Obamacare's false promise of the public option

Less than three years after taking full effect, Obamacare now finds itself in dire circumstances with major insurers cancelling Obamacare insurance plans, the number of available plans on the federal exchange in decline, and insurance prices rapidly growing out of control. Proponents of the president’s healthcare law argue that they have a solution: the public option.

The public option is a government-run health insurance plan that would be sold alongside private insurance plans on the Obamacare exchange. If it sounds familiar, that’s because some Obamacare proponents tried include to enact the public option in the legislation six years ago before it was ultimately taken out of the final bill. The policy is now making a comeback masquerading as a simple solution to spur competition in the health insurance marketplace and control growing premium prices.

Image source: AP/Don Ryan

Never mind that a diluted version of the public option has already been tried in the form of co-ops. The co-ops, as defined in the healthcare law, are state or regional-based non-profit health insurance companies, whose boards and leadership are required to be free of insurance industry insiders, and are subject to intense government oversight. Obamacare gave $2.4 billion in taxpayer-funded startup loans to 23 co-ops located across the country. These co-ops were supposed to serve as “competition” for private insurance plans – and they failed miserably. With only six of the original 23 remaining, billions of taxpayer dollars have been lost on startup loans that will never be repaid.

The co-op experience is probably enough on its own to tell us that the public option won’t stoke the fires of competition, but there's also the fact that the math of Obama doesn’t add up. Insurance companies simply can’t make money under the regulatory structure of the president’s healthcare law, and no profits means no plans. The only way for them to “profit” is through taxpayer-funded subsidies, which they are actively seeking.

So what would happen if the public option is introduced in the midst of this mess? As a government-backed plan, the public option will not be tied to the same financial considerations other companies face. It can therefore offer an insurance plan at a “lower cost” than can any private insurance company, though, in reality taxpayers will pay for the lower prices through subsidies to the public option plan.

Insurance companies will have no way to compete with the public option’s pricing, being constrained by the need to balance a budget . Insurers will be faced with a choice: continue to lose money, or stop selling insurance. In this scenario, they will be forced to pick the latter and remove themselves from the marketplace entirely.

As a result, instead of creating competition and increasing options, the public option will do the exact opposite, narrowing all the choices of the marketplace down to just one option – government-run healthcare.

When the only real healthcare option is a government-provided plan, this is a de facto single-payer system, where the government is the only party that pays healthcare providers for services provided to its citizens. Certain segments of the American population are already part of a single-payer system. Vulnerable, low-income Americans receive coverage through the Medicaid program, and veterans obtain care through the Department of Veterans Affairs.

This is where an even bigger problem starts to take shape. Both the VA and Medicaid underperform on quality of care and regular access to care when compared to private insurance. Study after study has documented that outcomes for a wide variety of health problems and treatments, from heart transplants to brain cancer, are worse under Medicaid than private insurance. In some instances, those on Medicaid don’t fare any better than the uninsured. And it would be hard to miss the rampant and extended delays experienced by veterans who tried to receive care through the VA – delays that saw many veterans die while waiting for critical health services.

With stakes this high, it is important for Americans to see the public option for what it truly is - single-payer healthcare . Americans deserve better, and it’s for this reason that the public option shouldn’t be an option at all.

Melissa Fausz is a Senior Policy Analyst at Americans for Prosperity. Follow her on Twitter @LissaAnne88

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