The Obama administration and their congressional allies are pushing forward with a public healthcare option said to compete in the marketplace with private insurance. Their health care remake will be government-run and financed by the taxpayers.

Reimbursement rates for the public plan will closely follow that of Medicare. However, given that reimbursement rates for Medicare patients are lower than that of privately insured patients, a large cost shift onto private patients and insurers is anticipated. It is expected that hospital administrators will strongly oppose any movement toward a public plan, as this will leave their facilities and staff underfunded, with little choice but to accept the large, government-run insurance.

The creation of this new health system will ultimately lead to decay into a Medicaid-style program. Of the 170 million individuals that currently have private insurance, 119 million of them will shift into the public insurance market. this evacuation from private to public will not only overwhelm an underfunded government plan, but also eventually cause commercial insurance to be crowded out of the market, unable to bear the financial burden.

This lack of competition will force reimbursement rates to fall below even current Medicare rates. Employers, already strapped for cash, will be incentivized to drop private plans altogether and force their employees into the public option.

The rapid movement towards a single-payer system, will not only hurt private insurers and hospitals, but ultimately lead to a decrease in quality of care for patients. Better health coverage is achievable by truly market-based, consumer-driven reforms.



Sincerely,

Mike Ciamarra

Vice President,

Alabama Policy Institute