View from Washington – The Playing Field

A government run health plan for the market

Among the competing tensions in the current policy debate, none is greater than the proposal for the enactment of a government-run healthcare plan to compete with private insurers. Recent comments by the White House indicate that the public plan will be the centerpiece of President Obama’s reform initiative. Among the Administration’s reform efforts:

  • Any plan must address ways to control long-term growth in healthcare costs.
  • Americans must be allowed to choose their own doctors, hospitals and health plans.
  • Healthcare coverage must be maintained for Americans even when they lose or change jobs.
  • Insurers must end barriers to coverage for people with pre-existing medical conditions.
  • The nation must ensure affordable, quality health care for all Americans.

The last point may pave the way for the public plan. Congressional Democrats are expected to include a government-run alternative in the legislation they will be drafting. This public plan will be seen as a litmus test for both parties.

For and against
Many Republicans, insurers, and healthcare provider groups argue that the public plan will have a competitive advantage against private insurers, and will lead to a single-payer system.

Many Democrats, labor unions, and others argue that to make healthcare available to everyone, a government run plan is essential. Without the burden of making a profit/margin and the pesky need to market itself, proponents argue the government could do a better job of providing affordable quality care. They further argue such a system will force the private insurance companies to compete against the government-run plan. The playing field will be further tipped in favor of the government option because the feds will have access to accurate price data when other competitors will not. Expect any best price information at the Veterans Administration (VA), General Services Administration (GSA), Defense Department (DOD) as well as the Centers for Medicare and Medicaid Services (CMS) to be made available to the government actuaries setting their so-called “competitive” prices.

Case study
While not necessarily comparable in terms of scope, the adoption of the prescription drug benefit does provide a good case study for the government to consider fostering aggressive competition. It certainly led to impressive results with drug prices. This program has been deemed a success by both parties for costing less than expected. Also, private companies working with insurers have made progress at identifying ways to provide better care at lower costs.

Adoption of effective cost controls for Medicare is vital to healthcare reform. Because Medicare is the size it is, it dictates terms – like forcing cost shifting by providers onto other payers. If this power were extended to a new public program, a single-payer system would seemingly be assured for the future. The healthcare system will move in this direction, possibly without intent, but certainly in actual result.

The policy goal for health reform must be to seek points of equilibrium among the various policy alternatives which will produce optimal systems of health care for the nation. And, among the tensions that exist in healthcare, no tension is as great as the achievement of a basic level of fairness in the distribution of healthcare resources and the services those resources enable. Healthcare reform is essential for our country – a public plan inevitably leading to a single-payer plan should only be a last resort if other market reform initiatives fail.

Robert Betz Ph.D. About Robert Betz Ph.D.

Robert Betz, Ph.D., is president of Robert Betz Associates, Inc. (RBA), a well-established federal health policy consulting firm located in the Washington, D.C. area. Additionally, Dr. Betz is an adjunct professor teaching at The George Washington University where he specializes in political science and health policy. For more information about RBA, visit www.robertbetz.com.

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