As the current health care reform bill rattles its way through the legislative process, Republicans and Democrats alike continue to grapple with a central question of the debate: whether to create a public option or a government-run health care alternative for those who either can’t afford or lack access to other private alternatives.
Proponents of the public option argue that without some government intervention into the health care market, private insurers will continue to drive up premiums and other costs because they hold near monopolies in many areas throughout the country.
But the notion of handing even a part of the nation’s health care system over to the government has been a point of consternation for some, who worry that ballooning fiscal obligations could bog down the federal budget for decades to come.
Amid these deliberations, The Michigan Daily sat down with five experts on health care reform from the University’s faculty to discuss the debate between private insurance companies and publicly funded alternatives.
While some express concern that a public option would bring premiums and medical costs down so low it would drive out competition and put private insurers out of business, Matthew Davis, associate professor of the School of Public Policy, disagreed.
Davis, who is also an associate professor of Pediatrics, said that if the health care reform bill passes, Obama will be bringing more than 40 million uninsured people into the market, increasing the number of patients for insurance carriers.
“There is a very strong economic argument that when Americans want more Americans to have coverage, that’s going to control growing health care costs,” Davis said.
He added that it is the uninsured who currently drive up health care spending by waiting and only seeking medical attention when a problem gets critical and very expensive to fix — all while the insured cover the tab.
“When the uninsured in America need to get health care and can’t pay for it, then the people with coverage end up paying for that care through higher premiums,” Davis said.
Besides the possibility that the government will corner competition, opponents of the public option are also concerned that insuring the high-risk uninsured will drive up health care costs for everyone else. But, according to Dean Smith, senior associate dean of the School of Public Health, those with private insurance are already footing the bill for those patients.
“Just because they don’t have insurance doesn’t mean they don’t show up at the emergency room,” Smith said.
Smith is part of a team at the University that has had firsthand involvement with the legislation making its way through Congress. He works at the University of Michigan Center for Value-Based Insurance Design, which helped develop the concept of value-based insurance.
The idea, which was included in the bill, advocates that the value of the patient’s clinical benefit should be equal to the amount of money spent. For example, cosmetic surgery, which holds relatively small value for health, would be more expensive.
But despite the public option’s potential for immediate cost-effectiveness, some economists and public health experts are concerned with the legislation’s possible long-term economic ramifications.
Many who are critical of the new legislation point to the evolution of Medicare, which has changed steadily since its institution in 1965, and subsequently increased the government’s role in determining pricing for health care.
“When Medicare first started, (the government) said Medicare would not be in the business of setting hospital prices,” Smith explained.
The most recent addition to Medicare was Part D, which allows the government to set prices for prescription drugs.
Smith said he is concerned the government will execute the same strategy with the public option, and that within a few years the government could be paying medical professionals less.
“With the ability to set prices paid to providers, the public option may be lower cost to employers and employees,” said Public Health Prof. Richard Hirth.
“The downside risk is that if payments under the public option approach current Medicare rates, providers’ willingness to participate may be jeopardized,” he added.
Smith argued that not only would this pose a threat to the nation’s economy, but the notion of lower prices for doctor and hospital visits as well as prescription drugs could jeopardize the future advancement of medicine.
“Cross incentives are what allows the research and development and progress,” Smith said. “We’re willing to pay more now as part of our investment toward what the future will look like.”
Though many opponents of the public option claim it would hurt the private sector during an economic crisis, Smith said the public option would decrease national health care spending by increasing the number of insured and offering better coverage.
He added that with more than 40 million new insured customers, even with lower premiums, the numbers would even out.
“The threat of the public option is enough to get insurance companies to bring prices down,” Smith said. “The nice thing about a public option is that we save money today.”
But despite the increased number of insured, Susan Goold, associate professor of Internal Medicine, expressed concern that if the legislation passes, Americans will someday have to pay higher taxes rather than higher premiums.
The solution to that problem, she said, is to “make policy that says that’s not going to happen.”
Mark Fendrick, associate professor of Health Management and Policy, who also works at the Value-Based Insurance Design office, said the private sector doesn’t adequately serve the public’s needs, which is why so many are uninsured and under-insured.
“Some certainly would argue that there are certain times where government involvement isn’t always a bad thing and that a plan with the purchasing power of the government can clearly enhance competition and markedly reduce overhead and other profits that come with the administration,” he said.
Fendrick said that with government intervention prices for health insurance would drop, as many insurers are currently operating in near monopolies. According to a report in The New York Times, there are nine states where a single insurer covers 70 percent or more of residents. In Hawaii, for example, one insurance company covers 78 percent of people and in Alabama, it’s 83 percent. And in at least 17 other states one insurer covers at least half the population.
While some point to Medicare and Medicaid’s perceived faults as potential pitfalls of the public option, others, like Smith and Davis, point to the programs as government successes to be modeled.
Smith notes that though people who qualify for Medicare are given the option to choose between the government-run plan and private plans, very few customers go with the private option.
Davis said Medicare has been good for the health care economy, which he said indicates that the public option wouldn’t hurt the private insurance sector and the overall health care economy.
“Medicare as a government program has served as a core source of revenue for U.S. physicians who see adults for the last 40-plus years,” Davis said. “(Medicare) provides reimbursement for people who see doctors very often. If you’re in the business of health care, that’s exactly what you want to see.”
He added that though Medicare and Medicaid often end up covering high-risk patients, there are uninsured individuals who are not elderly or poor who still need coverage.
“Doctors want to provide care to people who can pay,” he said. “And people can pay when they have coverage.”