A public plan, regardless of how it was structured or administered, would have an inherent advantage in the marketplace over private insurance companies because it would ultimately be subsidized by American taxpayers. It would also have an advantage since its enormous market presence would allow it to impose much lower reimbursement rates on doctors and hospitals, similar to current reimbursement practice under Medicare and Medicaid. It is estimated that privately insured patients presently pay $89 billion annually in additional insurance costs because of cost-shifting from government programs. Assuming the new public option would have similar reimbursement policies, it would result in additional cost-shifting as much as $36.4 billion annually. This would force insurers to raise their premiums, making them even less competitive with the taxpayer-subsidized public plan.
With the public option squeezing private insurers from the sides, and expanded eligibility for Medicare and Medicaid pushing from the top and bottom, it is unlikely that any significant private insurance market could continue to exist. America would be firmly on the road to a single-payer health care system with all the dangers that presents.
Featuring Benjamin H. Friedman, Research Fellow in Defense and Homeland Security Studies, Cato Institute; Spencer Ackerman, Senior Writer, WIRED Magazine; and Julian Sanchez, Research Fellow, Cato Institute; moderated by Laura Odato, Director of Government Affairs, Cato Institute.
Featured PublicationWe are grateful to the Harry and Lynde Bradley Foundation and the Carthage Foundation whose support of the October 2012 Cato Conference “Europe’s Crisis and the Welfare State: Lessons for the United States” made possible this special issue of the Cato Journal.
May 24, 2013
Cato Institute research on federal and private sector employee firings is cited on MSNBC’s Jansing & Co.
May 24, 2013
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