We need a public option within the health care marketplace (Opinion)

By James O’Neill

The recent federal government shutdown, the longest in history, rested on a single issue: Democrat demand to extend COVID-era insurance subsidies, without which 22 million Americans risk losing health coverage. Republicans held fast, but offered no solution other than their repeated claim over the past decade that they are working on something much better than the Obamacare Affordable Care Act. President Trump put forward the proposal to give cash subsidies directly to Americans, rather than insurance companies, so we could shop for the best deals. There is no solution in any of these proposals, and it’s time to address the real issues causing our out-of-control health care costs.

The United States spends more on health care per person than any other country and it’s not even close. Our spending per person is between two and three times what any other country spends. One would expect the health of our population and disease outcomes to be better than the rest of the world, but we are below average, with most developed countries doing much better by any measure. An individual can get top-notch care here, but only if they can afford it and get lucky with their insurance.

How do we fix this mess? Extending or increasing subsidies to insurance companies is not the answer because costs will just continue to rise. Giving subsidy money to individuals rather than insurers will only make the situation worse because insurance relies on a pool of “healthy’ people on which risk and expenses can be spread to pay for the smaller number of people who need expensive care. If the subsidies are held by individuals, the money is not pooled to support larger payouts where needed. We need to fix the root causes and stop kicking the problem down the road. The solutions are not easy and will take some time, but we are overdue in dealing with this crisis.

The number one issue driving health care costs is private for-profit insurance companies controlling administration and reimbursement. These are some of the biggest and most profitable organizations in our economy, representing nearly 18% of GDP. Congress is reluctant to mess with these companies due to their economic impact, their lobbying power and the political contributions they lavish on Washington. They are driven to maximize shareholder (and CEO) profit by making it difficult to access coverage and denying claims, which soaks up a huge percentage of spending both internally and with every hospital, clinic and doctor with whom they do business. This administrative burden on the system is estimated to be between 20 and 40% of spending. In contrast, Medicare’s administrative burden is estimated at 3%.

The number two issue is for-profit medical delivery. Hospitals, specialty clinics, drug manufacturers, ambulance services and other providers are largely owned by private companies, which consume an additional slice of the pie in profit and administrative burden. While there are some benefits to private enterprise in these areas, they should be regulated to prevent monopoly power and excessive profits.

The number three issue is a shortage of doctors and medical professionals. The American Medical Association (AMA) is a monopoly union for doctors that successfully restricts the number of physicians in the U.S. in order to keep salaries high.

Solutions are available if only our representatives have the will to enact them. The first step is to pass legislation to provide a public option within the ACA marketplace. The public option would be consumer-funded Medicare until age 65, at which time the current government Medicare funding model would kick in. Over time the public option would replace most private insurance plans due to its superior service and reduced costs. Private insurance companies would migrate to providing supplemental and specialty coverage. Additional legislation needs to be enacted to reduce delivery costs. This would include incentives for non-profit hospitals and clinics, pharmaceutical pricing reforms to promote market pricing and generics and revoking the AMA’s monopoly for the training and certification of physicians.

As individuals, we need to hold our political representatives accountable and speak louder than the health care lobbyists and their political donations. We must insist on these common-sense reforms.

James O’Neill is an independent policy analyst living in Lafayette.

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