The American Spectator

The Right Prescription

Senate Democrats on Tuesday night reached a tentative deal aimed at assuaging moderate Democrats' concerns about creating a new government health insurance option, but the so-called "compromise" would actually move the nation much closer to a government-run health care system than the public option itself.

Under the terms of deal, as reported by the Washington Post, Democrats would drop the current incarnation of the public option and instead allow the Office of Personnel Management, the entity that runs the Federal Employees Health Benefits Program, to oversee the creation of privately administered plans that would be offered on the new government-run exchanges.

But in a major concession to liberals, the agreement would expand Medicare to Americans over the age of 55, and thus potentially add millions of people to a system that is already on course to bankrupt the country, with a long-term deficit of $38 trillion (or as high as $89 trillion by some measurements). And the deal still leaves open the possibility that a public option would be "triggered" if the new Office of Personnel Management plans don't materialize.

It's worth keeping in mind that the "public option," as originally conceived, was much more of a threat to the private market than the version that ultimately ended up in the Senate bill. Liberals envisioned the public option as a government-run plan modeled after Medicare that would use its bargaining power over health care providers to drive down the cost of insurance premiums. Though the plan's purpose was ostensibly to "compete" with private plans on the new government exchanges, in reality, liberals hoped that over time, the lower premiums would gradually shift more people to the public option, so that eventually they could achieve their ultimate goal of a government-run, or single-payer, health care system.

The public option became a flash point in the health care debate, as critics noted that no private plan would be able to fairly compete against a government plan that could dictate how much they would pay doctors, hospitals and other providers. The government would also be setting the rules for the insurance exchange and if the government plan were to fail, there would be every reason to believe that future lawmakers would use taxpayer dollars to bail it out. A Lewin Group analysis estimated that as originally envisioned, the public plan could attract 131 million people, shifting two-thirds of those enrolled in private plans to government-run health care as businesses dropped their coverage and dumped workers on the government to save money. It also found that as a result of the government's bargaining power, doctors stood to lose $33 billion in income and hospitals would lose $36 billion -- costs that would result in decreased services and shift more costs onto those left with private health coverage.

But over time, the public option was scaled back. In the Senate bill, the government plan could not set reimbursement rates at Medicare levels, and it would not be available to large employers -- only to some small employers and individuals without insurance. And states would at least have the theoretical possibility to "opt out." According to the Congressional Budget Office, total enrollment would only be three million to four million. That doesn't mean the plan still wasn't worth opposing -- along with the rest of the bill -- but simply that it wouldn't be as damaging as when it was originally conceived.

However, expanding Medicare would go further to advance the original aims of liberals than the watered down version of the public option. By definition, the Medicare option (which would eventually be offered on the exchange to those over 55) would set reimbursement rates at Medicare levels, thus putting the squeeze on doctors and offering lower premiums that would make it more difficult for private insurers to compete. As with the public option, liberals will try to argue that the Medicare expansion will be funded by the premiums it collects, but it will benefit from the taxpayer-funded infastructure that is already in place to support Medicare -- not to mention potential subsidies down the road.

As part of the pact, according to the Washington Post, Democrats would impose a new rule that insurers have to pay out 90 percent of the money collected in premiums to fund medical payments.

Proponents of the government plan mockingly question how anybody could be opposed to offering a plan that would offer lower premiums. The problem is that the lower premiums for some impose burdens on others -- reduced services, a shortage of primary care physicians, a shift in costs to those with private insurance, and greater risk to taxpayers. While Medicare's defenders tout the program's low administrative costs, that comes at a cost, too -- massive fraud that, by some estimates, tops $100 billion a year.

The Mayo Clinic, which has been praised by the Obama administration and has supported some aspects of the health care legislation, blasted the Medicare expansion idea as "disastrous." A post on the blog of its Health Policy Center argued that, "The current Medicare payment system is financially unsustainable. Any plan to expand Medicare, which is the government’s largest public plan, beyond its current scope does not solve the nation’s health care crisis, but compounds it."

Mayo went on to predict that, "Expanding this system to persons 55 to 64 years old would ultimately hurt patients by accelerating the financial ruin of hospitals and doctors across the country." The Mayo Clinic alone, it said, lost $840 million last year under the existing Medicare system. 

The CBO has not yet evaluated the current proposal, but according to a recent Kaiser Family Foundation study, there are about 4 million uninsured Americans between the ages of 55 and 64 -- so that would probably be the minimum amount of people eligible to buy into the expanded Medicare program. Yet according to Census data, the entire 55 to 64 population is 33 million, so there's plenty of room for growth if future lawmakers open the exchanges to more people.

For liberals who view a single-payer, or government-run, health care system as ideal (and that list begins with President Obama), the goal of health care legislation was to move the nation as far as they could in that direction, knowing that the best way to achieve their goal over time was by building on the current system with which people are familiar.

“Extending this successful program to those between 55 and 64, a plan I proposed in July, would be the largest expansion of Medicare in 44 years and would perhaps get us on the path to a single payer model,” Rep. Anthony Weiner, a proponent of a government-run health care system, boasted to the New York Daily News. Weiner told the Associated Press that it was "an unvarnished, complete victory for people like me who have been arguing for a single-payer system."

If Democrats unite behind this "compromise" and the broader legislation becomes law, liberals will have largely succeeded. The legislation already expands Medicaid and S-CHIP by 15 million people and coupled with the Medicare expansion, most newly covered Americans would simply be added to the rolls of existing government-run programs. Millions more would be using government subsidies to purchase government-designed insurance policies on a government-run exchange. And the rest of the system would be subject to so many taxes, penalties, and mandates that it wouldn't resemble a private market in any meaningful sense of the word.

topics:
Health Care, Public Option