Upon word that Congress and probably the president are giving up on offering a public option in the health insurance marketplace, the right response is, “So what else is new?”
For the past 35 years, whenever Congress has ventured into health-care reform in response to public demand the big winners have almost always been the health insurance and pharmaceutical industries, and it will almost certainly be that way again. The massive spending against health reform legislation in every media market the past month, on top of the relentless tide of lobbying and campaign expenditures over the decade, guaranteed it.
In the great free market, there is an elemental justice in that result. Industry paid handsomely for the advantages. Why shouldn't it get them?
With the government option out of the way, the industry, with quiet but immense anticipation, will go along with a bill claiming to provide medical coverage to everyone although it won't. Like Mitt Romney's Massachusetts plan upon which it is based, people will be required for the first time to buy coverage from one of the handful of insurance companies, which will be a bonanza that will outclass every other bonanza the government has ever handed the industry. There have been many.
In phrases eerily similar to President Obama's, President Richard Nixon decried the devastating increase in health spending in a 1971 message to Congress in which he called for sweeping reforms of Medicare. His theory was that Medicare competition would also drive economies in the private health sector. Personal health spending, he said, had reached an unsustainable 7.7 percent of Gross Domestic Product. (Last year, it was 17 percent, far higher than any advanced nation on earth.)
Nixon wanted to introduce competition into Medicare, principally through managed care. Insurers and other managed-care contractors would save money, meaning lower government spending and profits for themselves. He got only a little of what he proposed from the Democratic Congress in the Social Security amendments of 1972 and the Medicare HMO Act a year later, but President Reagan — and the industry — fared better in the 1980s.
TEFRA, Reagan's attempt to ease the fiscal wreckage of his tax cuts of the year before, gave “managed competition,” as it became known, a leg up. Lots of companies got into the act and prospered from Medicare. When the government in 1987 had to file criminal indictments against the executives of the biggest contractor, in Florida, which was taking in $360 million a year from Medicare, the program lost a little of its shine. Still, the companies continued to attract more enrollees in HMOs, which were profitable to the companies and attractive to many of the elderly because of the low copays.
The Republican Congress, backed by insurers, struck a bargain with President Clinton in 1997 to allow passage of his 1998 budget act. It introduced a Medicare Part C that expanded the private insurance options. As always but unsurprisingly, rather than the private options reducing the federal Medicare outlays, they increased spending.
Then came the bonanza, the Medicare Modernization Act of 2003, enacted by a Republican Congress and President George W. Bush. It foiled the Democratic Party agenda of prescription-drug coverage for the elderly by installing a modest (in coverage but not in cost) drug program. It was designed by the insurance and pharmaceutical industries. But it went far beyond drug coverage. It replaced the “Medicare Plus Choice” program in the 1997 budget act with Medicare Advantage. Insurers could offer a range of options to seniors, including traditional fee-for-service plans. Seniors who opted for them could get lower copays, somewhat better coverage or both.
Taxpayers and poorer Medicare recipients would pay 12 to 19 percent more to cover Advantage users than for seniors remaining in traditional Medicare, but over time, the theory went, it would curb government outlays.
Didn't happen, of course. The Bush 2003 amendment quickened Medicare's anticipated insolvency by several years.
Seniors started showing up at town halls this month screaming at their congressman about losing Medicare coverage and the government telling them what treatment they could get. The most famous was the guy in South Carolina who told his Republican congressman, “keep your government hands off my Medicare.” The congressman gently reminded him that Medicare was already a government program. But the fellow might not have been as ridiculous as it sounded.
Chances are that he's a Medicare Advantage enrollee and his private carrier sent him a flier saying the reformers were trying to take away some of his privileges with government controls. Sure enough, one way they're talking about getting health spending under control is reducing the massive Medicare subsidy to insurance companies, as much as $10,000 a year for an enrollee, which covers overhead and profit for the company.
Without a public option, there won't be any curtailment of rampant health spending. Many still won't buy the private policies because they can't afford it, and the public subsidy won't be enough.
Oh well, they'll revisit it in 2017, when health spending will be 25 percent of GDP.