Opposing View: Don't Crowd Out Insurers

COMMENTARY Health Care Reform

Opposing View: Don't Crowd Out Insurers

Jan 14th, 2009 2 min read
Robert E. Moffit, Ph.D.

Senior Fellow

Moffit specializes in health care and entitlement programs, especially Medicare.

"If you have (health) insurance you like, you keep that insurance," President-elect Barack Obama has assured Americans. Unfortunately, that's not what would happen under his proposed health reform plan. In fact, millions would lose their existing coverage.

A major component of Obama's plan is a national health insurance exchange, in which the government competes with private insurance. In theory, everyone wins - the competition lowers rates and induces insurers to offer better plans. In reality, the presence of a large national plan would, perversely enough, encourage employers to drop coverage (which is, after all, quite expensive). Let the government take care of employees, they'd reason.

The inevitable result: a massive crowd-out of private coverage - especially employer-based coverage, which is how nine out of 10 Americans under 65 get their insurance.

How massive? In an October analysis, the Lewin Group, a leading econometrics firm, estimated that Obama's plan would dramatically alter the way in which many Americans are covered: 21.6 million would lose their private coverage, and about 48.3 million would end up in public coverage through the new government health plan, as well as the State Children's Health Insurance Program and Medicaid. Lewin estimated that 18.6 million employees would find themselves in the new government plan, as employers switched from private health insurance.

The end result of this enormous shift is all too predictable: a rapid evolution toward a single-payer system of national health insurance. At the very least, we'd wind up with a highly regulated and painfully sluggish, centrally controlled system in which private health plans and private medical practice are private in name only.

Meanwhile, millions of Americans would lose their employer-based health insurance. And the artificially swollen and heavily subsidized government health plan would remain as the benchmark for "private" decisions concerning financing, benefits and standards within the new health exchange.

The overwhelming majority of Americans who get health insurance through work say they're satisfied with it. And most American voters say they oppose any kind of government-controlled plan if it means they'd have to change their own health coverage. Under Obama's plan, though, that's exactly what many would have to do.

About 47 million Americans lack health coverage. It's a huge problem. To their credit, both major presidential candidates have ponied up ambitious plans to deal with it. Their approaches are expansive and expensive. That's where the similarities end.

When it comes to the future of America's health system, John McCain and Barack Obama hold two very different visions.

The Obama health plan would centralize power in Washington. Increasingly, federal officials would hold the purse strings and make the decisions on health-care delivery.

The McCain plan would decentralize control over health-care financing and decisionmaking, empowering individuals and families. In the public health arena, states would retain authority rather than cede power to the feds.

In the case of both plans, some crucial details are sparse. But it's easy to spot the major differences in approaches taken by the candidates.

To expand coverage, Mr. Obama would take four major steps:

-- Create a new national health plan. The new government health plan would enroll those without job-sponsored coverage and those not eligible for coverage under existing government health programs, such as Medicaid and SCHIP.

-- Create a national health insurance exchange. The exchange would be the ultimate regulatory "watchdog," making sure that private health plans competing with the government plan met the same regulatory standards as those applied to the new federal health plan.

-- Impose a "play or pay" employer mandate. Employers would be expected to offer their workers a level of health coverage set by the government. Those who didn't would have to pay a new federal tax - of an unspecified amount - which would be used to help finance the new government plan.

Robert E. Moffit, Ph.D.,is Director of the Center for Health Policy Studies at The Heritage Foundation.

First Appeared in USA Today

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