Government Solution to Health Reform Offered

Les Masterson, for HealthLeaders Media, December 17, 2008

The latest addition to the healthcare reform debate would pit a government plan against private insurers while maintaining the employer-based insurance system.

Supporters of a public insurance option say it would increase healthcare coverage, reduce costs, and improve quality and value. House Ways and Means Health Subcommittee Chairman Rep. Pete Stark (D-CA), U.C. Berkeley professor Jacob Hacker, PhD, and Institute for America's Future co-director Roger Hickey spoke today at a press conference about Hacker's report "The Case for Public Plan Choice in National Health Reform."

President-elect Barack Obama and Senate Finance Committee Chairman Max Baucus have backed the idea, which would mirror conventional Medicare. The federal government would manage the program and pay private providers to deliver care. Proponents say the public plan is not a "Medicare for all" solution, but builds a subsidized government option to private insurers and ensures that Americans can receive proper health coverage.

"This is not an argument for a universal Medicare program, but what I call a hybrid approach that builds on the best elements of the present system while putting in place this new means with which those without access to secure workplace insurance can choose among health plans that provide strong guarantees of quality, affordable coverage," says Hacker.

The public plan would compete with private insurers as a way to provide a level playing field to protect Americans without health insurance. Hacker says a public insurance option is similar to the healthcare system in Germany, and he estimates the U.S. could save up to $46 billion annually if it created a public-private system.

Stark supports the idea of a public insurance option that is based on the Medicare program. "I think that everybody should be covered and everybody should pay according to their ability to pay," said Stark.

Surveys show that Americans support a public-private health insurance system. "The proposal that I am putting forth basically lets Americans have their cake and eat it too," says Hacker.

Hacker says the public plan is needed because public insurance, including Medicare and the Veterans Health Administration, has:

  • Reined in costs and preserved access better than private insurers
  • Created new payment and quality-improvement methods that are followed by private plans

Hacker says public choice is critical in sparking private plans to improve transparency and invest in quality.

Medicare has less overhead than private insurers and doesn't pass on costs to consumers while increasing profitability, he says. As an example, Hacker says Medicare's health spending per enrollee increased 4.6% between 1997 and 2006 while private insurer spending ballooned at 7.3% a year during that same period.

Hacker says competition with government plans would improve private insurance offerings and give an alternative to those who don't think the public option serves their needs.

"If, as many critics of public plan choice contend, the private sector can provide greater value than the public sector, then private plans should have nothing to fear from competing on a level playing field with a new public plan," wrote Hacker in his report. America's Health Insurance Plans recently presented its own healthcare reform plan. Rather than rely on greater government intervention, AHIP's plan builds on top of the current employer-based system and requires all Americans to have health insurance, which mirrors the Massachusetts healthcare reform. Robert Zirkelbach, director of strategic communications for AHIP, says the organization's proposal would cover all Americans, improve quality, and make healthcare coverage more affordable.

"Healthcare reform should build on what's working in the current healthcare system and allow patients to continue to benefit from the innovative care coordination and disease management tools that health plans have implemented," he says.

Stark says he doesn't expect Congress to pass a major healthcare reform package in Obama's first 100 days. There are deferred issues, such as Medicare payment cuts to doctors, health information technology, and the State Children's Health Insurance Program, that Congress will need to tackle first. Stark suggests healthcare reform will take a full year.

The Congressman says reforms plans will need widespread support in healthcare, but questions whether health insurers will back a program that expands public insurance.

"I think you have to give everybody a chance of a hearing. We're not going to pass these plans if we don't have the American Medical Association, American Hospital Association, and even Pharma. You're not going to get the insurance companies on board, I don't think, but they are the easiest to roll because nobody likes insurance companies," says Stark.

Les Masterson is senior editor of Health Plan Insider. He can be reached at
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