Battle Lines Drawn Over Public Insurance Plan

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Obama speaks at health care forum i i

President Obama delivers remarks during the closing session of the White House's forum on health care reform last month. Chip Somodevilla/Getty Images hide caption

itoggle caption Chip Somodevilla/Getty Images
Obama speaks at health care forum

President Obama delivers remarks during the closing session of the White House's forum on health care reform last month.

Chip Somodevilla/Getty Images

Whether to create a new government-sponsored health plan to compete with private insurance is rapidly becoming the central issue in the ongoing debate on how to reshape the nation's health care system.

And a study out this week on the potential impact of such a public plan is giving ammunition to those on both sides of the debate.

Many Republicans are adamant that a Medicare-like government plan would create an unlevel playing field.

"There's a lot of us that feel that the public option — that the government is an unfair competitor," Iowa Sen. Charles Grassley said at last month's White House health care summit.

A public plan modeled after Medicare, agreed Texas Rep. Joe Barton, "will have the unfortunate effect of forcing private insurers out of business because the federal government will act as a competitor, a regulator and a payer."

But President Obama defends the concept.

"The thinking on the public option has been that it gives consumers more choices, and it helps give — keep the private sector honest, because there's some competition out there," he said.

And Jacob Hacker, the Berkeley political scientist who first popularized the idea of a public plan to compete with private insurance, said he never intended the government to put private plans out of business.

"Private plans compete with Medicare pretty effectively," he said. "We have to make sure the rules are fair."

A study by the private consulting firm the Lewin Group provides new talking points for those on both sides of the debate.

The study found that depending on how the public plan is designed — who is eligible to join and whether payments to health care providers are based on what private insurance pays or the much lower Medicare rates — the impact would be very different.

If Medicare payment levels are used, the plan would be less expensive, says co-author John Sheils. The average monthly premium would be about $761 per family, compared to $970 for comparable private coverage.

"Which is about $2,500 a year," he said. "And interestingly, if you think back on the third (presidential) debate, then-Sen. Obama said that his program would reduce premiums for your average worker by about $2,500. So it actually is kind of a good fit."

On the other hand, those lower premiums would also make the public plan more popular. And if enrollment was open to everyone, as many as 119 million people might end up dropping or losing their private insurance coverage.

"And that's an enormous shift. That's 70 percent of all people who have private insurance," Sheils said.

But while details have yet to be written, neither Obama nor leading Democrats in Congress have suggested making the new public plan anywhere near that widely available. They are mostly talking about making it available to workers in small businesses, the self-insured and those who are ineligible for insurance at their workplaces. According to the study, limiting enrollment to those groups would have a much smaller impact on those leaving private coverage — about 32 million people.

Still, conservatives are suspicious about the possibility of a private plan starting out small, then growing later.

"The public plan becomes basically a Trojan horse for single-payer health care," said Robert Moffit of the conservative Heritage Foundation. "The single-payer people on Capitol Hill would like to have single-payer health care system. They don't have the votes to actually do it in broad daylight, so what they want to do is do something like this — create a public plan and simply crowd out private health insurance."

Hacker said he has heard such complaints before.

"Medicare was a socialist plot, according to conservatives, when it was proposed in the 1960s, and now it's as American as apple pie," he said. "And I hope that the public plan within health care reform, the choice of a public health plan for non-elderly Americans will come to seem as American as apple pie."

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