WITH ALL the talk about bipartisanship and pragmatism from the White House, there has been concern that President Obama might settle for a low-voltage health reform bill that would only tinker with the system’s runaway costs and remove just a few million from the roster of 47 million uninsured. Then last week Obama forcefully reiterated his campaign pledge to create a Medicare-like plan for uninsured individuals, a crucial piece in meaningful reform.
Such a public-plan option is anathema to insurers, who worry that its potentially huge base of subscribers would allow it to drive hard bargains with providers and offer cheaper coverage for consumers. Doctors’ concerns about low reimbursement rates from a public plan have earned it the opposition of the American Medical Association. A public plan would also save on costs by owing nothing to investors and having much lower overhead than private insurers.
The insurance industry may be justified in its fear of competition, but it only has itself to blame. The most recent indictment of the industry’s failure to provide consumers the protection they need is a study released last week on the role that illnesses play in personal bankruptcies. According to the report in the American Journal of Medicine, medical problems contributed to 62.5 percent of all bankruptcies in 2007, a substantial increase from the 46.2 percent in a similar 2001 study. In the 2007 study, 77.9 percent of those bankrupted by medical problems had insurance at the time they became ill.
Granted, high out-of-pocket costs faced by the insured with porous policies are not the only reason illness could lead to financial ruin. In some cases, the illness caused a loss of work. But according to the study, privately insured bankrupt families reported medical bills averaging $17,749.
Horror stories like these have persuaded Obama, Senator Edward Kennedy, and others that health reform needs a Medicare-style public plan as a way to control costs and provide a yardstick for consumers to measure competing private plans. The option is particularly vital if the final bill includes a mandate on individuals to secure coverage, either from an employer or on the open market.
It would be unfair to require consumers to buy insurance exclusively from private providers, which specialize in high deductibles and rejected claims.
Although Massachusetts does have such a mandate, the state has been able to forgo a public plan because its major insurance carriers are nonprofits working in a tightly regulated environment. At the national level, Obama and Kennedy should stick by their guns in forcing insurers to compete with a low-overhead public plan.
