Obama's Top Economic Adviser Says 'Public Option' Health Plan Will ‘Never’ Take Public Money

By Matt Cover | June 19, 2009 | 5:29 PM EDT

Christina Romer, chair of the White House Council of Economic Advisers.

(CNSNews.com) - Christina Romer, chair of the White House Council of Economic Advisers, told Congress that the government-run health insurance agency that President Obama hopes to create would “never” rely on public money after it is established.
Romer made the claim before the House Budget Committee on Friday during a hearing outlining the administration’s case for the economic benefits of its health reform plans.
Romer, answering questions about the “public option” plan from Rep. Earl Blumenauer (D-Ore.), said that the public plan would “never” be federally subsidized.
Rep. Blumenauer: “So this is not [going to be] a federally subsidized plan?”
Romer: “Never.”
Rep. Blumenauer: “Start-up costs only?”
Romer: “Absolutely. We’ll make it so that it stands on its own, that it’s fair.”
Romer said that the administration wanted a government-run plan that would compete fairly with private insurance companies and would also serve as a market leader and innovator.
“The public plan is absolutely something that is designed not to in any way supplant the current system, not to in any way hurt current insurance, it’s designed to provide choice and make the market work better,” Romer testified.
Romer said that the “fundamental idea” behind the public plan was that the government plan would preserve competition and ensure that consumers always had a choice in where their health care comes from.
“The fundamental idea is to make sure that there is competition, to make sure that consumers always have a choice in the number of plans that could satisfy their needs,” she said. “It’s there to be an innovator. It’s there to be something that again is providing choice and competition.”
That assertion was challenged by Rep. Paul Ryan (R-Wis.), who told CNSNews.com that the only way a government insurance agency would not need government subsidies was if it brought people in who previously had private coverage.
“It will mandate lower prices,” the committee’s ranking Republican explained. “It will mandate lower payments. The subsidies will flow through the people to the public plan [because] the public plan will mandate lower prices -- those lower prices will require providers to raise prices on private plans, thus dumping people into the public plan.”
“So the subsidies will go through the people, to the exchange, to the public plan, which will pay artificially low prices -- that itself is a subsidy,” said Ryan.
A recent Congressional Budget Office (CBO) report seemed to back up Ryan’s analysis, when it found that the Kennedy-Dodd health care bill – currently being debated in the Senate – would push an estimated 23 million Americans out of private insurance and into the arms of a government health insurance agency.
“[T]he number of people who had coverage through an employer would decline by about 15 million (or roughly 10 percent), and coverage from other sources would fall by about 8 million,” the report said.
Representative Ryan also disagreed with Romer’s assertion that the public plan would compete fairly with private insurers because of the public money used to create it, a luxury not afforded to private insurance companies.
When asked by CNSNews.com if he thought the use of public start-up funds violated the administration’s fair competition pledge, Ryan answered, “Yes it does, yes it does.”