Many health reformers are urging President Obama to pass legislation which would create a public, Medicare-style health plan which would be available for all individuals. The plan would be open to all…or would it. If a government ran a huge deficit and had to cut spending, would there be an enrollment freeze if the public plan was losing money?
In California, their SCHIP plan (called “Healthy Families) has recently enacted just such an enrollment freeze. The Riverside Press-Enterprise reports that “Healthy Families needs $90 million from the state to cover an estimated 1 million children whose parents earn too much to qualify for Medi-Cal and too little to afford insurance, according to California’s Managed Risk Medical Insurance Board [MRMIB], which operates the program. That gap adds up to $270 million because the federal government kicks in $2 for every $1 the state spends on the program.”
Of course states cannot run deficits, while the Federal government is more than happy to do so. Further, the proposed “public plan” would be financed by enrollee premiums rather than tax revenue. However, if the public plan does start bleeding red, they will have to either: 1) close enrollment and/or drop unprofitable enrollees, 2) increase the deficit or 3) cut services and/or payment to providers to save money.
The public plan does have some merits and may actually improve the health care system in the U.S. Those who believe that a public plan will be a “cure all,” however, are just being naive.