Public Option or Government Takeover?

Amidst the heated debate over the future of health care, one professor told the House Subcommittee on Health that it could take 4 trillion dollars to make sure “nearly everyone” in America has health insurance.

“Using the ARCOLA model, we found nearly everyone would be covered if all elements of the Kennedy bill were enacted at a ten-year cost of 4 trillion,” said Dr. Stephen Parente on June 23. “That 4 trillion estimate over 10 years assumes a public option plan with Bronze, Silver and Gold levels in the proposed insurance exchange with a subsidy for premium support that is income-adjusted and calibrated for assistance at the Silver level.”

According to the University of Minnesota professor “The Silver level is [the] equivalent of [a Preferred Provider Organization] PPO plan with medium levels of generosity, something with [a] 15% coinsurance rate, manageable copays and average level of access to physicians and hospitals.”

In other words, such an implementation of the bill would entitle “public option” users to network-based health care with 15% of costs paid out of pocket and “manageable copays”—much like what Health Management Organizations (HMOs) and PPO plans currently offer in the private market.

President Barack Obama clarified earlier comments about his “public option” plan at a press conference on June 23, saying that “Well, no, no, I mean—when I say if you have your plan and you like it and your doctor has a plan, or you have a doctor and you like your doctor that you don’t have to change plans, what I’m saying is the government is not going to make you change plans under health reform.”

The government might not directly force a change, but Parente’s study estimated that 79 million Americans would lose their private insurance if the bill were implemented at the $4 trillion level. “Because the public plan can compete with the individual and group market private sector offering, we saw crowd out resulting from the public plan of 79 million covered lives with the majority [of] people leaving their employer-sponsored medium PPOs and HMOs,” he testified at the hearing.

47 million of Americans have no health insurance, according to 2008 U.S. Census Bureau data. Using Census information, the Associated Press estimated on June 26 that (based on 2008 numbers) the “uninsured” includes

– 9.7 million non-U.S. citizens (21%) and
– 28 million from families earning under $50,000 annually.

Even if the Census data were accurate, Prof. Parente’s testimony insinuates that in order to cover 47 million Americans the plan would likely cause a crowd-out of 79 million people already insured. In other words, to achieve near universal coverage under the Kennedy-Dodd bill, the government might just have to provide the public option to near 126 million citizens, or 41 percent of the American population (2008 estimate).

Columnist George Will told ABC’s “This Week” on June 14 that “Fourteen million of them are already eligible for other government programs and haven’t signed up. Ten million are in households with household incomes of $75,000 a year and could afford it if they wanted to.”

He added that “Furthermore, an enormous number in that 47 million are not American citizens. Sixty percent of the uninsured in San Francisco are not citizens.”

The U.S. Census Bureau does not ask respondents whether they are in the U.S. legally or not.

According to his comments, Professor Parente and his fellow researchers “accounted for the public plan being reimbursed at 10% above Medicare reimbursement, which is also 10% below commercial insurance premiums.”

Parente is the principal of the “health care consultancy, HSI Network” and has an adjunct appointment at Johns Hopkins.

“One conclusion emerges every time we score a plan,” testified Prof. Parente. “None are revenue neutral.”

He added,

“Even with Medicare & Medicaid ‘pay fors’, the savings in those programs
need to deal with cost pressures of those programs. In all likelihood these
proposals, if enacted will escalate the rate of growth of our national debt,
particularly the Kennedy plan.”

According to the 2008 report by the Trustees of the Social Security and Medicare, the program’s “financial status is even worse” than Social Security. “For the second consecutive year, a “Medicare funding warning” is being triggered, signaling that non-dedicated sources of revenues—primarily general revenues—will soon account for more than 45 percent of Medicare’s outlays,” they stated.

Bethany Stotts is a staff writer at Accuracy in Academia.