March 27, 2009
By Stuart M. Butler, Ph.D.
There is a lot wrong with America's health system. People can
lose their coverage if they switch jobs. Working families beset
with chronic medical problems may be unable to get affordable
There is broad agreement - spanning both the liberal and
conservative policy camps - on the need to fix these problems. But
there's much disagreement on how to go about it. One great sticking
point is whether or not to create a government-sponsored insurance
The Obama administration is promoting that approach. The idea
appeals to many Americans who have grown suspicious of private
insurers. At the very least, they want to be sure there will be a
"safe haven" insurance option, so that families can always be sure
that they can get adequate and affordable coverage, no matter their
health condition or employment situation.
The administration and others say a government-sponsored public
plan can and should compete with private plans on a level playing
field. With a public plan in place, they argue, Americans would
always have a guaranteed last resort. People would know it would
always deal with them fairly. And it would put pressure on private
plans to keep costs in check and quality high.
The idea sounds attractive, but it is actually a bad idea. And
federal lawmakers will find a far better alternative right under
their collective nose.
In the public plan scenario, the federal government would create
broad rules for the "game" in which plans would compete. But the
government would not just be a neutral umpire in the game. It would
also own one of the competing teams, namely the public plan.
Imagine the Washington Nationals made it to the World Series (I
know! But just imagine it.) and were facing off against the New
York Yankees. And imagine that in this series, the umpires were
hired and paid by George Steinbrenner. Somehow I don't think anyone
other than a few die-hard Yankees fans could claim with a straight
face that we'd have a fair series on a level playing field.
After all, the series outcome would hinge entirely on his
employees' decisions. And it would be King George's men who decide
how to interpret the rules and make the call on whether the ball
lands fair or foul, the pitch is a ball or a strike, the batter
checked his swing, the throw beat the runner, etc.
It's equally impossible to believe that Congress and the
administration could resist setting rules in a competitive health
system - and interpreting those rules - so that their own public
plan ended up winning the whole game. That's why many supporters of
a single-payer system, where the government runs the whole health
system, are suddenly converts to choice and private competition, as
long as there is a public plan.
So is there an alternative to a public plan for addressing the
concerns Americans have? As usual, it's always a good idea to look
first at what members of Congress actually provide for themselves
and several million other federal employees. That's the Federal
Employee Health benefits (FEHB) program.
This year, the FEHB offers federal workers well over a dozen
plans from eight different insurers. But not one of these options
is a public plan. Why? Because Congress has rightly insisted that
there must be a wall of separation between those who set the rules
- the U.S. Office of Personnel Management - and those who offer
The FEHB also demonstrates that you don't need a public plan to
provide a "safe harbor" coverage option. The program has
consistently offered several such options by negotiating with
private plans to provide predictable coverage all over the country.
These national plans include not just Blue Cross, but also several
union-sponsored plans, such as the Mail Handlers Benefit Plan.
Rather than stack the deck with a public plan in a new health
system, Congress could learn from the basic FEHB design, with its
selected private plans acting as safe-harbor options.
This could be done several ways. It could arrange for states,
using existing federal insurance regulation (the so-called "HIPAA"
rules), to work with one or more private plans in the state to
offer safe-harbor coverage through a high-risk pool or a similar
If a state did not organize such a plan itself, then Congress
could make the FEHB's national plans available to non-federal
employees and their families in the state. These plans would be
free of state benefit mandates and thus could provide coverage that
is identical to federal employees. The federal government would
operate a separate risk pool for these non-federal enrollees to
avoid disrupting the FEHB itself.
Today there is a refreshing desire to find common ground in the
health care debate. But the public plan proposal is fatally
divisive. It threatens to explode any potential right-left
coalition because it would push the country decisively towards a
Americans do not want that. But fortunately, by looking first at
its own health system, Congress can find a better way.
Butler is vice president for domestic policy issues
for the Heritage Foundation.
First appeared in the Washington Times
There is a lot wrong with America's health system. People can lose their coverage if they switch jobs. Working families beset with chronic medical problems may be unable to get affordable coverage.
Stuart M. Butler, Ph.D.
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