Friday, March 27, 2009

Medicare Open to All

A battle is looming over the question of whether a Medicare-like insurance program should be available to people of all ages.

President Obama appears to favor creating a new public health insurance option: “It gives consumers more choices, and it helps keep the private sector honest, because there’s some competition out there.” Like the President, Senator Max Baucus, chairman of the Finance Committee, favors retaining the current system of competing private insurers but would make Medicare more widely available, especially for those in the 55 - 64 year old category.

A recent New York Times article summarizes the argument for creating a new public program as follows:
The main selling point for a government-run program would be its low cost. It would have a much lower overhead than private plans, with no need to make a profit or spend money on marketing or brokers’ commissions. And, if allowed to flex its muscle, the government would buy medical care at much lower prices.
Insurers criticize the proposal as pseudo-competition, arguing that government programs do not have to bargain with providers in the same way that private insurers do. Here's how Karen Ignani, CEO of America's Health Insurance Plans (AHIP), put it- "There's no way to run a side-by-side competition within the current structure." Senator Grassley said much the same - "There's a lot of us that feel that in the public option the government is an unfair competitor..."

I believe, however, that there are reasons for health insurers to welcome a new public program. There's no way that U.S. health care will become affordable without new forms of managed care. One obvious need is for an entity like NICE (National Institute for Health and Clinical Excellence) that assesses health interventions for both clinical and cost effectiveness for the British National Health Service. And these analyses will have to be used, not simply talked about and then ignored.

Health insurers know how to carry out these management activities, but the public has not sanctioned their taking on the role of (a) allocating resources and (b) setting limits. Insurers did this in the 1990s - sometimes very skillfully and sometimes ineptly. But with the medical profession in the lead there was a massive pushback, and insurance-company led managed care bit the dust.

Karen Ignani may well be right that "side-by-side" a new public program and private insurance will not be competing on even terms. But from another perspective the public program could act like a "downfield blocker" for private insurers. A public program, which is ultimately overseen by the government, has sanction to make tough choices on behalf of the public good. It can't be seen as managing care just to augment the bonus of the CEO or to enhance shareholder equity - critiques that were levelled against private insurers in the 1990s when they tried to manage care.

If the public option is shot down private insurers will face the same dilemma they encountered in the 1990s. To carry out their societal responsibility they will have to make tough choices and foster managed care, but especially after all of the corporate fiascoes we have seen, it isn't likely that the public will allow them to do what needs to be done. Getting a grip on the health care cost trend will require a new form of public leadership.

[To learn more about the public insurance program proposal, I recommend "The Case for Public Plan Choice in National Health Reform" by Jacob Hacker, Professor of Political Science at U.C. Berkeley. For a strong critique I recommend "How a Public Health Plan will Erode Private Care" by Robert Moffitt, Director of the Center for Health Policy Studies at the Heritage Foundation.]

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