Steve Chapman

If Medicare were a bank, federal regulators would be closing its doors, selling its operations and sacking its managers. Thanks to soaring costs, the program is fast running out of money -- even though it pays such low fees that many doctors refuse to take Medicare patients. Meanwhile, Medicare fraud costs taxpayers some $60 billion a year, according to a report by CBS's "60 Minutes," making it among the most profitable fields for felons.

That's our experience with government-run health insurance for the elderly. So what do congressional Democrats propose to do? Offer government-run health insurance to everyone else.

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Senate Majority Leader Harry Reid capitulated to his party's more liberal elements when he said he will insist that health care legislation include a "public option" -- a government insurance plan -- to bring "meaningful reform to our broken system." But deploying a version of Medicare to repair the status quo is like using a brick to improve a window.

President Obama says it would help consumers by giving private insurers some real competition. But the typical state has 27 companies competing in the small-group health insurance market. If there were insufficient competition, the health insurance sector wouldn't rank 86th among American industries in profitability.

Health care plans average profits of just 3.3 percent. In wireless communications, a vigorously contested market, profits are 11 percent. Does Obama think we need a government cell-phone company to compete with Verizon and AT&T?

The proponents also believe that, like Medicare, a new government plan could be run far more efficiently than private firms. Don't make me laugh. Medicare, keep in mind, is going broke. And its alleged efficiencies are illusory or nontransferable.

Health economists Regina Herzlinger of Harvard and Robert Book of the Heritage Foundation note that on a per-person basis, Medicare has higher administrative costs than private firms. They look smaller only because the average Medicare patient uses more services than the average private insurance patient. "Expressing them as a percentage makes Medicare's administrative costs appear lower because they are spread over a larger base of health care costs," write Book and Herzlinger.

A "public option" might duplicate one of Medicare's means of saving money: limiting reimbursements to doctors and hospitals to far less than what private insurers pay. But 19 health-care organizations that support reform, including the Mayo Clinic, explained the flaw in that approach.


Steve Chapman

Steve Chapman is a columnist and editorial writer for the Chicago Tribune.
 

 
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