner (Washington DC)

During the last presidential campaign, at least six national health care reform proposals were discussed and debated. Consensus on the part of the Administration and the Congressional leadership has now formed around a single, government sponsored alternative to the private health insurance market.

If enacted, the Administration’s plan would represent the largest intrusion of government control into this country’s health care since Medicare and Medicaid—perhaps even larger. It is not an exaggeration to say our entire health care system is at risk with this new plan.

At face value the proposed government plan would function like Medicare and “compete” with private, non-Medicare insurance. It would offer employers and individuals an alternative to obtaining health insurance in the private market.

That seems all well and good. But in reality the government would set its tax subsidized pricing well below private plans and “crowd out” the private insurance carriers. The government would also mandate that the private carriers provide a comparable benefit package, hence eliminating any chance for competition with different product lines.

So what are the actual numbers? The Lewin Group estimates that at Medicare rates, the new government plan would cover 130 million people. Out of that group, 118 million will be forced to join after opting out or losing their private coverage. To put this in perspective, there are currently 170 million people in the United States with private health insurance.

To believe that the government would “compete” with private carriers is naïve. The government would cut rates well below the private market and make its plan look much more attractive until it controlled all health insurance. After all, it is impossible to compete against an entity that can draw on the full tax resources of the United States.

This is exactly what happened with Medicare. In 1964, senior citizens had access to a wide selection of private health insurance policies. Medicare was passed in 1965, and by 1970, no private market existed, except for co-pays and deductibles, for the elderly in the United States.

Why not offer Medicare to everyone in this country? The reason is simple—we can’t afford it. The unfunded liability for Medicare today is at least $45 trillion, and it may be as high as $67 trillion. Eliminating private insurance for non-seniors would double or triple this debt.

Also, Medicare reimburses hospitals at 70% and physicians at 80% of the private insurance rate. By eliminating the private carriers, hospitals and doctors who are now cost-shifting their losses to private insurance plans would be forced to close their doors. Hence just as demand for health care increases from aging Baby Boomers the supply would decrease.

With the government in complete control of our health care system, prices and reimbursements would be fixed and subject to Congressional politics every session, access and benefits would be dictated by bureaucrats, and ultimately rationing would occur, probably, as in Canada, through the use of patient waiting lists. Access to a waiting list is not the same as access to health care.

We are truly at the brink of losing what is left of our choice and having market competition in health care in the United States. The Administration’s public-versus-private “competition” plan is by far the most insidious of all the reform proposals discussed in recent history. The new plan would appear to offer a reasonable alternative to private health insurance, yet in reality it will destroy the private market and will force all US citizens into a government controlled health care program.