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Public Option Is A 'Trojan Horse' For Slow-Motion Socialized Care

David Gratzer
Investor's Business Daily
June 22, 2009

In his speech last week to the American Medical Association, President Obama told members that critics had unfairly painted his proposal for a government health insurance plan as "a Trojan horse" for socialized medicine.

"When you hear the naysayers claim that I'm trying to bring about government-run health care," he said, "know this — they are not telling the truth."

Mr. Obama’s personal goals are beside the point. The problem is that a giant public insurance plan — a public plan option that would be the core of his health reform and included in the Democratic House bill — will be a Trojan horse whether the President wants one or not.

Once a new federal program is introduced, it will act as a toxin inside the health care system, crushing much of the good in a rash, ideological effort to fix the bad.

Administration officials complain that private insurers spend too much on paperwork and overhead. Fair enough, and efforts to contain those costs through innovation and industry-led cooperation are helpful.

But if there is a public plan, it will be a variation of Medicare, which single-payer advocates praise as an example of administrative efficiency. A dirty secret goes unmentioned in that tale: Medicare is a federal program, not an insurance plan. It’s an apples-to-oranges comparison.

A public plan option can overwhelm even the best private insurers, partly thanks to the unfair advantage of federal status. How? Let me count the ways.

Private insurers must comply with state regulations, where Medicare coverage doesn’t.

Medicare is a “pay as you go” entitlement, not an insurance plan.

Properly funded insurance plans must anticipate future costs; in contrast, a public plan option backed by the federal government can simply tax or borrow enough to cover costs from one year to the next to survive.

A Medicare-style plan will set prices with providers, not negotiate them, creating not simply a further competitive advantage, but burdening private plans with cost shifting (as Medicare presently does).

That’s why entitlement programs around the world usually start with low fees and great benefits — and a public plan is almost certain to do exactly that — “to be competitive,” of course.

Fast forward 10 years and the “affordable” public plan will have captured a huge market share. Obama will be in Illinois drafting his memoirs, but Congress will face stark choices as the plan’s costs inevitably spike. The challenges will be eerily similar to the decisions made every day by legislators in countries with government-run health care systems.

When entitlement programs become too expensive, governments ration care, raise taxes, or both. Citizens seeking to leave the less attractive public system will face few alternatives, as private plans will have been blown out of the marketplace by Washington’s taxpayer-financed, price-controlled head start.

We also know a public plan will be a Trojan horse because of the sheer size of the insurance pool it can create. A plan that can ignore state boundaries and laws can do what many small-market plans cannot: spread risks on a national scale.

The president rightly notes that this should suppress the cost of premiums in the public plan. But if that’s the case, then why not let private plans achieve the same result? If the president and his advisers seriously believe their proposed "health exchange" with a hundred insurance options will create competition, then why do we need a public plan to make it a hundred and one?

How then to create a competitive marketplace?

Start by leveling the tax playing field so that the self-employed and the unemployed aren’t penalized by the tax code; that would make buying an individual policy an option for millions of Americans. Standardize state coding and forms, so insurers can compete consistently on price and service.

Finally, free the market, allowing people to purchase health insurance across state lines.

The public option is a Trojan horse, creating single-payer health care in slow motion. While the president might not see it that way, many advocates of Canadian-style health care certainly do.

If the administration truly believes competition can produce good results, then it should fast-track measures to promote a more competitive insurance market instead of fast-tracking plans for a more competitive government program.

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