Healthcare and the Supply Chain: How the Public Option Will Become the Only Option

The threat of the public option in the Democrat plan remains a lightning rod in the ongoing health care reform debate. Those in favor of the public option suggest that it will stimulate competition and help keep rates down among private insurance companies. The President promises that if you like your current insurance plan and your doctor you can keep them both. On the surface it sounds simple enough. But our national experience should have taught us that our politicians are not detail people and the devil is always in the details.

Various organizations have predicted that the public option will result in anywhere from 83 million to 139 million people losing their private insurance and moving to the public option. How would this happen? First, because the federal government can tap taxpayers for more money or create money out of thin air it will have the ability to low ball pricing anywhere it competes with a private insurer. Large employers facing increases in insurance costs from private companies will feel compelled to choose the lower priced public option in order to protect their own ability to compete in their own vertical markets. No employer large or small can afford to pay more than their competitors for health care insurance. As employers of all sizes peel off from their private insurers and move to the public option, the remaining private insurers will have smaller volumes of members and their buying power will erode. This loss of buying power will increase their own costs forcing their rates up sharply. And this will lead to further losses until most if not all will have no choice but to close down because they will no longer be able to compete with the public option.

While all of this is happening, most patients are likely to sit idly by believing that their ability to choose their own doctors will continue as if it were an inalienable right. Many will be content that the big bad insurance companies will have had their comeuppance. But their contentment will quickly fade when those once easy to get doctor's appointments will be harder to come by than front row seats to a Jonas Brothers concert. Estimates are that there are currently 100,000 too few physicians than needed to care for the existing population and those numbers will rise dramatically in the wake of a proposed 21.5 percent cut in Medicare reimbursement to physicians in 2010.

The public option simply sounds too good to be true if you just look at the insurer side. But if you've spent any time in the health care neighborhood, you know that the provider component requires at least as much simultaneous scrutiny and reform for the system to work -- let alone improve.

- >Lynn James Everard

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