With a public option, the playing field is not level or fair
Various commentators and politicians allege that a public option would enhance greater competition with private insurers in the health care arena. However I am still waiting for someone to explain exactly how a government administered and funded plan would accomplish greater competition.
What are the variables between a private and a government health plan? Is it the marketing budget? I doubt it as either party could offer the same type of ads.
Is it the sales or marketing process? The private sector already has the mechanism in place with agents and brokers to sell health plans. The government would either initiate a process to sell through agents and brokers or hire designated sales personnel. Either party could also use direct mail, telephone or internet sales methods.
Is it the actuarial or underwriting process which would give an advantage to the government? No, because the covered population and the morbidity results will be the same.
Is it the administration or claim adjudication process? No, because the hardware, software and personnel will perform the same functions and the marketplace will offer the same salary from either employer. Please note that the federal government sub-contracts administration and claim adjudication for Medicare and Medicaid to the private sector. Also various studies indicate that actual administrative costs for Medicare are about 5-6% of claims which are the same as for larger employer group plans.
What is left? The funding of the plan is the remaining piece of the pie. The private plans may require reserves to be held if the plans are insured but there are no reserves required if the plan is self funded. Also the private plans must pay a state premium tax which ranges from 2% to ¼% of premium. There may also be a small (less than 1%) reinsurance cost for the private plans which the government plan will not have due to its taxing ability.
But the key part is that the private plans must obtain sufficient funds (premium) to pay for claims and administration. Whereas the public government plan can rely on taxes to fund any level desired by the political officials. What is competitive when one party has an open checkbook and the other party must rely on a finite customer base which naturally seeks a competitive price?
The playing field is not fair or honest. When the government competes with the private sector there is not a level playing field as the power to tax can subsidize any activity even though the activity would perish without government (tax) monies. Example: passenger trains, air service to small towns, “bridges to nowhere”, etc:
So how is true competition increased with the presence of the unlimited tax power to offer any rate (premium) that the government-Congress desires to be politically attractive to the many voting interests? To satisfy constituents Congress can lower the premium rate to any level desired and simply add to the growing financial deficit. Congress has never adhered to a fixed health care budget. Only the prescription drug program has had lower costs than predicted; thanks to private firms competing in the market place.
Walt Guller
Wildwood
Walt: Whereas the public government plan can rely on taxes to fund any level desired by the political officials.
Guess you didn’t get the memo. The Public Option must be self-sufficient based on premiums. No taxes are allowed to be used in funding the Public Option.
Your entire letter is based on false information.
Lisa; still peddling your “premiums arent taxes” lie I see. Soon the rest of your lies will be posted. How boring.
Walt: Also various studies indicate that actual administrative costs for Medicare are about 5-6% of claims which are the same as for larger employer group plans.
More false information. Large employer plans have administrative costs of 16%.
The New York Times
http://www.nytimes.com/2009/11/03/business/03insure.html?_r=3
The percentage of premiums spent on medical claims is known in industry jargon as the “medical loss ratio.” According to the Senate analysis, the for-profit insurers’ average ratio in 2008 was 84 percent in policies offered to large employers, and 80 percent for small employers — those businesses with 50 or fewer workers.
Si,
If you want to say your premiums to Blue Cross are taxes, then you can call my premiums to the Public Option taxes. But Blue Cross and the Public Option are both prohibited from funding their insurance with Federal Income Taxes or State Income Taxes or FICA taxes or any other taxes you can think of.
Lisa,
The form of public option being peddled in congress won’t come on line until 2013, if it’s even passed. Not even sure what kind of PO is being offered at this point. That being said, if employers don’t provide coverage, the IRS will indeed dictate a tax to help cover the PO, a full 2-3 years before it comes on line, if passed. I am not interested in debating pros and cons of the PO anymore. You won’t change my mind and neither will I yours. I am interested in the topic of the letter; How does the gov’t PO provide a level playing field with the industry?
Walt: So how is true competition increased with the presence of the unlimited tax power to offer any rate (premium) that the government-Congress desires to be politically attractive to the many voting interests? To satisfy constituents Congress can lower the premium rate to any level desired and simply add to the growing financial deficit. Congress has never adhered to a fixed health care budget.
You are so wrong. Congress cannot fund the public option by growing the deficit. Congress can’t just lower premiums for political reasons. The premiums must be sufficient to fund the program. If there is not enough money then the premiums must be increased. Do some more research, dude. You don’t know what you are talking about.
budb: That being said, if employers don’t provide coverage, the IRS will indeed dictate a tax to help cover the PO, a full 2-3 years before it comes on line, if passed.
No, any taxes levied will be used to offer subsidies to lower and middle income folks. Those subsidies can be used to buy private insurance or the public option. The taxes will not and cannot be used to subsidize the public option directly.
Are you referring to the tax that employers must pay if they don’t provide health benefits? If not, could you be specific, because I am curious what taxes you are referring to.
Getting the memo and believing it are two different things. ”The Public Option must be self-sufficient based on premiums”. Our elected officials say and write a lot of things. It is up to us to read between the lines. The public option will not be self sufficient based on anything. If anyone thinks we will not pay for this please contact me and I will give you a great deal on the Ead’s bridge.
Let’s look at the way our government estimates cost. Using the war in Iraq as a recent example it was initially pegged at $50 billion. That was later modified to $200 billion. Now the cost is estimated at $1-2 trillion based on indirect replacement cost of hardware, the increased cost of oil and additional veteran medical expenses. Our government has a tendency to fudge the numbers on the lite side.
As in Missouri, there’s a simple lever - actually hammer - when they start sucking air. They’ll just cut providers’ payments. See how easy that is, just dump your short-falls on the venders. I’m hoping my dog’s vet can handle primates too; after my MD flees for his life.
HaHaHaHaHaHaHa, Lisa, you are hilarious. Walt, you are so on target. Lisa has no idea how business or any critical thinking skills. When the Government is involved they change the name from taxes to Premiums. Dont you love it?
Lisa, please explain which Government program runs so well and is not going bankrupt. Please explain which Government program had a projected cost that was accurate. Medicare itself is 10 times higher than projected.
Lisa, I do appreciate the humor though.