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‘The Mother of All Public Options’


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In January, liberal activists were expecting 2009 to be the year when they would finally pave the way for a single-payer program. All that was needed was a new, government-run insurance plan for the working-age population. With Medicaid and Medicare, the government already provides insurance for the poor and senior citizens, respectively. If a health-care bill passed by Congress could stand up a new option for those still in the work force, then the entire U.S. population could be insured, one way or another, by the government.

That was the thinking, anyway.

In reality, things haven’t gone quite so smoothly. The model for how the new “public option” would be run was supposed to be Medicare. But while liberals admire Medicare’s elaborate price-control system, they are basically alone in that view. Others recognize that the program, while popular with its enrollees, is far from a model of efficiency or cost control. For four decades, Congress and program administrators have tried to slow spending growth with price cuts and bureaucratic payment regulations. It hasn’t worked. The result has been cost-shifting to private payers, even as Medicare’s overall costs have continued to escalate rapidly. Moreover, Medicare’s fee-for-service payment model encourages fragmented and uncoordinated care, driving up costs for everyone buying services, not just the government. Cuts in fees do nothing to control the volume of services provided, which is the real source of rising costs.

Many in Congress, including a sizeable number of House and Senate Democrats, understand these problems in Medicare and want no part in creating another government-run insurance program with the same flaws. Even the House, with its scores of die-hard public-insurance advocates, was forced to drop any tie between the new insurance option created in the bill and Medicare’s discredited payment systems. In the Senate, a Medicare-like insurance program has faced even higher hurdles.

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Which is why this week’s announcement of a “breakthrough deal” based on expanding Medicare is so perplexing. According to press accounts, a group of ten Senate Democrats, negotiating at the behest of Senate majority leader Harry Reid, have tentatively agreed to drop the new government-run insurance option out of the Reid plan. In its place, they propose opening up the Medicare program to persons aged 55 to 64, as well as establishing a new national not-for-profit insurance option, run by the Office of Personnel Management.

The Medicare “buy in” idea is among the worst floated in this year’s long health-care debate, and that’s saying something. Medicare is careering toward insolvency. The program’s trustees estimate the current unfunded liability stands at $38 trillion over a 75- year period. The last thing Congress should be considering is putting more people into a program that is wildly out of financial balance.

Advocates will argue that the Reid plan wouldn’t make the program’s financial outlook any worse or better because the new enrollees would be required to pay a full, unsubsidized premium. But that is highly unlikely to work, programmatically or politically. If the enrollees paid the full cost, it would attract less healthy enrollees, which would mean very high premiums. Political pressure would quickly build to make the option more affordable for those in the program, many of whom would likely have chronic illnesses. And once an entitlement and subsidies were put in place to bring premiums down, employers would find ways to take advantage by moving their early retirees into the option to offload some of their costs. In time, a sizeable portion of today’s 34 million people aged 55 to 64 would likely end up on Medicare, increasing the program’s overall enrollment from about 45 million today to perhaps 80 million.  

When the tentative deal was announced by Senator Reid on Tuesday evening, many single-payer advocates expressed delight despite the apparent defeat of their yearlong quest to start a new government-run insurance program. They understand that a Medicare “buy in” would put the country on an even faster track to a full government takeover. As Rep. Anthony Weiner put it, the “buy in” idea is “the mother of all public options.” He’s right. Which is why any senator who was wary of the “public option” should be dead set against putting the country on the slippery slope that the “buy in” represents.



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