The Alan Katz Health Care Reform Blog

Health Care Reform From One Person's Perspective

Both Edges of Public Health Insurance Are Sharp

Posted by Alan on April 11, 2009

One of the more devisive issues emerging in the current health care reform debate concerns whether or not a government-run plan should compete with private carriers for individual and small group customers. President Barack Obama and Democrats in Congress have spoken forcefully in favor of this approach. Republicans have argued just as strongly against it. The role of government — should it be solely a regulator or serve as both regulator and competitor — is high on the list of issues most likely to frustrate a bipartisan solution.

I’ve written previously about the dangers of the hybrid approach, how it is likely to lead to a tilted playing field that benefits the public entry to the detriment and potential destruction of private offerings. But there are other points of view, several of them. For example, Princeton Professor Uwe Reinhardt, posting on the New York Time’s Economix articulates several reasons why the public might embrace a government competitor.

Professor Reinhardt notes that recent behavior by private health insurers has shaken public confidence in the industry. He also cites the double whammy of families facing lay0ffs in the current economic downturn and, as a result of our current employer-centric system, losing their subsidized coverage at the same time.

The long-term confidence elderly Americans have put in government-run Medicare plans, even over those of competing private health plans offering richer benefits.

But his strongest arguments in favor of a “Medicare for all,” public insurance program is its ability to beat down rising health care costs. “The providers of health care and health care products, to whom ‘national health care spending’ represents ‘national health care incomes,’ fear the market power that a public health plan might bring to the demand (payment)side of the health sector,” he writes.

Using its buying power, Professor Reinhardt expresses hope the public plan “might significantly bend down the lush, currently projected, long-run growth path of America’s health spending .”  Of course, it’s driving down the cost for enrollees in the public program at the expense of those in private plans that is of great concern to those who want to maintain a competitive system.

It’s the two-edged nature of a hybrid system that is most troublesome — and dangerous. As many of those who have commented on my previous post note, the key to meaningful health care reform is to focus on bringing down costs. Well, as Professor Reinhardt points out, Medicare-for-all can do that. But if the price of that cost control is the destruction of private insurance, why not just turn to a single-payer system in the first place? Well, of course, there’s huge problems with that approach, too, including the danger of runaway taxes.

Is there a middle ground?  Professor Reinhardt claims that an “all-American compromise that could give most sides in this fray much (but not all) of what they ask for” is possible and he promises to outline that compromise in a future post. Until he or someone else does, the debate over which side of the sword we want to face as a nation will, rightfully, be front and center.


5 Responses to “Both Edges of Public Health Insurance Are Sharp”

  1. I sincerely believe that both sides of the sword have been very clearly described here. Dave’s comments highlight the severity of the situation. But what I see most clearly is that there is a clear distinction when it comes to determining that the private health care system has run its course of life and come to an end because of the high premiums and inability to cover people. A change is dearly needed. I do like the Two Bill Solution as it will let each state own the credibility of its choice and put pressure on them to make it work and prove that they chose the better option. After all, it’s a democracy. We have got to change the way we perceive it.

  2. Dave Wood said

    The whole notion of a “middle ground” that involves the Federal govt. misses the point that this same Fed. govt. has failed at following terrorists into the US ( 9/11 ), failed at preparing an entire coast from Hurrican Katrina, failed to inform us of the true facts when taking us to war (Iraq), failed at lowering costs for health care paid for by the Feds (Med and Medicaid suffer from massive fraud and abuse), and cannot even manage to balance their budgets with any honesty. Is this the same Federal govt. we now want to take over MORE control of health care?

    Does not the Fed. govt. have enough on their plates. Is not health care the ultimate “local issue”, important enough to have it’s own authority?

    Every other nation has some sort of regional authority to handle and make decisions for health care. Canada has the provincial, Germans have whats called krankenhasse, or funds. Why do we want the Fed. govt. to be involved at all?

    Do you really want 435 Congressman and 100 Senators, and the HHS, The President, and 50 state legislatures, and 50 Governors all debating how much to pay for an office visit? ARE WE INSANE?

