Aug. 16 (Bloomberg) — Health and Human Services Secretary Kathleen Sebelius said providing citizens with the option of government-run insurance isn’t essential to the Obama administration’s proposed overhaul of U.S. health care “What’s important is choice and competition,” Sebelius said today on CNN’s “State of the Union.” The public option itself “is not the essential element.”
Asked if a cooperative plan is a possible replacement, Sebelius said she didn’t know what alternatives Congress would settle on among competing versions of the health legislation now under consideration. The Senate Finance Committee is discussing cooperatives, or networks of health-insurance plans owned by their customers, that would get started with government funds.
Sebelius’ comments suggest that the Obama administration may be considering backing off its commitment to create a government-run health insurance system to operate alongside private insurers in order to get health legislation passed.
Good news? Well, I wouldn’t start celebrating just yet:
Under a proposal by, D-N.D., consumer-owned nonprofit cooperatives would sell insurance in competition with private industry, not unlike the way electric and agriculture co-ops operate, especially in rural states such as his own.
With $3 billion to $4 billion in initial support from the government, the co-ops would operate under a national structure with state affiliates, but independent of the government. They would be required to maintain the type of financial reserves that private companies are required to keep in case of unexpectedly high claims.
“I think there will be a competitor to private insurers,” Sebelius said. “That’s really the essential part, is you don’t turn over the whole new marketplace to private insurance companies and trust them to do the right thing.”
The unfortunate part of this statement is that, despite Sebilius’ having been eight years as Insurance Commissioner of Kansas, she hasn’t got the slightest idea what she’s talking about. Insurance Plans like Life, Auto, or Home Insurances are required to have Reserves, as Secretary Sebelius notes. Health Insurance is about managing cash flow; the cash comes in (from monthly premiums) and gets paid out almost immediately for treatments, visits, etc. There are no cash reserves in Medical Insurance — the money comes right in and goes right out.
- The co-ops will get all the uninsurables.
- Costs will go through the roof.
- Costs will go into orbit.
- The government will have to bail out the co-ops again or let them crash.
- Higher premiums will drive away the healthy.
- Premiums will rise more.
- The government will have to take over the co-ops.
And when the government has to take over the co-ops, the co-ops are nationalized — just like GM, Ford, and the Banks — and Socialized medicine enters through the back door.
Not directly related — but perhaps it explains some of Secretary Sebilius’ thought processes here. Her maiden name?
Would you trust your Health Insurance to Secretary “Gilligan”? Me neither!