President Obama has said repeatedly that he favors a government-run health plan option because it would increase competition and help keep private insurers “honest.” What the president and many others don’t realize is that soon we may actually need private insurers to keep the federal government honest.
Right now the federally-funded Medicare program carries more than $30 trillion (yes, trillion – and counting) in unfunded liability. That essentially means that Medicare has promised over $30 trillion in benefits that it does not actually have the money to fund. There are two ways the government can make up that shortfall: by directly raising taxes or by shifting costs to private insurers. In either scenario, consumers will ultimately foot the bill. Medicare obviously provides essential benefits to millions of Americans, and has for a long time. But clearly, promising $30 trillion in benefits that you can’t actually pay for, and then expecting taxpayers to make up the difference…well, that’s really no way to run a business.
When it comes to unfunded liability, perhaps the government could learn a lesson from private insurers, who don’t have any. Yes, parts of the private insurance industry are profit-driven, and it usually enjoys billions of dollars in earnings or surpluses each year (a very small percentage of revenue when compared to other industries), all of which is subject to review by state insurance commissioners empowered to intervene. Sure, that aspect of the system may warrant increased scrutiny, but we have many very healthy insurers (which are also required to build up reserves so as to eliminate unfunded liabilities) that are not-for-profit, community-minded entities. And there is no denying that the health care system itself is in dire need of comprehensive reform. But it is disingenuous and downright hypocritical for the federal government to lay the brunt of the blame for the crisis at the feet of the “greedy” insurance industry when federal programs themselves are operating with staggering amounts of unfunded liability. One has to ask which is worse: a private industry turning a profit, or a government program rolling up mounds of debt it will ultimately ask the American people to pay off?
It is unfair and diversionary for the administration to continuously characterize the private insurance industry as a sinister force responsible for all of the nation’s health care problems – especially when the government and its trillions in unfunded liabilities are as much a part of the problem as anything. In fact, given that Medicare will run out of money in about nine years if it continues on its current trajectory, I would say the unfunded liability issue needs to be a much larger consideration in reform discussions. The only way to achieve true and honest change in our health care system is by having a true and honest debate about all of the relevant issues, not just those that conveniently support one side’s agenda.
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