The Affordable Care Act was signed into law nearly a decade ago, significantly expanding the role of the federal government in the U.S. health-care system. It’s telling that many have called for yet another overhaul of health care. This dramatic shift indicates a rare bipartisan consensus that the ACA has failed to achieve its objectives. The question then becomes what comes next.
One common proposal is the so-called public option. It would introduce a government-run plan into the commercial health insurance market or, alternatively, allow consumers under age 65 to buy in to traditional Medicare. The public option has been branded a “moderate” alternative to a complete government takeover of the health-care system under Medicare-for-all. But simply calling something moderate doesn’t make it so. Whether conceived of as an expansion of Medicare or the creation of a government health-care option, the public option is a Trojan horse with single-payer hiding inside.
As the administrator of the two largest public-health-care programs in the country, Medicare and Medicaid, I can say these programs face major fiscal challenges. Those who seek to expand them do so because of their expected lower price tag on premiums. But there’s a simple explanation that makes the low cost considerably less alluring: Public programs pay health-care providers less than private payers.
According to a study in Health Affairs, private insurance in 2012 paid hospitals approximately 75% more than Medicare did for similar inpatient services. Medicaid payment rates were even lower than Medicare rates. That’s why a substantial proportion of providers — 30% — do not accept new patients on Medicaid. Rather than expand public programs for future generations, Americans are much more interested in protecting the viability of these programs into the future.
Further, low prices imposed on doctors and hospitals can’t stop health-care costs from rising — as they continually do. This can have effects throughout the health-care system. Someone has to pay the bill — namely, Americans who purchase their coverage directly or through their jobs. In turn, this causes doctors and hospitals to attempt to make up the lost revenue by charging higher prices to private insurers, resulting in higher health insurance premiums for everybody else.
At the same time, a public option would be backed by the full faith and credit of the federal government. This creates a host of problems. While public options can turn to taxpayers to bail them out, private players have no such luxury. They must compete for consumers based on the merits of their product and remain efficient — or suffer in the market as a result. Without market pressure on the bottom line, an expanded government plan would balloon uncontrollably, crowd out private options, push consumers off private plans and reduce choice as private plans flee the market.
The absence of accountability to consumers would slow innovation in public programs to a glacial pace. It can take Medicare years to recognize new technology that private insurance already covers. Medicare took at least three years longer than private insurers to adopt disposable insulin pumps. The rules and regulations that determine which products are covered become outdated quickly, and it can literally require an act of Congress to change them. The result is innovation stagnation and limited access to new treatments. The president’s budget includes several proposals that attempt to address this.
In any case, we’ve seen this movie before. The ACA’s consumer-operated and -oriented health plans (or co-ops) provide firsthand evidence of the disaster that awaits a rerun. After receiving $2.5 billion in government-backed start-up loans, most went belly up and closed their doors, leaving taxpayers on the hook for any unpaid loans. The co-ops that have closed to date still owe nearly $2 billion. Moreover, the closures of these government-sponsored health insurance companies displaced nearly 1 million people from their health plans.
In the end, these government-sponsored plans couldn’t compete. As a central plank of many health-care proposals being discussed, the public option being proposed today won’t be allowed to fail like the co-ops did. Taxpayers will be forced to foot the bill, no matter how high.
Millions of Americans rely on Medicare and Medicaid. We made a promise to our nation’s most vulnerable to ensure they have access to health coverage. There is something deeply unjust in dumping millions more onto these programs, which are already on an unsustainable fiscal path.
That is why President Donald Trump has promised to keep what works in our health-care system, fix what’s broken and deliver a better experience for all Americans. Instead of introducing even more government intrusion into the markets, we must strengthen and protect our existing safety-net programs and address the drivers of costs by fostering a competitive and dynamic private market in which plans and providers compete on the basis of cost and quality — not a system that makes promises that can’t be kept and leaves taxpayers to clean up the mess.
Verma is administrator of the Centers for Medicare & Medicaid Services.