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Argument: Public option is really about making way for a single-payer system

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Supporting quotations

Gregory Mankiw. "The pitfalls of the public option". New York Times. June 27, 2009: "the public plan would likely undercut private firms and get an undue share of the market. [...] President Obama might not be disappointed if that turned out to be the case. During the presidential campaign, he said, 'If I were designing a system from scratch, I would probably go ahead with a single-payer system.'"

Stuart Butler. "The Case Against: The public plan will unfairly crowd out private coverage". Heritage Foundation. July 28, 2009: "A second claim is that a public plan would be a lean, mean competing machine, modeled on Medicare. It would use its size and clout to get the best deal for working Americans and force private plans cut costs or go out of business.

But advocates of this vision don't hide what they expect -- and even desire -- to happen. Gradually "Medicare for All" would crowd out most private coverage, paving the way for a cradle-to-grave single payer system.

Now, I lived under one in Britain for 30 years and I'm glad I don't now. I don't think Americans want that system. Still, maybe I'm wrong and they would support a single payer system after an honest national debate. But the "public option" proposal is just a dishonest sneak end-run around that needed debate.

Far from being merely an option, a Medicare-style public plan would unleash a dynamic that is not what Americans thought they were voting for last November. They were assured that if they are happy with the coverage they had then nothing would change with a public option."

Michael F. Cannon. "Fannie Med?". CATO Institute. August 6, 2009: "President Obama's vision of a health insurance exchange is not a market, but a prelude to a government takeover of the health care sector."

"The End of Private Health Insurance". Wall Street Journal (editorial). April 13, 2009: "In a recent analysis, Lewin estimates that enrollment in the public option will reach 131 million people if it is open to everyone and pays Medicare rates. Fully 119 million people will shift out of -- or lose -- private coverage. Everything depends on the payment levels that Congress adopts, as well as the size of the eligible pool. But even if a public option available to all takes the highly improbable step of paying at some midpoint between private and Medicare rates, nearly 68 million people will still be crowded out of private insurance. The nearby table summarizes Lewin's eye-popping findings.

This public option would be the most radical change in the way American health care is financed -- and thus provided -- in at least 44 years, and maybe ever. About 170 million people currently have private insurance, which is already pressured by the price controls of Medicare and Medicaid. A significant share of government underpayments are simply transferred to the private sector, adding tens of billions of dollars every year to consumer health bills.

A 2006 study in the journal Health Affairs concludes that around 17 cents of every dollar in relative reductions in Medicare payments to private hospitals are shifted onto private patients -- and that such cost-shifting accounts for fully 12.3% of the total increase in private payer prices between 1997 and 2001.

This share would be far higher were government payment rates not limited to the elderly and the poor but imposed over the entire system. This will only hasten the flight to government. Meanwhile, employers small and large will have every incentive to dump their plans and transfer their workers to the public rolls. The result will inevitably be a cascade of failures or withdrawals from the market by commercial insurers, with the public option as the only option for the diaspora.

Congress will finish the job with regulatory changes. Under the aegis of a level playing field, all private plans will be forced to offer benefit packages similar to those in the public option. They will also be required to accept all comers, regardless of pre-existing conditions, and also be forced to offer similar rates to all enrollees, ending the ability to manage risk through underwriting. Any private plan will essentially become a public utility where government decides what products it must offer and how much it can charge.

Democrats couldn't be clearer on this point. House baron Pete Stark -- who thought HillaryCare was too moderate and has long favored Medicare for all -- said at a recent hearing that currently "We have no mechanism to directly push the private sector to do delivery system reform and address rising costs." But the public option, he added, would force private insurers to "modernize," which seems to be his term for industrial policy.

Under this model, the annual political warfare over Medicare payment policies would be imported to what is left of the private sector. Once government takes over the majority of U.S. health-care liabilities, it can either provide every service at huge and growing cost, or it can ration services. People who need an MRI or hip replacement or whatever will face waiting lines. Medical innovation will be at the mercy of the price controls hashed out in Washington."

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