FixHealthCarePolicy

Shortfalls of the Exchange and Public Plan

The President is on the stump again trying to sell health care reform. Two critical elements of the bills moving through Congress are the public plan and the federal exchange. Robert Moffit, Director of the Center for Health Policy Studies at the Heritage Foundation, describes the shortfalls of these two aspects in the House and Senate bills.

In a recent analysis of the federal exchange and the public plan provision in the House and Senate bills, Moffit explains that a public plan would ensure the eventual triumph of a single-payer system of national health insurance run by Washington. The national health insurance exchange combined with a public plan, falsely advertised as a mechanism to advance consumer choice and market competition, would be the institutional vehicle to guarantee the exact opposite.

Moffit goes on to write:
While a national health insurance exchange is sometimes described as a nationwide pool of health insurance providers that would facilitate access to coverage for individuals and employers, its major function would be to provide a platform for a government-run public health plan that, using Medicare-style administrative pricing, would “compete” against private health insurance. Congressional champions of the idea say that this would increase the range of choice and competition available to Americans. In fact, it would do exactly the opposite.

The introduction of a public, government-run health plan would further complicate the operation of a national health insurance exchange. If the exchange became a powerful regulatory agency—Obama’s vision—Congress would have equally powerful incentives to set the rules to the advantage of its own health plan. This could be done in a variety of ways: by setting the government’s health plan premiums artificially low (using Medicare rates as in the House bill); by reducing or eliminating cost-sharing requirements; or by manipulating benefits to make the government health plan more attractive than the private health plans. Congress would have every incentive to make sure that its own creation did not incur the legal or financial risks that private firms ordinarily bear.

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Tags: federal exchange, public plan