Public Policy the Obama Administration's

Public Policy The Obama administration's health care plan will dramatically shape the way that the health insurance system functions in the United States. At the heart of this plan is the public option, which will set up a government-funded health insurance program. Consumers will have a choice between their existing health care plans and the on offered by the public. Companies as well will have the option to choose between offering their own plans or paying a tax to help fund the public option.

The health care plan is highly controversial for a variety of reasons. A substantial amount of opposition comes from the health insurance companies themselves, who stand to have their business eroded significantly. In addition to the debate about whether or not health insurance is a public good whose availability to all should be mandated, there are also questions about the impacts of government interference in the health insurance marketplace.

Whether the final health care law actually includes a public option is unknown at this point as the House bill contains one and the Senate bill does not (MacAskill, 2009). The nation is divided about the merits of the public option. Many see it as their only means to health care access. Business groups are in favor of it because they view rising health care costs as a competitive disadvantage.

Any in government with the foresight to understand that the growth in health care costs must be contained in order that the U.S. debt be controlled are also in favor of the public option. Rational opposition comes mainly from two camps -- those who do not feel that health insurance is a public good and those in the insurance industry who see a threat to their profits. I am in favor of the public option, albeit with some reservations. Underlying this view are a few key assumptions.

My reservations stem from the understanding that health insurance is not a public good. Therefore, government involvement in the industry is not something to be taken lightly. However, it is understood that government involvement in the health care industry is already at a high level. The compromise plan announced December 9th illustrates that even without a public option government regulation of private medical insurance is going to be substantial. Another key assumption is that the desired ends of the health care system post-reform are different than those pre-reform.

The current health care system relies on the market economy to deliver profits to shareholders first, with quality health care as a by-product of that. In order to orient the health care system to quality health care first, changes must be made. The underlying threat to budget disaster as health care costs rise faster than the GDP is also built into the assumption - one of the other major goals of health care reform is to control health care cost increases.

One of the intended outcomes of the public option is that it would improve competition in the marketplace. Costs are rising as rapidly as they are in part because buyers are price takers. 99% of companies over 200 employees offer a health care plan -- they cannot attract employees without it. This is because individuals, especially those with families, view a health plan as an essential hedge against risk of catastrophic illness or injury.

The public option will cap the price of insurance, so that buyers are no longer price takers above that point. This will force the private insurers to control costs or offer more coverage in order to attract customers. Corporations may forgo private insurance altogether if the cost is higher than the tax they would pay -- again either forcing the insurers to lower prices and/or control their costs.

Another intended outcome is that with greater influence over health care costs via their insurance program, the federal government will be able to lower or at least slow the rate of growth of those costs. This capability would come from increased bargaining power over health care providers and drug companies. Medicare, it has been pointed out, pays less to providers than do insurance companies (Krugman, 2009). This outcome would likely hold. An unintended consequence may be the improvement of U.S. competitiveness in business.

The public option would allow companies to shift their employees to the government plan. This would lower their cost of health care. They could increase wages somewhat, lower prices and be able to retain more jobs. More employers could remain in the U.S. instead of offshoring jobs. Workers would have more freedom to switch jobs. At present many workers are being underutilized because they are afraid to leave their jobs because they would lose their insurance.

The economy would gain a boost that would offset much of the GDP decline that would occur from greater health care cost control. Another unintended consequence is that insurance companies may decide to exit the industry. They will have a difficult time competing against a government entity with a.