I was fortunate to be invited to attend the President's speech last night as a guest of Representative Keith Ellison. Like many supporters of a new public option health plan sitting in the House gallery, I was gratified to hear the President reiterate his continued support for creating such a plan. As a former executive in the health insurance industry, I worked with Medicare and Medicaid and saw firsthand the vital role these public options play in our health care system. For health reform to be most effective, I believe a public option similar to Medicare should be available to all Americans.
Despite the criticism the proposed public option has received from conservatives, existing public options like Medicare remain popular with beneficiaries. Before Medicare, about half of America's seniors lacked hospital insurance, 25% went without medical care due to cost, and one-third lived in poverty. Today, nearly all seniors have access to affordable care, and we've cut the number living in poverty by more than half. In these troubling economic times, Medicaid is needed more than ever as more people lose their jobs and fall below the poverty line. The Veterans Administration health budget will be significantly increased in next year's budget. These public options provide access to care. They are affordable. They give us peace of mind and security.
A new public health insurance plan would offer a national safety net ensuring all Americans have access to a good quality insurance option. This would be particularly important in rural areas and inner cities, where private insurance options are not always available or affordable. Such a plan would also effectively sets a standard for the marketplace by keeping administrative costs low and encouraging companies to innovate by offering unique benefits above and beyond the basic benefit set. A public option also provides a way to respond to unique public health challenges in areas where private insurers may face shareholder concerns about the financial risk. For example, Medicare expanded coverage to Americans with end stage renal disease in the 1970s because those individuals were uninsurable in the private marketplace.
One of the misconceptions in the current debate is that a public plan would limit choice and drive private health insurers out of business. Since the 1990s, Medicare beneficiaries have had a choice of staying with the traditional Medicare program or enrolling in a Medicare Advantage health plan run by private insurers. Many have opted for the opportunities that a health plan offers, but more have opted to stay with the traditional Medicare for the choice and easy access to doctors and hospitals. Government run health plans also have the ability to contract with private companies for health information technology, prevention programs, health education and other services.
It's no coincidence the President is following up his speech with a visit to my home state of Minnesota. From 1989-1991, I chaired the Minnesota Health Care Access Commission which led to the bipartisan creation of our own state-based public option plan, MinnesotaCare. In creating MinnesotaCare, we were able to offer health coverage to tens of thousands of Minnesotans who would otherwise have been uninsured and as a result, over 90% of Minnesotans now have health insurance, one of the highest rates in the nation. The down economy has recently resulted in a record number of applications to MinnesotaCare, continuing to underscore the need for this vital program.
A new public plan will also need to be designed in such a way to reward doctors and hospitals that are delivering the best care at the lowest cost. Centers of excellence such as the Mayo Clinic here in Minnesota are often penalized by Medicare even though they keep Medicare patients healthier and at a lower cost than the national average. If a new public plan is created, it will need to provide incentives for doctors to deliver high quality care in an affordable manner.
When we enact universal coverage for a group of Americans, like we did with Medicare or the VA, it works. When we expand coverage, like we did at the state level with MinnesotaCare, it works. This year, we can complete the job and deliver more affordable care and coverage to all Americans. Given its historic success, a public option is the right option for health reform. The time to act is now.
Lois Quam is the CEO of Tysvar, a strategic advisory firm focused on health care and the new green economy, and a Senior Fellow at the Center for American Progress. From 1998 to 2007, she was the CEO of Ovations, a subsidiary of UnitedHealth Group, which provided health coverage to older Americans and low income families.