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Public Insurance Option is Far From “Socialized Medicine”

Republicans and the multi-billion dollar health insurance industry are back at it trying to conjure up fears of “government” take over of health system or “socialized” medicine.  The problem is that what has been proposed so far is far from “socialized medicine”.  What is being proposed is a public health insurance option that will compete with private health insurance companies.  This competition will serve to bring health care costs down but will put a dent in the huge profits that private health insurance companies make and health insurance industry doesn’t want that.

“Socialized medicine” is the phrase that fear mongers like to use. But what is “socialized medicine”?  Often times the people who use the term “socialized medicine” refer to the health systems in Canada or England.  “Socialized medicine” loosely means that the government owns the entire health care system.  The government owns the hospitals, clinics; and people who work in the health care system, including doctors, are employees of the government.  This is NOT what is being proposed and certainly not what is being envisioned for the future of the U.S. health care system.

Republicans and the private health insurance industry are using the words “socialized medicine” to scare people.  What is being proposed is a Public Insurance Option.  The Public Insurance Option gives people the OPTION of choosing between a private health insurance or the public insurance plan.  This is a good explanation of what a Public Insurance Option is:

President Obama’s health reform proposal is the establishment of a connector (Massachusetts) or exchange (Obama’s campaign plan) that offers a range of health plans side-by-side and that meets standards about who they must serve, what services they must cover, and how much they can charge. Put simply, the rules will specify the benefits that insurers must offer and require insurers to accept everyone who applies at a similar premium, regardless of an applicant’s health status. The operational features of this public health insurance plan and exchange would include: health insurance plan and exchange would include:

  * A health insurance exchange that offers private insurance plans and a public health insurance plan—all of them competing on a level playing field.
  * A public insurance plan operated by public employees separate from existing public and private plans.
  * Comprehensive and affordable coverage, with guaranteed access to health insurance and other consumer protections offered by all plans in the exchange.
  * A service delivery model that provides choice among insurance providers, better care coordination, and fair and efficient payment processes for patients and physicians alike.
  * A health care system that promotes innovation rather than risk segmentation.
  * An option for individuals to keep the coverage they have today if they so choose.

Public Plan Choice—the combination of the exchange and a public health insurance plan offering within it—offers an opportunity to create both competition and a new competitor in the health insurance marketplace, strengthening the exchange’s incentives for all health insurers to be more efficient and responsive to individuals. Through fair competition on a level playing field, the insurance marketplace is made more functional.

This is NOT single-payer health care.  Obviously, the private health insurance companies don’t want the added competition.  They have done a great job improving our health care system.  NOT!

I am not going to bore you with more statistics.  Let me just say that we pay more on per capita basis on health care than any other industrialized nation including those so-called “socialized medicine” countries and we have very little to show for it, except 47 million Americans without health cost coverage.

Two biggest issues should be: a) what is the cost of the Public Insurance Option; and b) how are we going to pay for it.  But no, Republicans and now conservative Democrats still want to protect their benefactors in the private health insurance industry hence all of the fear mongering and disinformation about the health care reform proposal.

The main legislative proposal that includes the Public Insurance Option is H.R. 3200 - America’s Affordable Health Choices Act of 2009.

What is the cost? 

According to Congressional Budget Office (CBO), the preliminary cost of H.R. 3200 is $1.04 trillion between 2010 and 2019.  Now, the President has said that he wants a legislative proposal to be deficit neutral - meaning it would not add to the federal budget deficit.  This will be challenging.  Preliminarily, according to CBO, H.R. 3200 would add $238 billion to the federal budget deficit over the same 2010-2019 period.  CBO stresses that it’s analysis of H.R. 3200 is not a complete cost estimate.

How to pay for it?

There is one proposal that is getting a hard look in congress and that is a surtax on wealthy Americans and a penalty on employers who don’t provide health insurance to workers..

Starting in 2011, a family making $500,000 would have to pay $1,500 in additional income tax to help subsidize coverage for the uninsured. A family making $1 million would have to pay $9,000.

Employers who do not provide health insurance to workers would generally have to pay a fee or penalty to the government. The fee would be equal to 8 percent of wages for an employer with an annual payroll of more than $400,000.

But another proposal that is not getting enough attention and should is the reduction of income tax exclusion for expenditures on employer-sponsored health insurance as proposed by Professor Jonathon Gruber.  It works like this, according to Professor Gruber:

The third concern is that removing the exclusion would mean an across-the-board tax increase. I prefer to view this as a progressive tax increase, with 62% of the revenues raised from families with annual incomes of more than $100,000. Yet there would still be a sizeable increase in taxation for middle-income families, with 10% of revenues coming from families with annual incomes below $50,000 and 28% from those with annual incomes of $50,000 to $100,000. For this reason, and because not all the revenues to be gained by removing the exclusion would be needed to finance reform, we should reduce, rather than remove, the exclusion.

The exclusion can be reduced, for example, by capping the amount of employer-sponsored premiums that is excluded from taxation, so that individuals are not taxed on premiums below some level (say, the average value of premiums for employer-sponsored insurance) and pay tax only on premiums in excess of that level. This approach has the advantage of addressing the bias toward excessively generous insurance without raising the taxes of people who have basic insurance. Moreover, it would be more progressive than an across-the-board removal of the exclusion, since higher-income people tend to have more expensive insurance than lower-income people. Alternatively, we could scale back the exclusion only for those in higher income groups; such a strategy could be designed to protect middle-income taxpayers from any tax increase.

When it comes to health care reform one thing is certain: Republicans lie their asses off and have no credibility on the issue.  They would rather side the private health insurance industry instead of developing solutions which are best for all or most Americans.