Medicare exemplifies the misleading nature of the 'option' portion of the public option. Proponents would have us believe that the public program (that's what I'll call it) will compete side by side with private plans. But, as Medicare demonstrates, a government run insurance provider--which by its nature is not forced to practice fiscal restraint or even operate in the same realm of economics as the private sector--will always crowd out private firms, not due to superior care or service provided, but rather by its ability to offer exceedingly low rates for an expensive product, rates that private firms could never hope to offer while remaining solvent and economically viable.
That does not mean, however, that Americans don't shoulder the burdens of Medicare's fiscal irresponsibility. Cost overruns are covered by tax dollars that must increase to continue to insure a growing population of seniors. The difference is billed to the taxpayers. It becomes an unseen entitlement cost. The fiscal black hole of Medicare gets lost in the thousands of pages of the federal registry, and the nation's absurdly complex--and often contradictory--tax code.
But why should seniors complain? They are not the ones shouldering the burden, and very often they accept benefits from Medicare that cost far more than they ever paid into the system. Furthermore, Medicare taxes go directly into the benefits payed for seniors currently enrolled in the program. It is an illusion that we pay into the system, and over time build a nest egg on which to rely when we hit 65. The money filters through Washington and right to the hospitals and HMOs providing care. Medicare has become a giant ponzi scheme, with current wage-earners paying for the lavish health benefits of the retired.
The famed Madoff ponzi scheme imploded when a financial collapse revealed that Bernie didn't have the money to pay back his clients. It took a massive shock throughout the system to break the feeble solvency of the scheme. Likewise, when the boomers retire en masse (it's already begun), they will start demanding their investments back, and the ensuing shock will cause Medicare to collapse.
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But Lachlan, do you believe that in any way, private insurers are more efficient? They have to pay higher overhead costs and they have less leverage to negotiate reimbursement rates with doctors.
Certainly, Medicare is not a perfect system. But let's say we held private insurers to the same standard we held Medicare--that, effectively, the money they raise can only raise with inflation. They would have been bankrupt years ago! Premiums rise in the private market on the order of 7 to 12% per year. If we rose the Medicare tax rate even half a percent, that would eliminate most of our worry. Certainly, that is not a long-term solution, and costs need to be brought under control--but why should private insurers have this option, and the government lack it?
Note that Medicare does not restrict which doctors patients can see. It doesn't "ration" care. And many of the people currently protesting against "government-run health care" are in fact old enough to be eligible for Medicare! I think your desire to have a free insurance market is based more in an overarching belief in the necessity of markets than any evidence that a private insurance market does a good job at keeping people healthy.
A profit-driven insurance market has an incentive first to make money. Second, it has an incentive to keep enough patients happy enough to keep buying their product. But why should the decisions for care be made with an eye towards profit? Surely, to promote the general welfare, government needs to do a better job than see what's most efficient in a utilitarian sense.
No, I am not saying they are efficient, I am saying the product is expensive, regardless of who is paying for it. A government insurance provider and a private insurance provider still must cover the same procedures, but one has an unlimited source of funds from which to draw, while the other needs to turn a profit.
So yes, insurance companies raise premiums, while Medicare keeps its tax rates low. But how can Medicare take in less money than a private insurer while still offering the same level of insurance? The answer, of course, is that it cannot. Medicare taxes do not have to go up to make up the difference, but some taxes do (now or in the future).
To answer your last question, insurance companies make a profit because they provide a service. Just like any other service, if we didn't feel we needed it (or wanted it) we wouldn't pay for it. So many seem to believe that the natural state of things is happy and healthy, but that these greedy profiteering insurance companies have blocked people from getting proper care.
No. Insurance companies enable millions of Americans to get health care they would otherwise never be able to afford. The peace of mind offered by insurance companies is, in the minds of Americans who buy it, well worth the monthly premiums.
It sounds really nice to say 'people shouldn't have to make a profit, they should just do it,' but unfortunately medical care costs money. A lot of money. I agree that cost-cutting measures need to be put in place (not via govt price controls, however), but to think that a government health insurance provider will be able to give insurance for less than it actually costs is a myth and an illusion. The government will compensate for cost overruns, and citizens will pay the difference. Just because the federal government provides it does not mean it's any cheaper. The costs just become hidden.
I think you misconstrue my argument. Providers should make profits. Facilitators--insurance companies--are an outdated relic of the 40's, 50's and 60's. There's no longer a purpose for them in any real sense; they just skim money off the top of the system in the form of profit.
And you ask how Medicare can deliver care more efficiently? Simple. It doesn't need to return a profit to shareholders, it only needs to break even. Also, it doesn't need to advertise. There's a reason Medicare's overhead costs are so low--because there are economies of scale on things like health care. But there are also savings when the insurance providers--who do nothing more than risk management --are nonprofit.
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