Questions and Answers on Creation of a New Government Plan
Question: Wouldn’t a government plan provide more choice—people could keep their existing health
plan or enroll in the government plan?
Answer: Creation of a new government plan would cause the employer-provided health insurance that
160 million Americans rely upon today to unravel. A recent analysis by the Lewin Group estimates over
two-thirds of those with private coverage – over 118 million people – would be shifted into the government
plan. Private premiums would skyrocket due to government cost-shifting, making private health
insurance unaffordable for most Americans. The government plan would quickly become the only
affordable option for health coverage.
Question: Do most Americans support proposals to create a government plan?
Answer: Americans want healthcare reform, but they want it to be done on a step-by-step basis, building
on what works in the current system. That means building on employer-based coverage that currently
covers 160 million Americans, rather than starting from scratch with a national government healthcare
program.
Question: Would a government plan help control costs in our healthcare system?
Answer: A government plan would actually make it more difficult to make the changes needed to
improve quality and rein in costs. Any cost savings would come from government underpayment of
doctors and hospitals, not improvements to the delivery system. Medicare has tried and failed to
implement necessary changes (e.g., centers of excellence) because of political pressure from various
groups. In contrast, private health plans have the flexibility to respond quickly to changing market
conditions and consumer demands. The ability to innovate will be lost under a government plan.
Question: Won’t a government plan reduce premiums for employers?
Answer: Expanding government health programs would exacerbate cost shifting by the government –
now $1,788 per year higher today for family coverage according to Milliman – and threaten the ability of
employers to afford health insurance. Under the present employer-based system, employers have
significant influence on the cost of their plan. Employers would lose any ability to manage the costs of
coverage under a government plan, but would likely still be on the hook for continued contributions.

Question: What would a government plan have on access to doctors and hospitals?
Answer: It is unrealistic to think that the government plan would do anything other than underpay health
care providers – Medicare rates today are 20-30 percent below what private plans pay. According to one
estimate, hospitals and physicians would see payments reduced by more than $800 billion by 2020 under
a new government plan. Cuts of such magnitude would create massive disruptions in services and
access to care would decline resulting in long waits, while the innovations, competition, and high quality
care currently driven by the private sector would be lost.
Question: Can’t the program be set up to avoid low Medicare payments to doctors and hospitals by
requiring the government to negotiate with healthcare providers?
Answer: Even if the program originally incorporated a requirement to negotiate rates, political pressure
to reduce costs would quickly lead to price-setting. This is exactly what happened to the Medicare
program. As a political compromise, Medicare was set up in 1965 to pay providers at private sector rates.
In a matter of years, Congress abandoned this approach and enacted payment limits for physicians and
hospitals. Over the past 25 years, Medicare provider payment have been ratcheted down and are now
20 percent less for doctors and 30 percent less for hospitals.
Question: Isn’t a government plan needed to promote competition with private health insurers?
Answer: The government plan would never compete on a level playing field with private plans. Instead
of negotiating payments with hospitals and doctors, the government would simply require them to accept
Medicare payment rates, which are 20-30 percent below what private insurers pay. Over time, more and
more Americans with private health insurance will see their costs grow until they are forced to drop their
coverage in favor of the government-run plan. The result will be a two-tiered system, with only a select
few able to afford private coverage, leaving those in the government plan facing longer waits and less
access to care.
Question: isn’t the health plan for members of Congress a government plan?
Answer: The Federal Employee Health Benefits Program (FEHBP) is an employee benefit plan for
federal employees and retirees. It is just like those employee benefit plans offered by major private
employers today. ALL the health plan options in the FEHBP are private plans – there is no government
option.
Question: Aren’t state employee benefit programs an example of an existing program where private
sector coverage competes directly with private insurance with no ill effects?
Answer: Self-insured plans for state employees are employee benefit plans. There is no difference
between such plans and self-insured plans offered by large employers except the fact that a public
employer is paying for the coverage. These self-funded plans are available only to state employees. No
state allows non-employees to buy into their employee benefit programs today. Opening up a state
employee plan would transform these programs into a government plan and raise significant concerns.

Question: Don’t we need a government option to ensure that people with pre-existing medical conditions
have access to coverage?
Answer: Comprehensive health reforms would ensure that everyone has access to affordable, high
quality private health plans. There is no need to create a new government bureaucracy to accomplish
this goal.
Question: Is the government plan a path to a government run healthcare system?
Answer: Yes. Many of those who support the government plan have supported government-run
healthcare for years. Understanding that consumers want to be able to keep the coverage they have
now, supporters have cleverly packaged the government plan as simply another choice for consumers.
However; the ultimate impact of the proposal is to move the nation quickly toward a system where
employer coverage will no longer be viable and the government runs the healthcare system.
Question: Won’t the government plan have significantly lower administrative costs than private plans?
Answer: There are big differenced between Medicare and the private market that make comparison of
administrative costs between the two misleading.
 In areas where they are most comparable – claims administration and other administrative costs
– Medicare and private plans have roughly the same administrative costs.
 Private insurers engage in many activities that Medicare does not, including developing and
marketing products, developing and supporting provider networks, and offering disease and care
management services.
 Private plans frequently pay state and local taxes from which Medicare is exempt.
 Private plans must meet stringent solvency requirements that do no apply to Medicare.
Question: Won’t a government plan improve quality faster than private plans?
Answer: Private health plans have led the way in efforts to improve quality, benefits and customer
service. The private sector can respond much more quickly than the government to changes in
consumers’ needs. For example, private plans are constantly modifying and creating new benefit designs
to respond to changing market demands. However, benefit changes under government programs often
require Congressional action, so innovation is rare, and changes in the private sector can take a long time
to appear in government programs. For example, preventive services were not provided under traditional
Medicare before 2003.