In particular, Mrs. Pelosi believes she's found a political trump. A so-called "robust" public option will cost the government less than other plans, since it will pay doctors and hospitals fees pegged to Medicare's price controls on thousands of services. The Congressional Budget Office has reportedly found that these below-market payments would result in "savings" of $110 billion, compared to requiring a public option to negotiate rates with providers like a private company would.
Yet as the government pays less, the private sector pays more. Like Medicare today, hospitals will shift some of their losses into higher private insurance premiums. Meanwhile, the public option's premiums will be artificially lower, even before the heavy subsidies that Democrats plan to offer. As private insurance costs increase, private payers will lose market share, intensifying the cost-shift and precipitating an exodus to government from commercial carriers.
Democrats dismiss cost-shifting as a tall tale of the health industry. After all, if providers can increase their revenue by charging private payers more, why haven't they already exhausted this opportunity? Perhaps because, contrary to Washington's fantasy of robber baron doctors, very few hospitals behave like classical profit-maximizing firms. Most are nonprofit institutions with social missions.
[...] But the reality is that no one wants a public option except the political left. Doctors and hospitals hate the idea as much as insurers do—and they're far from natural allies. The media are able to counterfeit public support, such as this week's Washington Post/ABC News poll showing 57% in favor, only by asking rigged questions about "choice" and "competition." Who's opposed to that?
SOURCE: Wall Street Journal
