The Key to National Health Care: The Public Plan Choice

A new report by Jacob Hacker, entitled The Case for Public Plan Choice in National Health Reform was released on December 17 by the Institute for America’s Future and the Center for Health, Economic, and Family Security. The report shows why forcing the insurance companies to compete with a public option is vital to (1) control costs, (2) improve quality, and (3) set a high standard for private plans. To see the full report, click here [4].

A Medicare-style public insurance plan is better able to contain health care costs than private insurance. Between 1997 and 2006, health spending per enrollee grew faster under private health insurance than under Medicare. [Health Affairs [5]] Public insurance has lower overhead. For example, Medicare’s administrative costs (in the range of 3 percent) are well below the overhead costs of large companies that self-insure (5 to 10 percent of premiums), companies in the small group market (25 to 27 percent of premiums), and individual insurance (40 percent of premiums). [Health Affairs [6]] And public insurance can use its purchasing power to reduce costs. In 2006, for example, Medicare physician payments were significantly lower than rates paid by private insurers, yet 97 percent of physicians are accepting some new public Medicare patients. [MedPAC [7]]

Public insurance has pioneered quality-improvement methods that have frequently set the standard for private plans. The Veterans Health Administration (VHA) created a model evidence-based quality-improvement program that significantly increases the percentage of patients who receive the care they need. [Congressional Budget Office [8]] Elderly Americans with public Medicare report that they have greater access to physicians for routine care and in cases of injury or illness than do the privately insured. [Medicare Payment Advisory Council [9]] They are also half as likely as nonelderly Americans with private insurance to report common access problems, such as skipping a medical test, treatment, or follow up, and failing to see a doctor when sick. [Health Care Financing Review [10]]

A public plan option will set a high standard against which private plans must compete. Transparency in Medicare has helped to identify areas where higher health spending has not increased quality. [Congressional Budget Office [11]] In contrast, 126 private plans refused to provide data to a national accrediting agency that was needed for the magazine to rank plan performance. [U.S. News and World Report [12]] Driven by profit, private insurance companies seek to avoid insuring those with chronic and costly disease, yet they are the ones most in need of innovations in treatment and care coordination. A public plan, which by nature will take all comers, is best able to treat them and disseminate the lessons learned.