Plublic health care and the "level playing field"…

We’re hearing an increasing amount of talk, blather, and “propaganda” (er, news coverage) about health care and the need for reform (ABC News will be broadcasting Mr. Obama & the Democrats’ position all day today, even hosting their nightly news show from the White House). We also hear a lot about the “public plan” competing with your private plan, etc. As Alan Katz stated a few days ago on his excellent blog, “The Alan Katz Health Care Reform Blog“…

Advocates of government-run plans insist that “If the private insurance companies have to compete with a public option, it will keep them honest and it will help keep their prices down.”

However, a government health plan can have severe consequences to private carriers. Current government programs like Medicaid and Medicare pay doctors and hospitals less than their actual costs. They make up the difference by increasing what they charge private health plans. But Medicaid and Medicare don’t compete directly with private carriers. The government-run health plan advocated by President Barack Obama and many Democrats would. The cost shift there would result in an ever increasing pricing gap between the public plan and private carriers. Eventually private carriers would become uncompetitive and leave the market.

President Obama hears these concerns, but rejects them. In Wisconsin, The Huffington Post reports him as saying, ”So, what you’ve heard is some folks on the other side saying, I’m opposed to a public option because that’s going to lead to government running your health care system. Now, I don’t know how clearly I can say this, but let me try to repeat it. If you’ve got health insurance that you’re happy with through the private sector, then we’re not going to force you to do anything.”

People can keep their private coverage if they want. Well, maybe. If the public plan behaves like Medicare, then this argument becomes a bit disingenuous. Medicare pays roughly 19 percent less than the actual cost care. Senator Edward Kennedy has proposed a public plan that pays providers 10 percent more than Medicare {but still less than “actual cost”}. This underpayment would force even more dollars to be shifted to private insurance companies. Not a recipe for those private plans you have the right to stay in to last very long.

President Obama is optimistic a compromise can that avoids this inevitable result can be found. “And I think that we can come up with a sensible, commonsense way that’s not disruptive, that still has room for insurance companies and the private sector, but that does not put people in the position where they are potentially bankrupt every time they get sick.” Maybe he can. If so, it would be nice for him to describe what this compromise might look like.