A recent New York Times highlighted Maine’s attempts at comprehensive healthcare reform. Their experiences serve as a cautionary tale for Congress.   The state established a public health insurance plan, expanded Medicare and Medicaid eligibility, and banned insurers from refusing to cover people with pre-existing conditions, but those actions have done  little to insure more of its residents.  Contrary to the promises of public option supporters, health care costs have only continued to rise in the state.

Reasons for the high health care costs range from the state-specific to the general. Unlike the bill that recently passed the House of Representatives, Maine’s healthcare reform legislation didn’t include a mandate to buy health insurance plans. It’s a vicious cycle: forcing health insurance companies to offer policies to unhealthy people with pre-existing conditions raises the rates for younger people; young adults will be even less likely to buy health insurance if their premiums go up, which results in the insurer’s risk being spread among less people. In the end, the older, unhealthier population remains in the pool and must contend with less affordable health insurance. Therefore, there is a larger uninsured population.

Granted, Maine is a market dominated by just one private health insurance company (which, with its effective monopoly, can increase premiums to their liking); and its population is older, sicker, and poorer than the U.S. in general. Senator Olympia Snowe points to her state as a cautionary tale of what may happen if drastic changes are made too fast. Snowe is a Republican that supports healthcare reform but is against the public option. Budgeting problems have caused Maine to cap enrollment of its own public option health insurance plan at under 9,000. The federal government, unlike most states, is allowed to run a deficit. However, it isn’t exactly rolling in the money right now either.

With all the controversy over the public option proposed by Democrats in their healthcare reform bills, the number of Americans who will actually be covered by the public option is surprisingly low. Speaker of the House Nancy Pelosi estimates that just six million (2%)  of the population under 65 years of age will choose the government run health insurance program. One out of five individuals who are buying insurance on their own or in a small group (and will participate in the insurance exchanges central to the House’s bill. would take the public option. The most important issue that has been lost in the debate is providing affordable health insurance to the nation, whatever form it takes.

The public plan might not be the panacea to increased health care costs its supporters claim it will be. The people most likely to be attracted to it will be those with pre-existing conditions private insurers are less likely to cover. Therefore, average health insurance quotes would be cheaper with a private plan, steering the healthier segment of the population away from the public option. Less stringent regulations that allow the less healthy to use more medical services and see more specialists would also drive up costs. (Private insurance companies sometimes limit their offerings based on profitability.)

All in all, the public option doesn’t seem to be as far-reaching as first expected, at least for now. Most Americans will continue to have health coverage through their employers. Senior citizens already have Medicare. What about the masses of low-income uninsured individuals and families? It turns out that most of them will be covered through Medicaid, another government program that will be expanded.

(Image: Speaker Pelosi under CC 2.0)

This can mean so many different things across the industry that it makes it difficult for people to understand each other with respect to what they think health insurance reform needs to be. This is part of the mistake whether intentional or not by the Democrats. They included so many different areas of the healthcare industry into reform. They included Medicare, Medicaid, private health insurance reform, doctors, hospitals, providers, and administration.

This combination of different health reform areas has confused the average person. In reality, the biggest problem our government wants to alleviate is the growth in costs for Medicare benefits. This is by far the biggest cost problem. The government though is addressing this by wanting to directly cut benefits and utilize these savings to incur additional entitlement benefits for the uninsured. This has angered many seniors and rightfully so.

There are many ways that are far better in addressing cost reductions in Medicare than just simply cutting benefits. Medicare is a badly run entitlement program that begs for reform. This is the real problem that needs to be fixed and not by reducing benefits.