The White House recently floated a trial balloon when Secretary of Health and Human Services Kathleen Sebelius said that a government-run “public option” in health care was not essential to President Obama’s reform.
The response from liberals, who view the public option as a critical step toward a non-profit and perhaps government-run health insurance system, was ferocious. It was so negative that now the White House is backing the public option once again.
Today, the Washington Post writes that Obama’s White House is shocked that the public option is such a big deal for the Left. This is not the way the President’s campaign team treated the issue, though.
In September 2007, then-Senator Obama was in Ames, Iowa, campaigning for president. In a forum, he tried to convince Democratic caucus-goers of his commitment to a single-payer system. He said that such a system is too politically risky to advocate, but that he hoped to offer Americans choices that would lead to such a system.
“If I were designing a system from scratch I would probably set up a single-payer system,” Obama said. “But we’re not designing a system from scratch…And when we had a healthcare forum before I set up my healthcare plan here in Iowa, there was a lot of resistance to a single-payer system. So what I believe is we should set up a series of choices….Over time it may be that we end up transitioning to such a system.”
Think back to 1995. House Speaker Newt Gingrich was discussing a scheme to offer an alternative to Medicare, which involved high-deductible health plans with tax-free Medical Savings Accounts. It resembled today’s HSA-compatible plans, except that the savings accounts came with an annual government subsidy for seniors. Gingrich was so certain that seniors would prefer this option, that he offered these remarks:
“[W]hat do you think the Health Care Financing Administration is? It’s a centralized command bureaucracy. . . . Now, we don’t get rid of it in round one because we don’t think that that’s politically smart and we don’t think that that’s the right way to go through a transition. But we believe it’s going to wither on the vine because we think people are voluntarily going to leave it — voluntarily.”
Sound familiar? Just as Gingrich described traditional Medicare as “withering on the vine” when people were offered a choice, Obama was describing a system in which private insurance “withers on the vine” when a cheaper government alternative is established, resulting in a single-payer system.
What’s wrong with that? The conservative objection is that this amounts to a government-backed predatory pricing scheme. Medicare, already on the rocks financially, survives by under-paying for many medical services, as the Mayo Clinic president Dennis Cortese has pointed out on several occasions, including in this letter signed by several other major providers as well. The shortfall is particularly acute in chemotherapy. Private insurers have to make up the slack by overpaying, and they pass the costs to consumers (who also subsidize Medicare through their payroll taxes).
This is how a public option plan would work, except that if it is truly effective then there will be no private insurance customers left to gouge. If a public insurance option is established that pays Medicare rates, it might be able to charge lower premiums and attract more customers. But as it gradually comes to dominate the market in a price war, and as private insurers “wither on the vine,” massive premium increases will be necessary — or perhaps tax increases — in order to pay the true costs.
This is essentially what has already happened on a smaller level with Maine’s public option, Dirigo Choice, in that state’s individual insurance market. After regulations similar to the ones in Obama’s health reform bill (especially the one pertaining to pre-existing conditions) drove all other state-level regulated insurers out of Maine, Dirigo had to double its premiums — its family plan now costs $1,500 per month — and reduce its benefits. The cash-strapped system is still in search of a new subsidy from taxpayers.
The high-profile debate over the public option on the Left now puts the White House in an uncomfortable position. Obama must revert to supporting the public option, just as the public is beginning to sour on that provision.
Americans are already wary of President Obama’s health care bill, but until now polls always showed narrow majorities had supported the idea of a government-run health insurance plan that competes with the private sector. This week’s NBC/Wall Street Journal News poll shows that this support has eroded, and now 47 percent of Americans oppose the public option compared to 43 percent who support it. Last month, the same poll showed 46 percent in favor and 44 percent opposed.
Overall, the new NBC News poll puts public support for President Obama’s overarching plan at 36 percent, whereas 42 percent believe it is a bad idea. A large majority of those surveyed continue to believe Obama’s plan will have no effect on their care (27 percent) or will make it worse (40 percent).
