Health Reform at the Federal Level

1
The Public Plan Option

• Health Reform at the Federal Level
• Peter J. Fotos
• The Heartland Institute

2
Understanding the 47M Uninsured
3
What is a Public Plan Option?

• A government-sponsored plan that would serve as
  an alternative in competition with private
  insurance plans.
• This plan would be
• Financed by taxpayers
• Managed by government bureaucrats and
• Open to everyone.
• Presumably, this option would be modeled after
  Medicare.
• More than 70 Democrats in the U.S. House have
  indicated that they will not support abroad
  health reform bill unless is contains a
  government-sponsored policy.

4
Is Government Health Care Cheap?

• Kerry Weems and Benjamin Sasse have examined the
  administrative costs of public and private plans
  and came to four conclusions
• Private insurers build networks that exclude
  low-quality providers
• Private insurers must negotiate rates
• Private insurers must combat fraud and
• Private insurers must incur the admin costs of
  marketing.
• Medicare only covers 58 of beneficiaries health
  care expenses, which is why many opt to buy
  private supplemental coverage.

5
Will the Public Plan Option Really Compete?

• The plan will be heavily subsidized to keep costs
  down.
• As people move to government-sponsored health
  care, costs will increase rapidly forcing the
  Treasury to increase outlays to keep premiums
  artificially low.
• Lacking the same benefit, private insurance rates
  will escalate.
• The Lewin Group says enrollment will reach 131
  million.
• Like Medicare, spending in the public option will
  be controlled over time by paying less for
  services, drugs, and technology.
• Reimbursement for doctors are at 81 of private
  rates.
• Reimbursement for hospitals are at 71 of private
  rates.
• Public Plan will force the private plans to
  modernize, meaning they will forced to accept
  all comers, ending the ability to manage risk
  through underwriting.

6
Can We Afford This?

• President Obamas reserve fund for health care
  in his budget only covers half of what is need to
  get serious health reform off the ground.
  (Maybe)
• Medicare and Medicaid alone account for 4 of GDP
  today and will rise to 9 by 2035.
• Medicares current unfunded liability is 36
  trillion or 317,700 per household.
• CBO estimates that individual and corporate
  income tax rates would have to rise by about 90
  to finance the projected increase in spending
  through 2050 without the new public plan option.

7
Summary

• A Public Plan option is a way for President
  Obama to make good on his hollow campaign promise
  to allow Americans to keep the health plan they
  want.
• Recent polling by the Kaiser Family Foundation
  found that the Public Plan is only popular until
  people understand its consequences.
• Everyone agrees that there are inequities in the
  current health care system, but most of that has
  been created by Congress through the federal tax
  code.