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What's So Scary About Offering People the Option of a Public Health Plan?

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Posted on July 8, 2009, Printed on July 8, 2009

Independence Day is a time to reflect on the United States and to ask what it is that we really value about our country. Most people would probably list the freedoms that it has usually guaranteed to most members of society. The opportunities for economic success, while not as great as often touted, are nonetheless impressive.

However, some members of Congress were apparently celebrating our system of employer-provided health insurance last weekend. Or, at least that is what they want us to believe.

As Congress starts to delve into the dirt of a health care reform package, the clearest point of conflict is over the existence and structure of a public health care plan. Some members of Congress have thrown down the gauntlet, insisting that they could never allow the public to have the option of buying into a government-run plan.

These members tell us that a government-run plan will be like having the post office manage our health care. While the post office actually does a pretty good job where I live, if the point is that a government-run plan is going to be bureaucratic and inefficient, then why are opponents of a public plan so worried about giving people the choice to buy into it? If the public plan is bad, then people will just stay with the options currently available in the private sector. As those of who believe in the free markets like to say: "what's wrong with giving people a choice?"

In addition to the members who just say "no" when it comes to a public plan, there are also members who are willing to allow a public plan, but only if they can be sure that it will not provide real competition with existing private plans. This route involves crippling the public plan in various ways to make it less competitive.

For example, one proposal is to establish a series of health insurance cooperatives, which would be prohibited from acting jointly to maximize their bargaining power. The idea is that a newly formed Nebraska health insurance cooperative, insuring a few thousand people, will not be able to put too much pressure on Pfizer or the American Medical Associations when negotiating prices. It also will not be able to provide much competition for Aetna, Cigna, and the other major insurers.

Several members of Congress have made protecting these insurers and the current system of employer-provided health insurance into a basic principle. Max Baucus, the head of the Senate Finance Committee, who will probably have more to say in the final bill than anyone else in the Senate, falls into this camp. Senator Baucus has explicitly said that he would not support a bill that jeopardized our system of employer-provided health insurance.

This is truly bizarre. The United States has employer-provided health care insurance as an accident -- it came about as a way to evade wage controls during World War II -- it was not some grand principle.

It is almost impossible to imagine why someone would consider employer-provided insurance as an end in itself. I say this both as an economist and as an employer. I am going to waste several hours tomorrow discussing my center's health insurance plan with an insurance broker.

It is very difficult to compare the merits of the different insurance plans that we are considering. There is an endless list of conditions that are or are not covered (which can change after the fact). There are also issues about how quickly and consistently the insurer will pay bills. We can ask people with other insurers about their experience, but there is no guarantee that our experience will be comparable.

Of course, our broker is of little use. She will only get paid if she persuades us to change insurers. How much can we trust her?

I am trying to do research and run a think tank. Senator Baucus might think that it is a good idea that I have to waste my time dealing with insurance brokers, but I don't, and I suspect that millions of other small employers feel the same way.

So, why not give us a choice of a good, simple, public plan? Employers that want to read through insurance contracts will still have that option. The rest of us can get back to our work.

Dean Baker is co-director of the Center for Economic and Policy Research.
© 2009 Independent Media Institute. All rights reserved.
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Dr. Dean Baker is a macroeconomist and Co-Director of the Center for Economic and Policy Research in Washington, D.C. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University. (more...)

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are so eager to take the public plan off the table... by John Sanchez Jr. on Thursday, Jul 9, 2009 at 11:36:25 AM
The Health bill finely decided on will be nothing ... by Dennis Kaiser on Thursday, Jul 9, 2009 at 4:28:18 PM
Congress is only worried about one thing and one t... by Sister Begonia on Thursday, Jul 9, 2009 at 5:25:55 PM
Quoting a friend who, in order to explain Max Bauc... by elena dumas on Thursday, Jul 9, 2009 at 6:34:39 PM
The reason I think the public "option" is not good... by August Adams on Thursday, Jul 9, 2009 at 11:23:16 PM
Single-Payer is the only way to go to actually ref... by Bryan Emmel on Friday, Jul 10, 2009 at 1:49:30 AM
The healthcare industry doesn't want to acknowledg... by Larry McCombs on Friday, Jul 10, 2009 at 8:26:07 AM
Tweedle dee and Tweedle dum want your vote and you... by Carol Crown on Friday, Jul 10, 2009 at 1:42:48 PM
We need to get one of the "outsider" parties like ... by Bryan Emmel on Saturday, Jul 11, 2009 at 3:25:43 AM
There's NO WAY a third party can ever make it in t... by Bia Winter on Saturday, Jul 11, 2009 at 8:32:24 AM