Friday, August 21, 2009

Will Having a “Public Option” or “Co-Ops” Lower Health Care Costs?

Did the competitive pressure of having the ‘non-profit’ Blue Cross/Blue Shield health care organizations help lower health care costs over the years?

They originally were formed as a ‘non-profit’ alternative to private health insurance companies back in the 1920’s to help teachers in Texas find health insurance coverage.

The presumption is that with non-profit status, a company could provide any service or good at a reduced price to the consumer simply because they don’t have to pay any taxes to the federal government.

Apparently, non-profit health insurance companies have not been the silver bullet to provide lower price competition over the years. 100 million people are now covered by BCBS non-profit entities. And yet, health care costs have been rising at 3-4 times the rate of inflation for the past 30 years.

Is there any tangible reason to strongly believe that adopting a public option, or even its cousin, the ‘co-op’ approach, will drive down costs in the health care system of America in and of itself as its advocates promote?

There has to be something else more fundamental going on beneath the surface of health care in America.

And there are, just to name a few:

  • Defensive medical practices by physicians
  • Duplicative medical diagnoses and claims by patients
  • New and expensive medical procedures and therapies
  • Expensive proprietary drugs that can help cure or contain anything from cancer to AIDS to high blood pressure.
  • An unhealthy lifestyle by most Americans, of whom 66% are overweight, obese or morbidly obese.
Without changes in these structural areas in health care, including tort reform, it is unlikely health care costs will plummet solely because there was a public option or co-op established nearby the currently operating for-profit or non-profit health insurance entities.

Here’s what we think would happen if the ‘public option’ or even the ‘co-op’ concept gets passed by Congress: Costs to the taxpayer will skyrocket over the next 10 years, probably to the tune of $3 trillion or triple the current cost estimate of 'only' $1 trillion.

“How can you possibly say that and mean it?” you might ask.

Because it has happened before, many times, in other government-run programs and not just in Medicare to Medicaid to state and local medical-related health programs. History is always a guide to future results in this regard.

It is the natural propensity for government programs to grow once they are passed into law. The problem with federally-supported health care since 1965 is that their growth in cost has been exponential in nature, not just keeping in line with inflation.

The natural order of any federal program is to be birthed amidst great hoopla and never die. Since the Reagan Revolution of 1980, the Clinton years, the 1994 Republican Revolution and the George W. Bush era, precisely one federal program has been abolished out of existence. Federal programs are the closest thing to having eternal life on earth, Ronald Reagan once famously said.

Once an altruistic program such as Medicare gets set into the law of the land, it becomes a natural vehicle for add-ons by well-meaning politicians and lobbying groups. It is never in large chunks but in such incremental steps that proponents can make opponents look like devils and insensitive clods if they stand in opposition to an add-on amendment that ‘helps grandma and grandpa” or “prevents needless suffering and death”.

Pretty soon, you go from a $5 billion Medicare program in 1968 to a $500 billion program in 2009. That is an expansion of over 100 times the original estimate of cost.

So before you get too enamored with the public option, into which the Detroit automakers will dump all of the employees and retirees into with seconds of President Obama signing the bill, if it ever comes to that, have a talk with your sons or daughters and grandchildren and see if they are ok with paying all of these enormous costs down the road.

It is on their tab, not ours.

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