The public option is poised to be the deal-breaker with regard to health insurance reform. Progressive legislators are pledging to vote against any reform bill that does not include a public option. Blue Dog Democrats and Republicans are adamantly opposed to any bill that includes a government-run plan.
The key to breaking this stalemate and achieving bi-partisan support in Congress for health insurance reform is a market-oriented public plan that Blue Dogs and genuine conservatives can support: a government-owned corporation, similar to the Federal Deposit Insurance Corporation, which would offer only catastrophic health insurance policies.
This “Federal Health Insurance Corporation” (FHIC) should be self-supporting, with premiums set just high enough to cover the cost of benefits paid. Since the public plan would be revenue-neutral, it would not add to the deficit or require raising taxes.
The FHIC could issue vouchers for regular check-ups to promote preventative care. All other interactions between patients and their doctors, hospitals, and other care providers would be paid for directly by the policyholder. If total expenditures for a given year reached a relatively high deductible amount, the policyholder would be reimbursed for any expenses over that amount.
Some private insurers already offer catastrophic plans, primarily to individuals not covered by their employers. These plans are not terribly popular because premiums are still relatively high. Furthermore, they don’t have the advantage of creating the illusion that somebody else is paying for your health care. A market-oriented public plan could set premiums much lower, since it would not have to show a profit or cover the costs of maintaining a sales staff, advertising, and paying executives tens of millions of dollars per year.
By working the way insurance is supposed to work (covering only catastrophic events) this approach would further reduce the cost of health care by doing away with the middleman in most doctor-patient interactions. The bureaucrats at private health insurance companies would not be replaced by government bureaucrats.
The vast majority of people do not need thousands of dollars worth of health care in a given year. The premiums we pay, directly or indirectly, for comprehensive health insurance plans are far and away the biggest health-related expense for the vast majority of individuals and families. The cost of a few office visits, routine tests and minor procedures could easily be paid out of pocket if insurance premiums were drastically reduced.
The fact that the public option would be limited to offering catastrophic health insurance policies and reimbursing policyholders whose health care costs exceed the deductible amount should make it clear that it does not amount to a government takeover of health care.
People who believe that the government can’t do anything right, or who want comprehensive policies, would be free to continue patronizing private insurance companies. On the other hand, individuals who cannot afford health insurance now, because of preexisting conditions or limited income, would have an affordable alternative to remaining uninsured.
The establishment of a Federal Health Insurance Corporation would be a giant step in the right direction toward both of our stated goals: reining in the cost of health care and reducing the number of uninsured.