Health Care "Entitlement" is the New "Entitlement"

Thu, 03 Sep 2009 13:47:21 +0000

I disagree with the analogy Stan drew in his last post. (And mind you, this is coming from someone who does not refer to the estate tax as a death tax.) In Section 223 of HR 3200, the Secretary of HHS is authorized to construct a public health insurance option with payment rates based "on the payment rates for similar services and providers under parts A and B of Medicare." In Section 222, the Secretary is tasked with setting the premiums for the public health insurance option "at a level sufficient to fully finance the costs of" its health benefits and administrative costs. Why would anyone be out of line to describe that as the option to buy into Medicare? And Medicare is an authentic entitlement program -- regardless of what else people might be including in the set of entitlement programs in political discussions, Medicare is never excluded.

So why does a public health insurance option defined in this way have someone like me seeing red? I have two reasons. First, I think Section 223 is here to stay and Section 222 will go away. The government is much better at making promises than funding its promises. The scenario I envision is that the public option does nothing to control costs. Its payment system is set up to resemble Medicare, and it is the growth in real, age-adjusted Medicare expenditures per capita that has most people concerned about long-term deficits. But with a public option, there will now be recourse for every citizen to petition the government to get a better deal on its health insurance premiums. The pressure will be enormous to subsidize the public option, just as there has been enormous pressure to offer services in Medicare that increase its cost at (future) taxpayer expense.

Second, there is no way to keep politics out of the operation of an entitlement program as complicated as Medicare. Legislators simply cannot help themselves. Staying with the follies of former Senator Stevens to whom Stan referred in his post, recall what he did for Medicare payments in Alaska on his way out the door. I have argued that the government does have an important role to play in the regulation of health insurance markets (Community rating, Guaranteed issue, Ex post risk adjustment, and an individual mandate, with Medicaid for a fee as the backup option). To the extent possible, it should stay out of the business of delivering health care. Markets should determine the allocation of goods and services, not legislators and bureaucrats.