Rip Van Health Care: Heritage Foundation Recycles ‘Big Government’ Fear Mongering

If Rip Van Winkle fell asleep during the last major effort to reform the health care system and woke up today, he wouldn’t be able to gauge how long he’d been out. While he slept, opponents of comprehensive health care reform reloaded their gun, but they loaded the clip with the same bullets.

During the early 1990s, the Heritage Foundation issued a series of primers characterizing Clinton’s reforms as a “top down, command-and-control system” that would “meticulously govern virtually every aspect of the delivery and the financing of health care services for the American people.” A simple copy-paste job fourteen years later and Heritage is now warning that a national health board and a new public health plan — as proposed by Baucus, Obama, and Daschle — would “cancel private coverage and care”:

A new public agency — variously described as an institute, board, or council — that would make key recommendations regarding the kinds of medical technologies, treatments, drugs, and procedures that would be officially deemed “effective” …would constitute an unprecedented level of government regulation and control over the delivery of health care….The creation of a new public plan would result in millions of Americans losing their employment-based coverage coupled with a massive expansion of government coverage and financial control.

The Federal Health Board, designed to set “evidence-based standards for benefits and quality for federal programs,” would, in fact, establish independent “control over the delivery of health care.” But this reform would result in less government control, not more. Congress’ role would be limited. In the same way that it doesn’t regulate monetary policy (that’s up to the Federal Reserve) or flight safety (that authority is vested in the FAA), Congress would task health care decisions to a broad spectrum of health-care participants who would “make decisions informed by expertise and experience, much of it private sector experience.” “We would try to streamline the tremendous bureaucracy that exists today… if you think our banking system today is reasonably regulated, why not try the same type of model for our health-care system?” asks the incoming Health and Human Services Secretary.


Heritage’s claim that allowing private companies to compete with a new public program would choke private insurers, raises its own questions. The Foundation claims that “genuine market competition is not envisioned in any of these proposals” since “the government would not only be a participant in the competition but would also be setting the rules for the competition”:

With the government plan, taxpayers would presumably absorb all of the risks, losses, and liabilities of such an enterprise, while private health plans would absorb their own risks, losses, and liabilities. Consequently, from the beginning, such a competition could not possibly be fair in any meaningful sense.

Currently, insurer and hospital markets are increasingly dominated by large insurers and provider systems. These private insurers do not use their market power to “drive hard bargains with providers” and have no need to bargain with providers.

Introducing an efficient public option would force private plans to offer better services through higher levels of efficiency and force the public plan to maintain reasonable physician and hospital reimbursement rates (otherwise enrollees would exit to private plans.) Even if private plans charged higher premiums, most would still survive because they are typically more responsive to consumer demands for choice. As Linda Blumberg, a Principal Research Associate at the Urban Institute, explains, “some people are going to be very willing to pay more money to stay in a private plan if they perceive that plan as being higher quality, giving them a boarder network or richer benefit packages.”

Still, Heritage’s concern about fair competition is duly noted. The playing field has to be leveled. Baucus has explained that under his plan, the “public option must offer benefits similar to private plans in the Exchange.” Others have proposed a “two-fold structure” within which a public insurance plan “would be offered in the mix of competitive options and then there would be some kind of oversight board that would be in charge of overseeing that competition that would be separate from it.”