Will an Opt-Out Approach Really Give States a Choice?

While we don’t yet know the details, Senate Majority Leader Harry Reid unvieled a plan today to create a national government health care plan, but allow states to opt-out of it if they choose. While supporters of the measure have touted it as simply federalism, the reality is far different.

The problem is that even if legislation allows individual states to opt out of a government plan, any national plan will incur costs that would likely be borne by all taxpayers, regardless of whether or not their state carries the plan. For instance, any government plan would have to have initial start up costs — in the House Democrats’ bill these amount to $2 billion, which would be given to the Secretary of Health and Human Services. And if the government plan begins losing money and needs to be bailed out by the federal government, taxpayers in all states would bear the burden.

While the House bill includes a provision that would prevent a federal bailout, nobody seriously believes — especially after the events of the past year — that future lawmakers would allow a government plan with millions of beneficiaries to fail rather then pump federal money into it.