A New Federal Health Plan…Really?

There is a good string ongoing at Charlie Baker’s blog on this which includes a link to the discussion also ongoing at the National Journal.( http://www.letstalkhealthcare.org/health-care-costs/public-private-competition-in-health-care/). I won’t reiterate what has been said, but I do want to add a few more thoughts (and questions).

The primary issue at play in the proposal to launch a federal health plan is affordable access to healthcare primarily for individuals and employees of small businesses. The fact that the federal government is involved in this issue likely means that there is a perception or a reality that these populations are being unfairly treated within the existing system. There are two possible reasons for this. The first is that the individuals within these populations have no bargaining power. Large employers buy lots of insurance collectively and hence receive attractive pricing from insurers. The consequence is that individuals (like me) and small businesses subsidize these large groups so that insurers can turn a better profit. Some insurers may not price this way…but some probably do.  My first question: Would it not be easier to create buying pools of individuals and small businesses so that they collectively would have bargaining power rather than creating a nationalized insurance company? Secondly, without an employer contribution the real cost of insurance is staggering. It doesn’t help either that individuals do not receive a tax deduction for this cost whereas employers do. This is an obvious injustice that legislators could most definitely tackle.

One of the most siginificant concerns about a federal health plan is that the government mandates lower provider rates. Due to this cost shifting, the federal plan could offer lower premiums to policy holders. The effect is that more individuals choose the private plan thereby crowding out the private insurers. The issue: government reimbursement rates do not actually cover the cost of medical services provided (this is already the case for many providers). What happens? Hospitals and medical service providers go under…and then where are we? A better option: The federal government could expand the Federal Employees Health Benefits Program or the states could expand their state employee programs thereby creating group bargaining power. By allowing already sick individuals to buy into the state employees plan (or FEHBP) the issue of access for this group would also be addressed. Moreover, the government could extend the tax credits available to employers to individual buyers of insurance. These steps are far less costly to the government and equally effective at solving this particular problem.

Imagine if the government were to create a nationalized company to address every competitive injustice. Rather than try to compete itself, the government should be looking for ways to improve the competitve landscape of the private market so that patients benefit first and foremost. How do they do it? Mandatory health coverage, subsidies for low income individuals and families, risk pools for high risk patients, and the elimination of re-underwriting. These efforts would address access and affordable coverage, but would not necessarily address the massive healthcare cost challenges facing the nation (although they will help the issue- for example by providing primary care to many currently uninsured and thereby avoiding expensive acute care later on). The larger cost challenge is another discussion entirely and should be kept so.

The bottom line: A federal health plan is an overly complex and costly solution with little promise of success.

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