Public Option is a Proven Failure

One of the things being talked about in the debate over reforming health care in this country is the “public option.” This option is a government-run insurance option that would compete with private insurers. To a lot of people this sounds like a good thing, but I am not one of them. In the research I’ve done, the public option has shown itself to be great if you want to bankrupt the country, but not so great at “reforming” health care.


There are three examples of why I don’t like the public option. This option has been tried in three states – Hawaii, Tennessee, and Massachusetts. In Hawaii, lawmakers there approved the Keiki Care program. Its aim – to cover every child from birth to 18 years of age who didn’t already have health insurance. Surely this is a lofty goal. However, the program didn’t quite work out as planned. Here the “law of unintended consequences” reared its ugly head. What happened was that parents who already had private health insurance for their children started dropping their children’s health insurance in order to qualify for “free” health care. They abused the system. Why pay their hard-earned dollars for something the state will provide for “free”? When the number of Hawaiian children that “qualified” for the Keiki program grew by leaps and bounds, this resulted in what would be a state budgetary shortfall of some $900 million. Unlike the federal government, states aren’t allowed to print money, so when faced with budget deficits they either have to cut services in other areas or raise taxes. Despite its good intentions, the Keiki Care program had to be shut down after only seven months. In short, it didn’t work.


In Tennessee, lawmakers implemented a universal single-payer system known as TennCare. To quote Reps Marsha Blackburn and Phil Roe [both Republicans from Tennessee], “the objective was to use the anticipated savings from Medicaid to fund and expand coverage for children and the uninsured. The result was a program that nearly bankrupted the state, reduced the quality of care, and collapsed under its own weight.” TennCare was designed to replace Medicaid with a managed care system and promised savings to expand health coverage to all. That sounds almost word for word what President Obama wants today. In this case it wasn’t parents that dropped children from private insurance as was the case in Hawaii, but private business. Private businesses all over Tennessee stopped offering health coverage for their employees, which forced many people into the public option system. Again, the number of people who qualified for “free” health care ballooned. To cover the costs, Tennessee had to raise taxes and tried to establish a state income tax. When that effort failed, the Democratic governor had to restructure the program, cutting 200,000 people and cutting benefits. Hmmm….cutting benefits…that sounds like rationing to me. And they’re talking of cutting off another 150,000 people as well. Another part of restructuring the program included reductions in reimbursement rates for hospitals and doctors. Since they weren’t getting paid, fewer doctors could afford to accept TennCare patients. This flies in the face of President Obama’s pledge that you would be able to keep your own coverage and keep your own doctor. If you were on TennCare, and you liked your doctor, but your doctor had to drop you as a patient because TennCare wouldn’t pay you, you’d be up the proverbial creek without a paddle. Tennessee lawmakers ignored the “law of unintended consequences.” Think about it – if you own a business and you pay money to insure the health of your workers, wouldn’t you try to improve your balance sheets if you heard that the state will provide for “free” what you are paying company dollars for? If you were an unrepentant capitalist you would jump at that chance in a heartbeat. Given this set of circumstances, the TennCare program isn’t working out too well either.

Then there is Massachusetts, the state affectionately known to many as “Taxachusetts.” In Massachusetts nearly 97 percent of the state’s population has some kind of medical insurance coverage, that’s because of a "play or pay" mandate on businesses requiring firms to provide health insurance to employees or pay a tax so the government can provide coverage; and generally expanding public insurance [the "public option"]. In March 2009 the New York Times reported spending on the state's health insurance programs is expected to be 42 percent higher this year compared to 2006. Program budget gaps have been addressed by raising taxes on businesses, insurers and hospitals; jacking up tobacco taxes; and increasing premiums and co-payments. As costs explode, the Times reported that some experts argue that government will have to place caps on spending, "which could lead to rationing of care." Writing in the Washington Examiner on July 6, Sally Pipes of the Pacific Research Institute reported:

"The centerpiece of Massachusetts' 2006 health reform bill is Commonwealth Care, a government program that provides free and subsidized insurance plans to low- and moderate-income patients. It's spending has doubled in the last two years, jumping from $630 million in 2007 to an estimated $1.3 billion in fiscal year 2009. Last year, rising costs lead Commonwealth Care officials to approve a 12 percent rate increase, meaning that basic insurance costs will cut even deeper into the incomes of most participating patients... And employers, now required to contribute to employee coverage or pay a tax penalty, are drowning under ballooning healthcare costs. Indeed, businesses that sponsor high-quality insurance plans have seen annual rate increases of 10 to 15 percent since MassCare's inception. This has made it harder and harder for businesses to stay in the state. And it's made the state less attractive for entrepreneurs and investors."

In 2006, Massachusetts brought about the following reforms: individual mandates, employer mandates, an exchange, and subsidies. Individual mandates require all state citizens to purchase a government-approved policy. Employer mandates require businesses to contribute to their employees’ coverage, fining those that do not meet minimum standards. The exchange creates an artificial, heavily regulated market place. Finally, the government subsidizes the policy for people making up to 300% above the poverty line. What has happened? According to, Michael Tanner of the Cato Institute listed these among Massachusetts’ failures:

Rising insurance premiums:

* In Massachusetts, health insurance premiums rose by 7.4% in 2007 and 8-12% in 2008.
* These cost increases outpaced national averages – 6.1% in 2007 and 4.7% in 2008.

Out of control spending:

* Massachusetts’ health care reforms were projected to cost $1.56 billion.
* Costs for 2009 may now be as high as $1.9 billion - $300 million above original projections.
* These costs lead to new taxes. Already, Deval Patrick has responded to deficits by increasing the state’s cigarette tax by $1 per pack.

Waiting lists:

* The number of people foregoing care because of difficulty finding a provider has increased from 3.5% to 4.8%.
* Among low-income individuals, the same figure increased even more, from 4.2% to 6.9%.
* Average waiting times for an appointment with an internist have increased from 33 to 52 days.

Now I appreciate the need for some kind of reform in health care. Costs are just too damn high. It’s a racket, and a legalized one at that. But this public option has been proven a failure in the three places where it has been tried.

Some define insanity as the repeated attempts at failure with the hope of a different outcome. The public option has been tried in three states with the same outcome – failure. Do we as a country want to try it a fourth time and hope for a different outcome? If we do, then we are truly insane.