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Medicare Buy-In

by DEAN BAKER

Back in the good old days the conservatives were the folks who favored individual choice: not any more. In the current health care debate, the top priority of the so-called conservatives is to deny people choice. They want to make sure that Americans do not have the option to buy into a Medicare-type public health care plan. These alleged conservatives have come up with a variety of arguments against allowing people the Medicare-type option, but the only one that makes sense is that they work for the insurance industry.

The argument against a Medicare-type option always begins with the assertion that the government can’t do anything. This is a peculiar claim given the popularity of Medicare, but it also makes no sense as an argument against giving people a buy-in option. Suppose the government gives people the option to buy into its really bad plan. Everyone would just stick with the good private plans we have now, right?

The so-called conservatives then tell us that people will end up buying into the bad Medicare-type plan instead of the good private insurance options because the government will subsidize the Medicare-type plan. A little bit of arithmetic is sufficient to dismiss this argument.

How much money would be needed to get people to choose a bad health care plan rather than a good one? This would have to involve some serious subsidies; people are not going to sacrifice their health and the health of their families for another cup of coffee at Starbucks.

Suppose it took a subsidy of $1,000 a year to get people to choose the bad Medicare-type plan over the good private sector plans. With a non-Medicare population of more than 250 million, this would imply government subsidies of more than $250 billion a year, if the Medicare-type plan was to fully replace private sector plans, as the so-called conservatives warn.

Is it really plausible that Congress will approve $250 billion a year in subsidies ($2.5 trillion over a 10-year budget window) for a Medicare-type plan that everyone thinks is awful? Is there another altogether wasteful program that gets public subsidies even one-tenth of this size?

This one just doesn’t pass the laugh test. If conservative politicians don’t think they can prevent such an enormous waste of taxpayer dollars being perpetuated year after year for the indefinite future, they should probably consider another line of work.

In short, there is no genuine conservative argument against allowing people the option of buying into a Medicare-type plan. If the plan proves to be inferior to private insurance plans, as is often argued, then the consequences will be relatively minor. Some number of people who choose to sign up with this plan will find that they don’t like it, and then will switch to a better alternative. In time, a bad public plan will soon flounder, since few people will buy into it. There may be some effort to provide subsidies to even a bad public plan, but it is not plausible that the subsidies could be large enough to displace private plans.

It is also clear that the opposition to a Medicare-type public plan does not stem from townhall-type mass based opposition. A recent New York Times poll found that by an overwhelming majority, 65 percent to 26 percent, the public favors giving people this option. If there is a member of Congress that risks defeat by supporting a public plan, it is not because of their constituents’ views.

The opposition to a Medicare-type option is not based on public sentiment or the fear that the plan will be bad. Rather the opposition is based on the fear that the plan will be good and that people will choose to buy into it. This will cost the insurance industry tens of billions of dollars in profit over the next decade and could mean the end of big paychecks for the industry’s CEO’s and other high-level executives.

But the people who oppose giving the public the opportunity to buy into a Medicare-type plan should not be called conservatives. Honest conservatives would have no objection to giving the public a choice. The people who oppose a Medicare-type plan are doing the bidding of the insurance industry – there is no conservative principle at stake. And we all know what Joe Wilson has to say about people like that.

DEAN BAKER is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of Plunder and Blunder: The Rise and Fall of the Bubble Economy.

Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University.

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