The Problem with Opt Out Plans


by Mark Plaster MDNavy Mark


Some of the proposed health care reform bills that are currently winding their way through Congress contain an “opt out” clause for those states who do not wish to participate in the ‘public option’ insurance plan, which is simply an expansion of Medicare.  First, why would any state opt out of a government handout?  There are some states who are dominated by one or two powerful insurance companies who have tremendous lobbying strength in those legislatures.  Those states might opt out to protect those interests.  But a larger reason might be that the state government might see the hand writing on the wall.  The future of government health care is an expansion of state Medicaid.  If states feel that they can escape this flood of red ink in the future they may opt out of the gift from the government in the short run.  It’s entirely possible that the federal government will encourage states to opt out, thereby relieving the Congress of the responsibility for the uninsured.  Further, those states that do opt out will subsidize those that don’t.  But to think that states will opt out because “we are doing just fine without your money” is naive.  Politicians are short sighted.  States will take the money.  

We already have a model for opting out.  It’s the private school system. If you feel that the public school system is not for your child, either because it’s not safe, the education is poor, or the social influences are not up to your standard, you can take your child from the public sector and place them in private education.  You can ‘opt out’ of public education.  In fact the state plans on a certain number of these privately educated children not showing up on the first day of school.  However, taxes from their parents are counted on to support public education.  Despite this cost shifting, inefficiencies in public education cause cause district after district across the country to teeter on bankruptcy.  If all the privately educated children came flooding into the public school system to get what is owed to them, the system would collapse.  Similarly, in most universal health systems there is a ‘private tier’, where patients dissatisfied with their health care, the wait, whatever, can go to a private physician.  It serves as a pressure valve for the system.  In many ways, the US has served that purpose for Canadian patients who can’t find the health care they need in Canada.  But what would happen if there was no opt out for them.  The demand on the system would likely bring about its implosion.  The incoming President of the Canadian Medical Association made this observation recently.

So even though you can opt out of the service, can you opt out of paying for the ‘public option’?  Can you opt out of the tax increases?  Of course not.  The current Senate bill includes a mandated payment by the manufacturers of medical devices, such as pacemakers, artificial limbs, etc.  Similar to the penalty on tobacco companies, they are not allowed to pass this on to consumers of these products.  But pass-throughs  are inevitable.  Costs of other items will go up and these costs will be borne universally whether your state opts out of the public option or not.

Just as you can’t opt out of the taxes to pay for the system, seniors can’t opt out of the changes to their Medicare.  Many elderly have chosen the private health plans of the Medicare Advantage programs.  Many of these are slated for big cuts.  Despite promises by President Obama that everyone can keep their insurance if they like it, seniors will not be able to opt out of these changes to their plans. 

While current plans may allow states to opt out of participation in government administered health plans, there is currently no provision for the young and healthy to opt out of insurance coverages that they do not want or need.  In fact these premium dollars are seen infusion of cash needed to pay for the health care of the poor.  This is the reasoning behind why all health care plans need to be ‘qualified’ by the government.  Young healthy people tend to opt out of buying expensive health plans that they feel they do not need.  Requiring everyone, young and old, those with healthy lifestyles and those without, to buy the same ‘qualified’ insurance plan will insure that there is enough cash.

In the end, how much choice will states have?  How much choice will individuals have?  Not much.  And that is why the opt out provisions are so politically palatable.  They ‘allow’ states and individuals to make ‘choices’ where there are essentially no other options.



  1. Gotta say….your post started with a big fat *poof.* I think you got the education analogy wrong. I am not sure of the specifics… But here in NYS it works kind of like this: Every school child is allocated a certain dollar amount, lets say it is $5000/ year. That $5000 will go to whatever school the child is enrolled in, public, private, or religious. The state then may give additional support to the public school system (lets say another $1000 per pupil)Then the local school taxes pay for the rest(perhaps another $3000 per child).

    I am not sure of the specifics…but private elementary and secondary schools are given funding by the government around these parts…

    • “Every school child is allocated a certain dollar amount, lets say it is $5000/ year. That $5000 will go to whatever school the child is enrolled in, public, private, or religious.” What have you been smoking? You are describing a voucher system. That WAS in place in DC until Congress cancelled it. No other place in the country has such a system. Private schools get nada from the state.

      • Not in NYS….. I gotta get my school board friend to tell me the current rate. Maybe I am, wrong on the amounts. Maybe the state gives all pupils 2000 regardless of public or private enrollment…

      • Supreme Court Ruling on
        Chapter 2 Aid to Parochial Schools
        Chapter 2 of the Education Consolidation and Improvement Act of 1981 provides for the allocation of funds for educational materials and equipment, including library materials and computer software and hardware, to public and private elementary and secondary schools to implement “secular, neutral, and nonideological” programs

    • Florida gives us bupkis, unless you are enrolled in the public school, which are just as miserable as you might expect. Actually ask your school admin, check it, and then post again. You’ll be sadly enlightened.

  2. Not to be annoying or anything…but it really bugs me that people think that a mob of Canadians dependent on the US for medical care. I live 5 miles from Ontario. It is by far the worst province (for healthcare) In Canada. From what I have heard it is a bitch to get an MRI in Ontario. The only time I have stumbled over Canadians here in Buffalo/ Niagara Falls (which is the closest American city to the biggest Canadian city…Toronto) is in Diagnostic centers.

    Now in the Niagara Peninsula…there was a push to close two ERs and make them urgent care centers. That would basically make one ER (I mean ED!!!) for a 20 mile radius. It was funny because NYS was trying to close three of our hospitals.

    Anyways….I will be more likely to see Canadians at the mall then any medical center.

  3. Insurance is meant to protect against the unexpected. I may feel I’m such a good driver I don’t need car insurance. However when the deer ran out infront of me and I totalled my car, I was glad I had it.
    Young healthy people may feel they don’t need health insurance, but where I work we get a lot of young healthy uninsured people with appendicitis, PID, injuries not covered by property and casualty insurance, etc. Who pays for that? We all do, because the patients do not.

  4. Mark,
    You have hit the nail on the head. Sometime it would be interesting to hear what the health plan of Congress and the Senate will be like. I bet you it will be much different than what the rest of us are left with. They always manage to exclude themselves when they come up with all these wonderful solutions to society’s problems.

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