Mon, 15 Jun 2009 18:12:55 +0000 – By Tevi TroyFormer Deputy Director of Health and Human Services
Grumbling from moderate Democrats and industry groups about the possibility of a public sector health care plan is on the rise, and President Obama has resorted to a misleading new argument to fight back. According to the Associated Press, the president has been asking critics of an expensive and expansive new plan "What's the alternative?" -- as if that question itself ought to melt away any opposition.
The problem with this argument is two-fold. First, the theoretical absence of an alternative does not in itself justify some of the costly proposals emanating from Capitol Hill these days. Senator Kennedy, for instance, has proposed insurance premium subsidies for families earning as much as $110,000 a year. If we are going to subsidize people up to that high an income, we will be subsidizing about four-fifths of the population.
Another problematic idea is the so-called "public plan," a government run insurance plan likely modeled after medicare. Medicare itself is financially unsustainable -- one of the trust funds is headed for bankruptcy in the late two thousand teens -- and has been unable to control costs throughout its four decade history. In 1965, when Congress was creating Medicare, President Johnson criticized his staff for allowing a cost estimate for the program of $1 billion to trickle out to the public. Today, the program costs over 500 timesthat amount. In addition to the cost, the public plan could also have a detrimental impact on individuals' private coverage. This is because of the phenomenon of "crowd out," in which privately insured individuals migrate into public plans when they become available, either because their employer stops providing insurance, or because they want to join the government-subsidized plan.
The other, larger, problem with the president's claim that there are no alternatives is that it's just not true. As I've argued in this space before, Senators Tom Coburn, M.D. (R-Okla.) and Richard Burr (R-N.C.) and U.S. Representatives Paul Ryan (R-Wis.) and Devin Nunes (R-Calif.) have introduced a bill that would would give individuals a greater ability to purchase health care on their own via the use of refundable tax credits and improved Health Savings Accounts. The point is not that this bill is perfect or the only way to solve the problem, but that there are alternatives out there, and the president is wrong to suggest that isn't the case.