AIP column: Three dirty little secrets of the public plan

Today’s column at American Issues Project focuses on three “secrets” of the public plan that have thus far escaped the media coverage of ObamaCare.  Amazingly, these do not include the fact that the Obama administration apparently doesn’t understand the definition of “competition” and the fact that the private market provides it without any competing plans from the government.  Their disdain for profit as a consequence of efficiency isn’t among them, either, since their disdain for profit in general is rather well-documented.

No, I have three specific points that don’t get much visibility, and this one is probably the key point:

While Sebelius and the White House disdain and completely misunderstand the private market, the private market in fact subsidizes the already-existing public plans of Medicare and Medicaid. A correspondent from within a major insurer explained to me exactly how that works:

At a recent leadership meeting, our CEO mentioned that the providers are very nervous about the government program expanding. Currently, the government dictates to a provider how much they will be reimbursed for a given procedure. That reimbursement does not cover the actual cost, which leaves the provider to spread the remaining portion of the cost to the rest of the people who have insurance.

If the government program were to expand, the number of privately insured people to absorb that extra cost would shrink, driving up the cost of insurance for everybody else. Eventually, two things would happen…. First, nobody could afford the non-government program, and secondly (and this is what the providers are truly afraid of), providers would not be able to cover their costs. This would drive them to bankruptcy. We would then either be in a position where there are no health care providers, or the government would have to nationalize them as well.

Many providers now refuse to take new Medicare/Medicaid patients because the plans don’t cover their costs to provide services. Those who do wind up charging their other patients more to cover their losses. The private insurers bear the brunt of that business practice now, which is bad enough. If the private insurers disappear, though, providers will not recoup the losses at all, and will go out of business altogether.

Read the whole column, especially to get an idea of how Kathleen Sebelius and Barack Obama envision a public plan competing with private plans to deliver better value.  The answer will stun you.

While you’re at AIP, check out the commentary from the fine stable of bloggers.  Matt Margolis wonders how many jobs are being “saved” in Massachusetts, Jimmy Bise has three questions about health-care reform, and John Hanlon analyzes the latest NBC poll suggesting that the honeymoon is over for President Obama.