The Public Option: What’s the Big Deal?
The public option in the Senate health reform bill continues to be the focus of attention in media discussion on the upcoming debate. I talked about the positions of the fence-sitters in a posting here last week. But the more I read about the public option as currently structured the more baffled I become about its preeminent position in the debate. Many senators have drawn a line in the sand with regard to the public option but the expected impact of the current plan is so small as to make it a minor factor with little expectation of becoming a prominent competitor with private insurers in the exchange. It seems a poorly chosen battlefield for both sides.
The Congressional Budget Office says the public option, as designed by Harry Reid, would enroll only 3-4 million people and probably be more expensive than private competitors because it would attract less healthy individuals thereby driving up costs. I must confess I can only cite the CBO here because I am not clear on the logic of that argument. As I understand it all insurers will be obligated to insure people regardless of their age, preexisting conditions, etc. A recent oped piece in the NY Times says the bill would “require insurers to offer coverage to everyone in the exchange at the same rate regardless of health (albeit with some adjustment according to age).” If that’s the case then it makes no sense to me that the public option would attract “more than its share of the chronically ill and other high-cost subscribers.” Yet that is what I keep reading and it seems to be confirmed by the CBO.
The public option will be required to negotiate rates with providers as private insurers do (rather than imposing lower Medicare reimbursement rates) so it will have no competitive pricing advantage. It is not required to make a profit but it must be run as a normal operating business and meet deficits with premium increases. The government will provide start-up costs to make the public plan operational but from there it must be self-sufficient.
Harry Reid has made the public option much less robust than first conceived. When it had a competitive price advantage over private insurers it was a threat to the insurance industry. But Reid has eliminated that advantage so Republican fear-mongering about a government takeover of health insurance, government intervention in patient-doctor discussions, and the pending doom of the private insurance industry, have no basis in fact. The public plan will simply become another competitor in local markets. That’s a good thing in markets currently dominated by just one or two insurers who effectively set rates wherever they want. In markets that are already competitive the public plan will probably not be very attractive. It’s hard to imagine the government will be able to provide customer service at a level available from well-established private insurance companies.
On the plus side, the health care debate has clearly shown public dissatisfaction with private insurance companies. There is reason to believe many people would rather deal with the government and especially those with preexisting conditions or those who have been rejected coverage (this is one reason given for expecting the public plan to attract sicker customers thereby driving up its costs and its rates – seems a reasonable argument but I’m still not convinced).
There are two counterarguments to my assessment of the public plan as a relatively
insignificant issue: first, simply by creating a public plan the groundwork is set for future changes that will result in all the evils anticipated by plan opponents; and second, the public plan could face huge cost overruns and, despite establishment as a self-financing entity, could cost taxpayers enormous sums in the future. I dismiss the first argument as just more political fear-mongering with no basis in fact especially given the broad public opposition to such a result. The second argument, however, certainly bothers me and is the reason I continue to support the Olympia Snowe trigger option. The cost issue was cited by Lieberman and others as the basis for their opposition to the public option but there seems to be no reason to expect the public plan to attract significant enrollment. Future budget issues from rising health care costs arising from Medicare and Medicaid will dwarf whatever budget impact may result from the public option. Still, I’d prefer it wasn’t included from the outset and, despite CBO projections, I do agree the risk of cost overruns seems high.
Nevertheless, if we ended up with the public option as currently defined (or at least as currently understood by me) it strikes me as just another one of many competitors in what will be a crowded field of insurance competitors on the exchanges – and not a very robust competitor at that. It may set a ceiling on insurance premiums but I expect there will be plenty of competitors prepared to compete on price much to the public’s benefit. Discussion over the public plan is certainly important but it strikes me too much weight has been placed on an issue that Reid actually made considerably less controversial.
You make some good points, but like many conservatives I simply don’t want the government to get more involved in my life. Generally more government leads to fewer individual choices and for this reason alone I oppose the public option.
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The best thing for consumers of medical products and services, would be the elimination of all insurance, to the point that said products are treated no different than any other product on the marketplace. In the distant past, when few had health insurance, people were apt to budget for medical contingencies, and the providers were able to offer their service at affordable prices. The medical industry has morphed into a colossal giant, with the endless bureaucracies and government reporting requirements, both in the medical insurance and actual medical industry.
