My Rules For Creating a Competing Public Plan
There has been a lot of discussion about creating a public plan that would compete with the existing panoply of private options. I am not ideologically opposed to having a public alternative, but it must be done in a way that levels the playing field. We should look to historical precedent in this matter, and I can think of two examples: Freddie Mac and Fannie Mae. These two institutions were set up to encourage home ownership, and were run in such a political manner and so fiscally irresponsibly that they contributed in large measure to the financial mess in which we now find ourselves.
So, if we go to a public plan, I have a list of minimal requirements that must be met:
1. Health decisions must be left in the hands of an independent authority, including decisions about what and whom to cover, how benefits are managed and the premiums
2. There would be a statutory requirement that government cannot use its revenues to support the public plan
3. There would be no hidden subsidies relative to private plans, i.e., :
a. Pays taxes on any profits;
b. Has capital requirements like anyone else
(Fannie Mae and Freddie Mac got very big precisely because of #3.) This also means that if the government wants to pay the premiums of a particular group (say 55 to 64 year-olds), they have to offer a voucher that can be used in private or the public plans.
Looking at this list–and thinking about the current situation–I realize this may be untenable. This government just gave $50 billion to General Motors. If the public plan gets into trouble because it covers everything – just like Medicare – then is it reasonable to assume they won’t be bailed out?
The bottom line is that I don’t see a way to ensure a level playing field.
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