Medicare Offers Lessons For Possible ‘Public Plan’

As President Barack Obama and some Democratic lawmakers push for a government-run public plan, Medicare is being scrutinized.

The New York Times examines Medicare, which provides coverage to more than 45 million elderly and disabled and says: "How closely a new public plan would resemble Medicare is unclear. Still, Medicare's record offers insights into the benefits and pitfalls of public health care. While it has driven down costs though its sheer market dominance, Medicare has also been extremely slow in using its power to encourage or compel more effective health care. And, of course, providing health care for older Americans has been expensive. Medicare is expected to represent an estimated 13 percent of next year's federal budget. Medicare has evolved into the bedrock of health insurance for America's elderly population since it was created in 1965. Anyone over 65 qualifies for coverage, regardless of income or health status. The program focuses on paying medical claims rather than denying them, as private insurers often do, and those covered have found it relatively easy to understand what benefits are provided and to find a doctor who will treat them. The elderly also have the option under Medicare of enrolling in health plans offered by private insurers."

The Times reports: "Medicare's market leverage enables it to purchase medical care much more cheaply than private insurers do, and the government uses this clout to drive down prices as a way of controlling costs. Because Medicare represents such a large share of the overall insurance market, hospitals and doctors typically treat Medicare patients even when they might refuse to accept a patient from a private insurer paying the same rate. Medicare's monopoly over the insurance market for the elderly also allows it to compel important changes in the way medical care is paid for. ... But it is that very market power that critics worry about as the debate over a new public plan for the uninsured begins... And that, critics say, could mean private insurers will be squeezed out of that market and consumers will lose the opportunity to choose among different insurance plans. On the other hand, if Congress creates a smaller program that lacks Medicare's market power, it would raise another question: why do it at all? The government could simply set the rules for competition among private plans and, if necessary, offer subsidies to consumers to help them purchase coverage. But a public plan could still have a cost advantage" (Abelson, 7/4).