Great post, Mike. You make good headway with the question “What’s the big deal?” and then explaining that, in some states, the public option may be some needed competition.
I wonder what you think about Senator Ron Wyden’s “Free Choice” proposal which, I think, has been accepted into the Senate’s proposed bill. Seems to be a good thing, from a GOP perspective, given that their platform has been all about protecting the patient and, specifically, portability of plans.
The proposal, synopsized:
“Under the Senate legislation as it is currently written, Americans with employer-provided coverage, whose income is below 400 percent of the federal poverty level and whose premiums are between 8 and 9.8 percent of their total income will be exempt from having to purchase health coverage but will not be able to access the exchange to qualify for government assistance to purchase insurance. The agreed to amendment will make it possible for these individuals to convert their tax-free employer health subsidies into vouchers that they can use to choose a health insurance plan in the new health insurance exchanges.”
What do you think about the impact of this proposal?
A link to a story about “Free Choice”
http://washingtonindependent.com/68595/reid-baucus-approve-wydens-free-choice-proposal
Good post, Mike.
Many conservatives dislike the public option because they believe it will be used as a building block to a health care system that is ran completely by the government. As Ron alluded to in his comment, that would probably result in fewer individual choices.
Concerning your theory that Republican opposition to the public option is nothing more than political fear-mongering, I have to wonder if you are right. It does seem that a lot of their opposition is not based in fact, but rather what will get more people stirred up. I have said all along that opposition to this health care reform legislation needs to be based on what is actually in the bill and not what we think might be there. To do anything less is a disservice to the American people.
I echo that sentiment, but in fairness we need to make sure that the Democrats are focusing on the true intent of health care reform, cost containment. Mike’s post points to the most disturbing thing about today’s political scene, to me: Our elected officials, bolstered by the media and a public that is informationally usually a step or two behind, tend to take sides on small issues which then take on lives of their own to become the ONLY issues. And I always wonder which big issues are falling by the wayside while we fight it out.
Thank you all for your comments. I’m confused by Ron’s response about his opposition to the public option stemming from his view that “like many conservatives I simply don’t want the government to get more involved in my life.” If you don’t want to be a part of the public plan then don’t join it and it’s not in your life — but Medicare will be there soon enough. If you, like Larry, see the public option morphing into a single -payer plan then I contend you have crossed the line from analysis into fear-mongering. Larry, you yourself said “opposition to this health care reform legislation needs to be based on what is actually in the bill and not what we think might be there.” I don’t see how you can have that view yet at the same time view the public option merely as the building block for government run insurance.
Laurie, I was unaware of Wyden’s amendment. I quite liked Wyden’s original plan to eliminate employer plans and make each individual responsibile for his/her own insurance (a variation on Warren’s premise though he’d make iinsurance completely optional) but I viewed it a bit like the Fair Tax — interesting idea but not gonna happen. This cut down version is also interesting though I share the concern that it may be bad for the company and the employees who remain in the company plan. I’ll have to spend a bit more time thinking about this one.
Mike,
I think Matt answered your question very well. Time after time, we have seen government programs expand far past the purpose for which they were first intended. I do not believe it is fear mongering to recognize that or to fear that it possibly will happen with the public health care option.
Getting the government involved in anything means that it will expand well beyond the parameters originally conceived by the legislators.
What government program over the past century is actually smaller than what was intended? The public option may “only” include three or four million people from the get go, but it’ll expand in time as some “crisis” will force more people into the mix.
Harry Reid is up for election in 2010. Let’s hope that the good people of Nevada give him a nice send off next year.
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Mike writes:
“the public plan could face huge cost overruns and, despite establishment as a self-financing entity, could cost taxpayers enormous sums in the future”
One reason for public rejection of private run health insurance is precisely because of the high costs inherent in private run health insurance. The concern over higher taxes from publicly funded health care would be more than alleviated by cutting out a profit hungry middleman. Health care is NOT a commodity for profits to be derived from……it is an essential service just as police and fire protection are.
