Policymakers on both sides of the aisle are buzzing about the latest idea to expand the federal government’s role in health insurance (New York Times, “Momentum Builds for U.S. Role in Paying Highest Health Costs“).

Evidently, there is an emerging consensus among Beltway health policymakers that it’s not enough that the feds provide or subsidize health insurance for nearly 40 million elderly Americans (Medicare); some 40 million low-income Americans (Medicaid); nearly 10 million federal employees, retirees, and their families (FEHBP); and roughly 5 million veterans.

The Kerry campaign, Senate Majority Leader Bill Frist, health insurance lobbyists, and other assorted statists have concluded that the federal role in the health insurance market is simply too small. They think the feds should cover the costs of privately insured beneficiaries who incur high medical expenses (e.g., more than $50,000 in a year–a sizable proportion of those who are seriously injured or really sick.)

Isn’t that what private health insurance is for?

According to the Times, Frist’s plan “envisions a federally chartered but privately run reinsurance organization, analogous to the Freddie Mac and Fannie Mae mortgage companies that were established to assume the risk of lending so that bankers can give homeowners more affordable mortgages.”

Yeah. Fannie Mae and Freddie Mac have worked out just swell.

The Galen Institute, a free market health policy think tank, speculates as to the real reason this idea is bubbling up (”Federal Reinsurance - a Bailout for Excessive Union Demands“):

The real motive behind a federal reinsurance program is to get the taxpayers to bail out General Motors, Ford, and other giant manufacturers that have routinely caved in to union demands for ever-richer benefits. A story by Danny Hakim in “The New York Times” says for GM “the projected cost of providing health care benefits to current and future retirees… is a staggering $63 billion.” The article says GM covers the health care costs of 1.1 million Americans though its workforce is only 200,000. Ford’s costs “have risen to $12,443 for every current or former worker, from about $500 in 1970.” The article quotes Princeton professor Uwe Reinhardt as saying, “To saddle the cash flow of American businesses with an obligation that other [foreign] competitors do not have creates serious long-run disadvantages.” But no one has “saddled” these companies with these costs except themselves. Even today the companies and unions are barely budging from their free-spending ways. The article says last year “the union agreed to increase co-payments for brand name prescription drugs to $10 from $5 for hourly workers and future retirees.” No wonder they are facing a crisis.

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