Any health care reform that aims for universal coverage has to include a publicly funded insurance plan -- the so-called public option.
Since Medicare and Medicaid were enacted in 1965, the majority of Americans have been insured through private health care plans, most often through their employers. However, private plans have never insured all Americans, and in the last 30 years, the percentage of Americans they have covered have been slowly slipping. In the 1970s, an all-time high of 80% of Americans were on private insurance plans. Today, that number has fallen to 65%.
Private insurance companies have dropped 15% of the population for a reason. They don't want them. Insurers have spent the last 30 years carefully combing through their client base and eliminating the most costly patients. After all that work, their profit margins are way up. In the 70s, insurers paid out about 95% of premiums for claims; that number stands at 80% today. That extra 15% means billions in profits for them. They won’t give up that money.
So, why are insurance companies fighting the public option, if they have no intention of covering the uninsured? Industry lobbyists say it is because they will not be able to compete against the deep pockets of government, that the public option will undercut their prices and drive them out of business. The government, they argue, can afford to operate at a loss, while they cannot. But this is clearly nonsense -- all current proposals require employers to insure their employees or pay a tax for not doing so. Businesses, as allergic to taxes as they are, are not likely to dump the plans they have. The government will have to tax non-participating businesses enough to finance a public option, so the tax penalty will not be cheap.
Private insurers also know that the government is not in a position to rapidly absorb 65% of the health care market. The federal government is big, but even it cannot swallow 10% of GDP in the near term if it were to drive private companies out of business. As long as insurers do their jobs, and satisfy their customers, they should be safe. And they have a 20% profit margin to work with.
What insurance companies are fighting for is to be the public option. They are willing to insure the uninsured population, but they want the government to pay them to do it. Their plan is to get the government to subsidize premiums so they can offer insurance to the 45 million uninsured without having to cut prices — or profits. They don’t really care if the plan succeeds in covering everyone, just as long as they get money to offer more policies without any premium reductions.
While I would like to see the uninsured on the same private plans most employed citizens enjoy, experience suggests that handing money bags to private companies is poor public health policy. Massive cash giveaways will not guarantee quality care, and more importantly, will do nothing to control costs.
The easiest way to extend a public option to the uninsured is to expand Medicare to cover them. Not Medicaid; Medicaid is the ugly stepchild of healthcare policy. It is woefully and chronically under funded, paying physicians so poorly that 50% of doctors have closed their practices to new Medicaid patients. Medicare, on the other hand, is a healthy and productive program for one simple reason. Elderly people vote. They keep politicians intimidated and have aggressively protected their interests each time anyone has suggested taking a knife to Medicare benefits. If the uninsured end up in the same boat with the elderly, ironically the poor would end up allied with one of the most powerful constituencies in U.S. politics.
My biggest fear for the public option is that it will become a cash giveway for private insurance, but my second biggest fear is that it becomes a neglected government program that is underfunded and poorly run. Then, after a few years, conservatives will move to kill the program they consciously hobbled from the start.
We need a public option. But it has to be the right public option, or this whole reform business will fail in a colossal way.