The Flap Over Public Health Plans: 40 Years Too Late

Note to critics of the public plan option for health insurance: This debate is over. You lost. In 2007, more than 45 percent of all medical costs in the U.S. were paid by government, vastly more than the one-third funded by private insurance.

The role of government insurance has been growing rapidly for more than four decades, since the creation of Medicare and Medicaid in 1965. From 1970-1990, during a period when the White House was occupied by Richard Nixon, Gerald Ford, Ronald Reagan, and George H. W. Bush (a period of GOP rule broken only by the brief Democratic interregnum of Jimmy Carter) government health care spending rose ten-fold. For all the talk of public insurance as Socialism, you'd think Eugene V. Debs must have been hiding somewhere in the Rose Garden during those years.

In truth, millions of Americans already have access to public coverage. There is Medicare for those over 65, Medicaid for the poor (including many frail elderly), SCHIP for kids, coverage for the active military, and for many veterans. In 2008, government paid more than 90 percent of the cost of the Medicare Part D drug benefit, the crowning health care achievement of George W. Bush, a man few would label with the "S" word.

Together, the share of medical spending paid by government has grown from one-third in 1970 to nearly half today, according to the statistics from the Census Bureau and the Labor Department. If your definition of "public plan" includes insurance available through highly-regulated private carriers to federal, state, and local employees, the numbers are even bigger. And, of course, don't forget the quarter-trillion dollar government tax subsidy for employer-sponsored health insurance.

But even using the most narrow definition--those getting direct government coverage-- more than 80 million Americans already have such insurance. That's half as many as have employer-sponsored insurance, but it's still a lot of policies.

Of course, among those 65 and older, far more have Medicare than have private coverage (many have both). Nearly a quarter of all children under 18 are covered by the government. In 2007, private insurance paid for $775 billion worth of health care. That sounds like a lot. But the government paid more than a $1 trillion.

Public plans have been a pillar of health insurance in the U.S. since the 1960s. We can have a perfectly good argument about whether these plans work as well as they should, whether there are markets where private insurance is more appropriate than public coverage, or how we should structure a public plan. But talking about government coverage as if it is the insurance equivalent of a four-leaf clover is just bizarre.

Indeed, when it comes to setting insurance standards, Medicare has been calling the shots for years. For instance, its payments are the benchmark against which private insurers fix the prices they pay doctors and hospitals.

It is especially odd to hear the American Medical Association grumble about public insurance. Back in the 60s, the AMA opposed creation of Medicare, a program the organization decried as, yes, socialized medicine. I suspect those docs never imagined that government would pay about one-quarter of the cost of physician office visits and clinical services as it does today.

While Medicare payments are far from ideal--specialists are often overpaid while primary care docs are underpaid--government reimbursements are the financial foundation of many medical practices. Without those steady payments, a lot of docs would be out of business.

It is no surprise that critics of health reform would revive the old Harry and Louise argument that government is trying to take over your health care. But if that's a problem, it isn't a new one. Government began taking over health care decades ago.

Comments

[droftim]

Democrats in Congress should stop trying to make up Universal Heathcare opponents and being fobbed off by talk of "a public option". Any add-on to the dysfunctional and bankrupting for-profit scheme we have today will only add more costs without offering any real benefits.

At this point what we should be talking about is what kind of Single-Payer system we want. We should not be scared off by people who do not know what they are talking about. People need education ... and lots of it.