The Healthcare Supply Chain: What's the Skinny on the Public Option (Also known as Single Payer)

Years of annual double and high single digit premium increases have created an ever growing chorus of complaints that these costs are making U.S. companies non-competitive in their markets. Wouldn't public funded healthcare make U.S. companies more competitive in the global economy? The surface answer is affirmative. But the real answer is definitely not. Here is why. Governments do not create wealth. They simply take the wealth made in the private sector through the collection of taxes. In order to provide for a public option the government needs money to pay for it. It can get it from one of three sources: taxes, borrowing and printing money. And the last two require more taxes to pay them back. The result will be that the very same companies that complained about the high cost of health care will be no more competitive because their decrease in health care costs will be more than offset by higher -- and perhaps significantly higher -- taxes. They could end up less competitive with much worse health care for their employees.

The Congressional Budget Office analyzed the impact of the Kennedy version of the Democratic health care plan and concluded that at the end of 2019, ten years after implementing the plan, its cost would have been $1.6 trillion and there would be more uninsured then than there are today. The CBO also concluded that 119 million Americans would lose their private plans and move to the government plans. Proponents of the public option, including the President, argue that it is necessary to provide competition with private plans to reduce costs.

Here's the problem. Companies complaining about the cost of health care will likely move to the public option to save money. The government won't need to spend money on marketing and it won't have to spend money resubmitting claims that have been denied by existing government payers. On top of that, the government, with access to the US Treasury and a seemingly unlimited ability to tax individuals and corporations, can effectively low ball its pricing on the front end, making it impossible for the private plans to compete. The private plans cannot simply levy taxes or print money and once they are no longer profitable there will be no incentive for them to stay in business and they will become extinct. Over time government run health care will become the only game in town. As such they will be able to do what they want and decide who gets care and who does not and charge what they wish. (The requirement for Americans to buy health care insurance could become a blank check to the government for each person's share of whatever the government says health care costs at that time.)

The government's public option seems far more likely to eliminate competition than to enhance it. In fact, to fund a part of its plan, the government intends to cut reimbursement to health care providers by more than $300 billion over ten years. That alone will drive more providers from the market place and further reduce access to care. And fewer providers will create the same result as rationing of care, which the government claims it will not do. If supply is reduced but demand increases and the supply cannot be increased and higher prices are not an option the demand cannot be met -- leaving many, who thought they were promised access, left out in the cold. Everyone may have insurance but not everyone will have access to the care they need.

- Lynn James Everard