August 13, 2009 | Commentary on Health Care
Liberals in Congress say they want a public plan to compete against private health insurance in order to give Americans more choice and competition. Ponder that.
The reason that argument is so puzzling is that it is routinely made by Congressmen who have been stalwart champions of a single payer system of national health insurance. Single-payer means just that. Government monopoly. No competition.
So, yes, it is hard to believe that officials who have whined from time immemorial about the waste and inefficiency of multiple private payers for health coverage would suddenly become champions of personal freedom of choice and competition in health insurance markets.
So, don't believe it.
In the House bill (H.R. 3200), there is no truly level playing field for competition between the public plan and the private health plans. While the bill says that the public plan will be initially financed by appropriations for start up costs, it also says that the Secretary of HHS can enter into contracts to administer the public plan, just like the Secretary enters into contracts with private firms to administer Medicare, but these contracts cannot, in the words of the House bill, "involve the transfer of insurance risk" to these private firms. In other words, the taxpayer is on the hook for the risks of the public plan. The bill says that the government plan must be self-supporting through premiums. But since the purpose is to create a low-cost plan, one can imagine that this will be quickly eroded, that the government will not want to charge full freight, and future Congresses will appropriate taxpayer money to bail it out.
Members of Congress will say that the public plan should compete on its own, financed by its own premiums, and that it will be allowed to fail. They say that. But they say a lot of things. It is hard to believe that the public plan, another government sponsored enterprise, like Fannie Mae and Freddie Mac, would be allowed to fail. If automakers, AIG and other financial institutions are "too big to fail", it strains the imagination that Congress would not bail out its own creation, especially if it enrolls millions of Americans who have been dumped out of their private health insurance coverage. The Lewin Group, one of the nation's top econometric firms, estimates that as many as 88 million Americans would be shifted out of their employer's health insurance coverage under the terms and conditions of the House bill. That is a large consitutency for bailouts.
While the House bill provides that enrollees in the public plan will have the same rights as Medicare beneficiaries have today, that's not enough. Sure Medicare beneficiaries today have access to the federal courts to secure their statutory entitlement, but Medicare beneficiaries can't sue the Secretary of HHS for damages for injury arising out of wrongful coverage denials decisions in the same way they can sue private insurance executives. No way.
Private health plans are routinely subject to federal and state laws governing torts and contracts, and private health plan executives can be sued for violations of these laws. If Congress wanted to really secure a level playing field, they would allow ordinary Americans to sue the officers of the public plan for the same reasons in the same way.
For a truly level playing field, there are even more laws that would have to apply to the public plan as well as the private plans: anti-trust laws, consumer protection and solvency rules in any states where the public plan competes with private insurers, and federal and state tax laws.
On the last day before the House recess, July 31st, Congressman George Radanovich (R-Ca) offered an amendment in the House Energy and Commerce Committee that would have subjected the public plan to all the same rules and standards that apply to private health plans, including the payment of state taxes. The Committee's Democratic majority defeated the Radanovich amendment. So much for the level playing field.
So, would Congress or could Congress create a level playing field? To think so, in the face of the evidence, would require more hope for a change in congressional behavior than normally sober people can summon.
Robert E. Moffit, Ph.D. is Director of the Center for Health Policy Studies at The Heritage Foundation.
First appeared in Human Events