Optional Health Care is Another Medicare Disaster

The current core issue in the Obama health reform plans is whether a "public option" should be one of the choices made available in a "health insurance exchange" (interesting that whether there should be a health insurance exchange at all seems to be already settled). Former governor Howard Dean is circulating a petition that calls it "non-negotiable," while the normally compliant Sen. Charles Grassley (R-IA) sees it as a "deal breaker," according to Bloomberg.

Most of the advocates of the public option compare it to Medicare. UC Berkley professor Jacob Hacker is quoted in The New York Times as saying, "The Medicare program is a real success story," and Karen Davis of the Commonwealth Fund says, "It would transform the market for private insurance." She claims a public plan would cost only $9,000 per year for a family, while a private plan costs $11,000.

It's hard to know how she figures that since there is absolutely no information available about how such a plan would be structured. But that's okay. Howard Dean says in a video that private coverage charges 30 percent to 50 percent of premium for administrative costs. These are all just made-up numbers, based on nothing at all.
But here are some real numbers: Medicare currently has $34 trillion in unfunded liabilities, but the average beneficiary pays 14.1 percent of her income on out-of-pocket health care costs, compared to 4.3 percent for a non-Medicare household. Is that really a program we want to replicate for most Americans?

Most of the Times article focuses on unfair competition -- i.e., the public plan would use price controls and regulations to under-price private competitors. That is certainly true, but it sounds a little whiney and it leaves open the suggestion that price controls and regulations work pretty well and should be extended to regular folks, so they can save money. It also opens the door to advocates saying, "What's a matter? Ya 'fraid of a little competition?" Unfortunately, we've all been pretending for decades now that Medicare is a good program, but it isn't. It is lousy insurance coverage that is popular only because beneficiaries pay only a fraction of its costs.

Maybe a better strategy would be to accept the challenge. If the Obama Administration thinks public/private competition is such a good idea, let's take it all the way. Let's have public schools compete with private ones, and the post office compete with private mail service, and ditto with the DMV, and highways, and prisons, and fire departments, and welfare programs. Let's open up the whole damned thing. Make the money available to citizens and let's all buy the services we prefer, be they public or private. What's a matter? Ya 'fraid of a little competition?

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