• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • CAP Wrong Again: Public Plan Will Kill, Not Create, a Competitive Health Insurance Market

    The Center for American Progress has a new report out titled “Competitive Health Care: A Public Health Insurance Plan that Delivers Market Discipline”. Listing everything that we disagree in their report would result in something much longer than a blog post, but since they mention us by name, we need to make one fact clear: including a public plan in a Federal Employees Health Benefit Plan (FEHBP) health insurance reform model would destroy a competitive health insurance market.

    Here is what CAP writes:

    Promoting choice among health insurance plans to reform a dysfunctional health insurance market is an idea that has been around for decades. The Heritage Foundation has long advocated health reform modeled on the choices in the Federal Employees Health Benefit Program, which provides health insurance to federal employees.

    This is true. The Heritage Foundation has long supported a FEHBP-style insurance exchange. But then Cap continues:

    Public Plan Choice—the combination of the exchange and a public health insurance plan offering within it—offers an opportunity to create both competition and a new competitor in the health insurance marketplace, strengthening the exchange’s incentives for all health insurers to be more efficient and responsive to individuals. Through fair competition on a level playing field, the insurance marketplace is made more functional.

    We couldn’t disagree more. We have also regarded the creation of a public plan the antitheses of a competitive market. Here is just some of what we have written on the subject:

    Heritage Director of Center for Health Policy Studies Bob Moffit, December 22, 2008:

    While [a public health plan] might look like a prescription for consumer choice and competition, the reality is very different.

    Consider the components: a powerful regulatory body that runs a proposed National Health Exchange, enforcing a single set of rules; a rigged competition between private health plans and a government health plan that enjoys special advantages and potentially unlimited taxpayer subsidies; and another powerful federal agency–a board, council or institute–determining what medical services and benefits would be covered and reimbursed in Americans’ health insurance. In the new public plan, as is the case for Medicare and Medicaid, costs would doubtless be controlled by cutting payments for medical goods and services, thus reducing their availability.

    Given the structure, function, and dynamics of such a combination of proposals, the result would surely be a rapid evolution toward either a single-payer system of national health insurance or, at the very least, a highly regulated and painfully sluggish, centrally controlled system of health care in which private health plans and private medical practice are private in name only. Meanwhile, millions of Americans would lose their employer-based health insurance, and the artificially swollen and heavily subsidized government health plan would remain as the benchmark for “private” decisions concerning financing, benefits, and standards within the new National Health Exchange.

    Stuart Butler, Vice President, Domestic and Economic Policy Studies, Domestic Policy, November 14, 2008:

    The Heritage Foundation and some other think tanks have argued for years that an FEHBP-style health exchange would make sense.

    the exchange must provide a level playing field for all competing plans – no unfair kickbacks or financial links between the exchange and any one plan. The FEHBP is strictly neutral. But Mr. Obama wants to inject a government-run insurance plan as one of the competitors in his exchange version. That’s dangerous.

    A government-sponsored exchange would naturally write the rules to favor its own plan. Imagine if baseball umpires and the New York Yankees both worked for George Steinbrenner. The Red Sox or Rays wouldn’t stand a chance.

    Moffit, August 14, 2008:

    In the Federal Employees Health Benefits Program (FEHBP), the unique consumer-driven health program that covers federal workers and retirees–and which many cite as a functioning version of a “national health insurance exchange”–the United States Office of Personnel Management (OPM), the agency that administers the program, does not field an “OPM Health Plan” to compete with the hundreds of private health plans around the country. In the FEHB, competing health plans offer a variety of different benefit packages, from managed care offerings to health savings accounts plans. And in the FEHBP, the private health plans, not the taxpayers, assume the financial risks.

    But the proposal for a national health insurance exchange with the government as a direct competitor is very different. The government would not only set the rules for the competition, but it would also enter into the competition as a player. The incentives governing the government plan and its powerful board of directors–presumably Congress–would not only be economic but also political. As a result, the role of consumers personally choosing value for their dollars would be dramatically diminished.

    The likely incentives for government officials would be to set rules to advantage the government’s own health plan and to disadvantage the private health plans, including setting the government’s health plan premiums artificially low, reducing or eliminating cost-sharing requirements, or more heavily subsidizing certain benefits to make the government health plan more attractive than the private health plans. These plans would operate without incurring any of the normal financial risks that private health plans must bear.

    Butler, June 19, 2008:

    It is also important to remember an old sporting adage—if the umpire works for one of the teams, you should be suspicious of the score. The simple fact is that if the government is sponsoring a competition within an exchange, and also is responsible for one of the plans, there can be little doubt that the rules and regulations promulgated by the exchange will tend to advantage the government-sponsored plan. This will be compounded if, like Medicare, the public plan receives a large taxpayer subsidy.

    Posted in Obamacare [slideshow_deploy]

    2 Responses to CAP Wrong Again: Public Plan Will Kill, Not Create, a Competitive Health Insurance Market

    1. HSR0601 says:

      I guess the best part of competition between the public and private insurance will be that it can bring down the excessive costs and raise the quality of service to survive particularly in private sector , therefore there is no need to worry about the expensive medical costs over time, as EUROPE tells it.

    2. Bart, California says:

      A public-plan-as-competitor is like allowing the coaches of one baseball team to double as umpires.

    Comments are subject to approval and moderation. We remind everyone that The Heritage Foundation promotes a civil society where ideas and debate flourish. Please be respectful of each other and the subjects of any criticism. While we may not always agree on policy, we should all agree that being appropriately informed is everyone's intention visiting this site. Profanity, lewdness, personal attacks, and other forms of incivility will not be tolerated. Please keep your thoughts brief and avoid ALL CAPS. While we respect your first amendment rights, we are obligated to our readers to maintain these standards. Thanks for joining the conversation.

    Big Government Is NOT the Answer

    Your tax dollars are being spent on programs that we really don't need.

    I Agree I Disagree ×

    Get Heritage In Your Inbox — FREE!

    Heritage Foundation e-mails keep you updated on the ongoing policy battles in Washington and around the country.

    ×