US Senator Charles Schumer (D-NY)

According to the May 5th New York Times, Senator Charles Schumer (D-NY) has proposed a health care reform “compromise” on the creation of a new public plan to compete with private health insurance. No doubt Schumer is trying to convince moderates that they should ignore Rep. Jan Schakowsky (D-IL) frank admissions that a public plan is just the first step of an unprincipled strategy to achieve government run health care.

Schumer’s compromise would require that the public plan and private plans would abide by the same rules and regulations. But even the NYT identifies some huge holes in his claim. Would the public plan be subject to state premium taxes, like private health plans, or state insurance laws, or solvency requirements with the private plans in states with which it is competing? Could the public plan be allowed to become insolvent? Or will it become another candidate for an eternal Congressional bail out? We have even more questions than the NYT does:

  • Will public plan officials be subject to the same state and federal tort laws?
  • How about the same accounting standards as private companies?
  • Could they be sued for breach of contracts?
  • Will they have to negotiate rates and benefits like private plans, set up provider networks, and set prices in the market, just like private plans do today? Market prices? (No special advantages, remember)
  • Will the officers of the public plan be able to reject doctors or medical professionals who do not meet quality standards like private plans can do today, or will they be forced to take any willing provider?
  • Will the benefit setting of the public plan be transparent and benefits packages be completely transparent, defining clearly what is and is not covered? No confusion on these points, like that which afflicts Medicare beneficiaries today.
  • Would the public plan officers have budgets to market their products, just like private plans? Would those marketing costs be subsidized by the taxpayer or paid out of public plan premiums? ( Otherwise, looks like those awful administrative costs would be incurred by the taxpayers).

Of course, Senator Schumer and his colleagues invite us to ponder a problem in elemental logic. If the public plan and the private plans are really going to abide by the exact same rules, what is the point of a public plan in the first place?

Of course, the public health plan would be a wholly owned subsidiary of Congress Inc. That means that it would be a political institution, just like every other government sponsored enterprise, including Fannie Mae and Freddie Mac. It will be ground zero for special interest lobbying – by doctors, hospitals, drug companies, and insurers, as well as every special interest to the left of Pearl Jam, on a scale unprecedented in health care history.

If Fannie and Freddie, and AIG and the Automakers, and the Big Banks and whatever else is in line for a big bailout at taxpayer expense is “too big to fail”, guess what would be the congressional response to a shortfall in the income of a newly minted, congressionally created public health plan with millions of enrollees? There’s no guess work here. Unless you believe in Unicorns.