Let Private Compete with Public Insurance

Supporters of the public option, a government run health insurance plan to compete with private insurers, say that it will make everyone better off by forcing private firms to provide health insurance for less. But if that is the case, why not allow already existing public plan options to compete with the private sector?

Give people in Medicare, state Medicaid plans, the Veterans Administration, and state SCHIP plans the choice of staying in the government run program or taking an equivalent voucher for the purchase of private health insurance and private medical care, perhaps with a health savings account option for any leftover funds.

For example, in Colorado, the state SCHIP plan is projected to cost $1,776 per child per year in FY 2009-10. According to eHealthInsurance.com, available private health insurance plans range from $420 a year to $3,002 a year. Letting the state SCHIP plan compete with private insurers would give parents a number of new plan choices, allowing them to tailor their financial protection to their needs. Plus, unlike the government plan, most of the private plans pay commercial rates. This means that parents would have a much wider choice of providers for their children.

When people pay cash, providers typically charge less. Letting people choose between first dollar coverage and health savings account cash could also help them save money for things that government plans don't cover.

Isn't it time for an evidence-based comparative effectiveness approach to health care policy? Let the competition begin.

Comments (10)

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  1. Ron Greiner says:

    SCHIP has terminated millions of children on their 19th birthday regardless of medical history. Any child that is diagnosed with MS, like my daughter, has their insurance terminated.

    If parents had a voucher then they could purchase portable individual insurance so their child would be safe.

    HSA insurance on a child will cost about $600 a year in most states so the balance of $1,176 could go into the child’s HSA at the bank.

    Obama’s goal is not to insure children but to funnel billions of taxpayer dollars into politically connected insurance companies in the name of poor children.

  2. Marcy Zwelling says:

    I would agree that the ONLY way that the “public option” works is for that option to be the voucher (or tax credit) for real catastrophic insurance. That “insures” the social (moral) commitment we have made to one another. On the other hand, the benefit side should be about the private market place and direct contracting. We might consider a tax deductible (HSA) option up to a point.
    This is really all that needs to be done to reform the marketplace. The savings would be incredible not just in cost but in time and resources.
    Finally, all physicians and providers MUST post their fee schedule and insurers and the government should publish their payment schedules. Transparency is essential in any marketplace. That is one of the missing components in this debate. What is the cost of this thing we call “health care?”… oh and by the way… what is healthcare?”

  3. Tom H. says:

    Great post, Linda. It clarifies the hypocracy on the part of the left. They say they want competition only when they are trying to undermine private insurance. They definitely do not want private plans competing for Medicare enrolles (as in Medicare advantage) or private plans competing for Medicaid enrollees either.

  4. Devon Herrick says:

    Proponents argue the pubic plan will keep private insurers “honest” and hold costs down through vigorous competition. Presumably this means private insures will be forced to charge lower premiums by accepting lower profits or risk losing market share. But do proponents really believe private insurers will compete to retaining unprofitable market share? Backers of the pubic plan undoubtedly believe insurers will abandon unprofitable markets. Proponents’ true goal is to crowd out private coverage leaving what amounts to a government-run, single-payer plan.

  5. Brian W. says:

    If competition between public and private plans is such a good idea, why aren’t there any private plans competing against Medicare?

  6. Linda Gorman says:

    Why don’t private plans compete with Medicare? When people stop working and reach age 65 they are forced to join Medicare Part A or lose their Social Security benefits. (There’s currently a lawsuit challenging this requirement.) And if they want a policy to fill Medicare holes and make it resemble private insurance that limits one’s financial liability, the government decrees that you have 12 choices with standardized benefits named, as one would expect from the bureaucracy, A through L. Oh, and you will also be required to join Medicare Part B to get one of these policies.

    Sort of hard for a private company to compete against this kind of monopoly. Some people do keep working after 65 so that they can avoid Medicare, at least for a while. Others simply to to places like the Mayo Clinics that don’t accept Medicare, file their own claims, and make up the difference in cash.

    The other issue is that Medicare is insolvent even with the enormous tax subsidy. No private company would be allowed to be so reckless with its finances, tilting the playing field to the government once again.

  7. […] Let Private Compete with Public Insurance […]

  8. […] Linda Gorman has previously discussed, if the real point of a so-called “public option” was simply to supply fair competition against […]

  9. dan says:

    dont know alot about insurance other than it cost a ton of money and if your in the MIB your out of luck my wife is in the mib and insurance is high so i started looking around and found a website that offers tons of quotes in a single website they saved me $1654.00 a year take a look http://www.insurance-direct-easy.com

  10. mutuelle says:

    perfect competition exist. indeed its better than monopoly.