Take An X To The Public Health Insurance Option

Take An X To The Public Health Insurance Option

There’s an old proverb—everything old is new again. That is certainly true for healthcare policy.

Last month, Mon. Bernie Sanders, I-Vt., introduced the Medicare for All Act of 2023, the single-payer health plan the Vermont socialist has been pushing for years.

President Biden will surely dust off his old proposal for a public option whenever he launches his re-election effort. He stumped for this “moderate” alternative to Medicare for All during his campaign for the White House in 2020. But Democrats in Congress haven’t made any progress on the idea since Biden took office.

Medicare for All and the public option are two paths to the same destination—a government takeover of the health insurance system. The former is upfront about that goal. The latter slouches toward single payer.

Few public option plans have had a longer shelf life than the Medicare-X Choice Act, the brainchild of Democratic Sens. Michael Bennet of Colorado and Tim Kaine of Virginia. It’s been introduced three times—in 2017, 2019, and 2021. It hasn’t yet made an appearance in the current Congress. But it still captivates Democrats. Earlier this spring, the left-leaning Urban Institute released a study analyzing “access and equity concerns” in the bill.

The study concluded that Medicare-X would not reduce access to or quality of care for black or Hispanic patients. But that’s a dubious finding.

Public option plans are explicit about cutting payments to doctors and hospitals in order to keep their costs down. It’s hard to understand how lower payments to providers would have no impact on the supply of care they’d be willing to provide.

Medicare-X would let people buy into a low-cost, government-subsidized insurance plan. In this case, individuals and small businesses could purchase the plan—a modified version of traditional Medicare—on the Affordable Care Act’s exchanges.

The plan would phase in over four years. In the first, only people who live in areas with one or no insurers on the Obamacare exchanges could enroll. By the fourth, anyone can sign up.

Advocates of the idea say Medicare-X would be just one more insurance plan for sales on the exchanges. People could pick private plans, if they wanted to.

But they wouldn’t have that choice for long. No private insurer can compete with a public option.

Unlike private companies, which need to earn money or at least break even to stay afloat, the public option would have the full faith and credit of the United States behind it. That means the government could undercut private insurers by keeping Medicare-X premiums lower than those of other plans on the market.

To keep its own costs down, Medicare-X would simply underpay healthcare providers, just like its namesake does today. In 2020, Medicare paid hospitals 84 cents for every dollar they spent treating the program’s beneficiaries. That shakes out to a $75.6 billion shortfall.

Today, raising hospitals prices for private insurers in order to offset the losses they incur covering Medicare enrollees. That’s why private insurers pay hospitals 247% of what Medicare would pay for identical services, according to research from the RAND Corporation.

As more people enroll in Medicare-X, hospitals will bill private insurers more to offset the losses. Private insurers would then hike premiums on enrollees to make up the difference, which would push more people to the subsidized refuge of the public option. And the cycle would repeat.

Eventually, the pool of potential customers for private insurers will become so small that they’ll leave the market. The federal government might even hasten this transition by offering private insurers contracts to administer Medicare-X plans.

Insurance companies would be hard pressed to turn down such a deal. The insurance giant Humana made a similar calculation this year, when it announced it would stop selling employer-sponsored insurance in order to focus on selling more lucrative options—namely, government health plans.

Public option supporters are quick to point out that seven in 10 Americans support their plan. But just one in 10 Americans supports eliminating private insurance—that is, the public option’s logical conclusion. In other words, plans like Medicare-X are only popular because the politicians pushing them are bending the truth.

There’s no telling when Democrats will dust off Medicare-X again. When they do, they’ll make their case with the same misleading pitch as always. Voters shouldn’t be swayed.

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