    The answer is the TWO BILL SOLUTION ( google it) which says that Congress would write two bills, one by the Democrats that would be called the SPA PROGRAM (single payer authority), and the second bill called the TAC PROGRAM (written by the Republicans, private insurance based- total choice) and the let the states or regions OPT into either program on a voluntary basis through a local election.

    In this way we might see the fine liberal people of Oregon vote in the SPA PROGRAM and elect its own leaders, and would self tax and self rule. Likewise we may see the fine conservative people of Utah vote in the TAC PROGRAM and elect its own leaders and would self rule it’s own more choice and more competition program based on true and pure free markets as Newt Gingrich and Sen. Coburn (Rep-Ok) suggest.

    The rest of the nation could watch and see how it goes. I believe both programs would slow down cost increases, and lower uninsured rates, and slow down the obesity rates, and increase quality.

    Obama will succeed in lowering the uninsured, but will drastically ramp up spending unnecessarily. We currently have enough money in our system to cover everybody, if only we could just rearrange the chairs, so to speak.

    We currently spend double what Japan and Europe pays totaling around $7,000 per capita. I personally pay 7 different authoritys for my health care – that is 1. employers share for health insurance policy, 2.- medicare tax, 3. health insurance in my care aka auto insurance, 4. Fed. income taxes, 5. state income taxes. 6. health insurance at my work ( workers comp), 7. sales and local taxes for the county health care system.

    And each of these authoritys or companys have their own offices, accountants, managers, computer programers, bill collectors, and on and on. WHAT A SYSTEM!

    And Obama wants to not only keep this system intact, he wants to EXPAND ON IT. To add more layers to an already overly fragmented montrosity.

    If it is proven that the current system is wasteful, unfair, and ineffecient, why on gods green earth would you want to expand it? The entire structure of the system stinks. There is no debate on it’s flaws or it’s complexity, nor on the reverse incentives to good health and well being.

    The main problem in the current system is that there is no ONE authority to make decisions on investing in better health habits, or how to improve quality. Instead we have the CMS, under the HHS, under the President, funded by the Congress, and ran by 50 state legislatures and 50 Governors running Medicare. ARE WE INSANE?

    Massive Medicaid fraud proven by the New York Times reporters in a series of articles where each agency proceeded to pass the blame to the next agency or the Governor. Billions wasted. The TWO BILL SOLUTION is the answer.

    • Squibcakes said

      This proposal is only feasible if employer sponsered coverage is eliminated in favor of a completely individul market, and even then does not address the core problem of growth.

      Growth is a two pronged issue: utilization and inflation. Inflation in healthcare is complicated by rapid adoption of new technology (or services) that is made possible by third party payment (i.e. the healthy who subsidize the sick and no one has to pay full price). Inflation in the private sector would improve long term without the distorting influence of government price fixing. Utilization is the much thornier issue. Growth in utilization is due to an aging population and productivity (new, better services or new uses for old services). Until we can find a sustainable way to grow utilization, we won’t have a long term solution. The best path is to pursue a healthier lifesyle. More physical activity, less caloric diets, etc. Short of that, no insurance at all would create sustainable utilzation growth, but that is undesirable because of the hit to our quality life afforded by access to preventive care and basic treatment.

  3. laborlawguy said

    The problem with “Medicare for all” is that, once you’ve eliminated the private insurers, where are you going to shift costs (Medicare underfunding) to? The most logical answer is rationing, coupled with the other logical answer–higher and huger tax bills.

  4. Yes, there “is a middle ground”. In my blog ( have put forth few articles outlining this. It seems that Congress and the ins. corps. know that to prolong a fight over the issue is to avoid it. Thus, neither appear as the “bad guy”, as in fact, they are “in bed together” for the most part. A resolution is rather simple if parties would approach it in a genuine and forthright manner with the best interests of citizens in mind, as opposed to their own hidden agendas of corp. profits and (lobbying) donations to political war chests. Being a published author with a book that touches upon health care and insurance reform (, it never ceases to amaze me how complicated issues are delibertaely made. Thank you, Dr. David Robinson

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