How a "Public Option" Can Eventually Leave Consumers Without Options
By Thomas Perrin
During his address to the joint session of Congress the President made it clear that the "public option" is still on the table for this health care reform plan. He stated, "But an additional step we can take to keep insurance companies honest is by making a not-for-profit public option available in the insurance exchange. It would only be an option for those who don't have insurance," or in other words, an "insurer of last resort."
Midway through his speech, the President noted that, currently, a majority of Americans are in favor of a public option. But, do Americans really know what a public option is? In a recent poll released by Penn, Schoen & Berland and the AARP, only 37 percent of Americans could correctly define the term "public option" on a multiple choice questionnaire.
Unfortunately, many in Washington do know how a public option works. In a July interview with a single-payer supporter, Congressman Barney Frank admitted that the public option is just a tool to achieve a solely government-run system. He said, "I think that if we get a good public option it could lead to single-payer and that is the best way to reach single-payer. Saying you'll do nothing till you get single-payer is a sure way never to get it…I think the best way we're going to get single-payer, the only way, is to have a public option and demonstrate the strength of its power." This is a troubling statement and reveals the true expectations some politicians have of the public option.
This plan should sound eerily familiar to Floridians. In 2007 Governor Crist called for a special session to deal with the property insurance market after the devastating 2004 and 2005 hurricane seasons. It was at this time when the state-run "insurer of last resort," Citizens Property Insurance Corporation was allowed to "compete" with private insurers, while at the same time having their rates suppressed by statute. Armed with the advantage of governmental price controls, similar to what would be in place with a health insurance public option, Citizens rapidly gained a third of the entire property insurance market in Florida. This placed private policyholders on the hook because the state now has the ability to levy massive assessments on private policyholders and even auto policies if even a moderate storm hits a well-populated area of the state. Along with overly strict rate regulations, this now uncompetitive market forced Florida's largest private property insurer to make the decision to leave the state because it was simply no longer profitable. This is a gloomy sign for the rest of the private property insurers and policyholders in Florida.
Overall opposition to the health care reform plan has now risen to 53 percent according to Rasmussen tracking polls. It should also come as no surprise that support for the public option portion is quickly losing steam as well, now that voters are becoming more educated about the "power" that Congressman Frank was referring to. If the Senate decides to force this plan through by using the budget reconciliation process which lowers the necessary votes for passage, it will be a clear sign that they have disregarded Americans' call to take a more thorough approach.
To meaningfully reform our health care system we need to give individuals more control of their own health insurance policies. Allowing the tax deduction that currently goes to employers to go directly to the consumer would be a giant step in the right direction. This would give the individual a more transparent view of what health insurance policies actually cost and create incentives for living a healthier lifestyle.
Once this transition has taken place, other important changes could be made to further reduce cost and improve care such as allowing interstate purchasing of insurance plans, reducing the number of mandated benefits that insurers are required to cover, reallocating a large portion of Medicaid spending into simple vouchers so recipients can purchase their own plans, and finally, reforming medical malpractice laws.
The market distortion caused by Florida's experiment with a property insurance public option should serve as a powerful warning to Washington as health insurance reforms are considered. We simply cannot risk turning control over health care to the government. As Benjamin Franklin once said, "They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety."
(Thomas M. Perrin is the Director of Public Affairs at The James Madison Institute, a non-profit, non-partisan public policy research organization based in Tallahassee.)
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