A Public Plan: Some Perspectives

Three perspective articles from noted economists in this past week’s New England Journal of Medicine   review the pros and cons of offering a government-sponsored health plan as part of health care reform.   In a previous post, I talked the future of health plans in the context of calls for a national health plan.


Jacob Hacker  favors a public health plan – saying that “competition between the public and private sectors will ensure lower costs and better access.”  He notes that it will be important to be sure the public and private plans compete on a level playing field.  The level playing field, for Hacker, includes 3 Rs – the same Rules, Risk adjustment, and Regional pricing.


Mark Pauly  also favors a public health plan – noting that choice is good, and some Americans don’t trust the market to deliver what they want, while others don’t trust the government    He suggests that there are not “advantages tgo a large plan’s dominating the market,” a position many providers in states with dominant health plans would contest.  Pauly worries that politicians might lobby to influence plan design – but feels reassured that true competition will only draw patients to plans that address their wants and needs.  Pauly says that all government plans should start small to make for neutral competitive markets.  Of course, a SMALL public plan playing by the same rules as private plans would not be able to exert much downward force on unit prices. 



Victor Fuchs  says that the whole discussion of a public health plan is beside the point.  He points out that more Americans get insurance through self-insured employers than via any other method (30%, vs. 24.5% fully insured).  A government-run plan would only be relevant to this group if the government offered administrative services.   Even for Medicare, CMS actually farms this out to private contractors – so it’s not likely that the government has a competitive advantage in this space. He says that the main challenges are lack of universal coverage, cost increases and poor quality – and is not convinced that a public health plan will be a good solution to any of these issues. 


Ted Kennedy had a recent op-ed article in the Boston Globe  setting out his vision for national health reform – which includes a public plan.  


I find Fuchs’ arguments most compelling.   We need to think about how to change the way we deliver care to make that care of higher value; it matters less whether the check is written by a plan owned by the government or by a private health plan.   A public plan that had real leverage would be opposed vociferously by the health plans and by providers.  On the other hand, a public plan with little leverage wouldn’t matter.  I believe that the final health care reform bill will have a trigger to implement a public plan in the future, if costs are not reined in, rather than right away.   

Addendum: Elad Sharon sent me reference to a Lewin study suggesting that a public plan would drain 2/3 of patients out of current commercial health plans.  Lewin is now owned by Ingenix (a division of United Health Group) - although states that it maintains editorial independence.  This modeling is very sensitive to assumptions, and there are many unknowns.