The Obama administration’s public healthcare plan would undermine competition among insurers, said Rep. Paul Ryan, R-Wis.
“The whole purpose of having a public plan is not to have fair play, honest competition; it’s a stacked deck,” he told CNBC. “It’s kind of like my daughter’s lemonade stand competing against McDonald’s. Its very design is so that it doesn’t actually work.”
Ryan introduced a bill in late May, The Patient's Choice Act, which would provide health coverage for uninsured Americans. The act would convert a "tax exclusion" into a tax credit and Medicaid into a defined contribution system. Regardless of income and preexisting health conditions, households would be able to use a tax credit towards buying a health insurance plan on a state-based exchange, he said.
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“You can fix those problems of cost and accessibility for the uninsurable and the uninsured without having the government take it over, without these new taxes and new spending,” said Ryan.
At the moment, the House is considering five possible plans, and it remains uncertain which will ultimately become the victor.
As the details get sorted out, cost remains a central issue. The Obama administration’s healthcare plan would cost some $1.6 trillion over the next ten years, according to the Congressional Budget Office.
Ryan alleges such spending would compound U.S. debt problems.
"CBO is saying even if this thing adds up in the 10-year window, it has huge deficits in the outyears because healthcare spending goes up 8 percent in this healthcare bill and the offsets only increase five percent per year," he said.
Ryan outlined four reasons the government’s healthcare proposal would give its plan greater advantage over competing health insurers. While a public entity would not have to pay taxes, maintain large capital reserves or account for payroll and benefit costs, for instance, the private sector would, he said.
“More importantly, the government gets to dictate the prices it pays to providers,” he said. “The private sector doesn’t get to do that.”
The public plan also would lower Medicare reimbursement rates further, for instance, which puts more competitive pressure from the public to private sector, said Ryan. He thinks this will ultimately encourage more companies to "dump their people" into the public plan, he said.
In addition to Medicare payment cuts, the House's health bill needs $800 billion in tax increases in order to ensure the healthcare plan is deficit neutral, said Ryan.
"Fifty percent of that surtax, according to all the numbers we have from the number crunchers goes to small businesses," he said. "Our tax rate is going to be 45 percent. Top tax on dividends, 45 percent. Top tax rate on capital gains, 25.4 percent. We're going to do this in the middle of a recession?"
Although the American Medical Association [AMA] officially supports the public plan, infighting within the AMA and other physician groups is rising, he said. Doctors are scheduled to get a 21 percent cut in their Medicare rates next year, for instance.
"If everything is at Medicare, which underpays by 20 percent, they gain on the right hand and lose on the left hand," he said.
Ultimately, Ryan predicts that large insurers will cut a deal with the government in which they essentially become claims processors.
“And just the really big companies with the economies of scale will survive, and the small, medium insurers will go by the wayside,” he said.
President Obama, who reiterated his call for healthcare reform Monday, has said that competition will remain intact and those who want to keep their current coverage may choose to do so.
“The problem is this rhetoric has nothing to do with the substance,” he said. “As we mark up these bills, you see these price tags and the Congressional Budget Office saying it’s going to have a huge deficit, the substance is starting to catch up with the rhetoric.”
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