Commonwealth Fund: Stark’s Health Bill Covers All, Nets Savings

stark.jpgOn the first day of the 111th Congress, Rep. Pete Stark (D-CA) — chairman of the House Ways and Means Committee’s health panel — re-introduced (for the 15th or 16th time) his AmeriCare Health Insurance Act of 2009.

As the Wall Street Journal’s Health Blog explains, under the bill, “Americans could obtain health insurance either through their employers or through a Medicare-like program the congressman calls ‘AmeriCare.'” Employers who don’t offer coverage to their employees would pay into a fund to cover their employees through the new public program.

Obama envisions something different: a health insurance exchange that fosters competition between private insurers and a new public plan. Stark’s bill simply expands Medicare and does not directly force private plans to compete for business. “As Barack Obama takes office and sets the direction for reform efforts, Congress is poised to work with him to make comprehensive health reform a reality,” Stark said. The bill is “consistent with many of the principles outlined by the President-elect.”

Consistent or not (and on the whole it certainly is, at least the principles are the same), a new analysis comparing the “leading bills of the 110th Congress aimed at expanding and improving health insurance coverage” concluded that Stark’s proposal would cover the most uninsured and produce a net savings of $58.1 billion. Here is a comparison of coverage and costs of both proposals in 2010:

Stark’s Plan Obama’s Plan
Number of uninsured covered 48.9 million 44.9 million
Remaining uninsured 0 4.0 million
Total health spending ($58.1 billion) $17.8 billion
Federal Spending $188.5 billion $103.9 billion

The Stark plan promises to cover everyone at a cost of $188.5 billion in 2010, but then cuts national health spending by $58.1 billion “by covering more people under Medicare, which has far lower administrative costs than private insurance plans.”

Stark’s large expansion of Medicare is politically toxic because it exposes him to conservative claims that his plan would “crowd out” private coverage.

Their argument goes something like this: Medicare’s low administrative costs (remember, they don’t have to turn a profit like private insurers do) and market power, allows it to charges less than what private insurers can afford to offer. This logic is questionable and “crowd out” itself is a rather contentious and ideologically polarizing debate — single payer proponents wouldn’t mind seeing private insurers go out of business, arch-conservatives fear that a new public program will spell the end of private insurance.

Extremes aside, let’s leave the choice to the individual. In Obama’s insurance exchange, for instance — where the public and private plans would be in a head-to-head competition on a level playing field — Americans would have the choice of a private or public option. Private insurers would have to adopt certain efficiencies to compete for patients and public plans would have to offer more consumer-responsive plans to hold-on to their enrollees. All this might lower the nation’s spiraling health care costs and individual health premiums.