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My opposition to the public option, as it has been, is based on the fact that it is intended to lead to a single payer system. Single Payer Action, the group that led the Whole Foods Boycott (over the CEO’s opposition to the public option), interviewed Barney Frank, who admitted that the best way to get to single payer was the public option. (Come to think of it, why would a single payer advocacy group boycott a business for opposing a public option??) Jan Schakowsky is quoted in a long video sequence stating that the public option will lead to a single payer system. The president himself, on his website from his run for Senate, spoke of being a “leader” in moving towards a single payer system for his home state.
Even on the off chance that the public option would not lead to single payer, it would likely become just a fraud ridden as medicare and medicaid. Let’s face it, they’ve had over 40 years to clean those programs up, without success.
Cost over-runs are par for the course for governemnt programs. If I’m remembering correctly, the original estimate for the cost of Medicare by 1990 was to be $12,000,000,000. I believe the actual cost was over $100,000,000,000. That’s a big miss. I see know reason to believe that this plan’s estimated costs will not similarly skyrocket.
I believe that the best way to keep the government out, and contain costs is to make HSA’s available to whoever wants one. Coupled with a high deductible insurance plan (which can be made to cover pre-existing conditions), the costs will be maintained, because the consumer will be paying, no middleman. That’s frankly been one of the problems with the current system. Someone else is paying for it, so there is no downward pressure on prices. Also, if you let people move any unused excess in their account to a retirement account at the end of each year, you might see people avoiding unnecessary ER visits and “defensive medicine.” Then, if you allow every company to compete in every state, there will be intense competition to offer the most for the least.
There are so many ways that this can be taken to save money, increase access, and decrease paperwork. None of it has to involve another wasteful and fraud ridden government entity
Matt,
You may have a legitimate concern regarding the costs and red tape of the public option; perhaps HSA’s are one possible solution.
But you’ve jumped the shark with your ridiculous claims that you oppose it ” based on the fact that it is intended to lead to a single payer system.” Now you are spouting your chosen paranoia as that which you just “know” instead of dealing with reality…Right wing propaganda designed to stop progress gets us nowhere. I mean, do you ever even listen to your self? Please read this and tell me if it makes ANY sense:
“The president himself, on his website from his run for Senate, spoke of being a “leader” in moving towards a single payer system for his home state.”
Matt, the “President” did not say that, a candidate for Senate said that of what he’d like to see happen with his home state. You know, like Mitt Romney did in Massachussetts. Big deal. As a candidate for President and as President, Obama has said over and over again that he’s not advocating a single payer option for the country as a whole. “If we were starting from scratch…” But, I guess that sort of stuff isn’t in your ‘belief” system.
You know what? When people talk common sense, I am often swayed. I am never swayed,though, by propaganda that falls apart in a single sentence diagram.
With all due respect Laurie, here is some of that propaganda, right out of Jan Schakowsky’s mouth…
http://www.youtube.com/watch?v=UfOWnZ82Pm4
Or here’s some more right wing propaganda from Barney Frank….
http://www.youtube.com/watch?v=f3BS4C9el98
And for the most devastating right wing Propaganda, here is “candidate for president,” Barak Obama
http://www.youtube.com/watch?v=fpAyan1fXCE
You really ought to talk to the left about this…coming up with all of that right wing propaganda and all.
Matt,
Not too concerned about Frank etc. They’ve always been for a single payer, yet don’t have the votes to get it and never will.
You continue to play the boogeyman clips and attribute them to “candidate for President Obama”…From 2003, when he wasn’t even yet a candidate for the US senate.
He has said publicly and often since then that a single payer option-starting from scratch-would be perfect, but that it isn’t feasible in our system as it sits. didn’t see you add any of his frequent and recent chats on that. Nah, far more easy to point to six years ago and BAM! That’s it.
Positions evolve over time, often because of pressure from opposition and sometimes because a politician’s focus and responsibilities broaden and change. I think we’ve had a demonstrable message sent to the politicians of the country that Americans aren’t with single payer, and I think they’ve heard it. If in 10-15 years the American people change their mind, so be it.
But for now, reality is my preferred viewpoint. And I look at it all, including what’s on the table, rather than using somebody’s contrived “crystal ball” approach to debate.
Matt,
Since I brought up reality, I have a question for you, predicated on the GOP health care platform of 2008 revolving around protecting the patient and highlighting portability of plans.
Which is more portable: A plan tied to an employer or one that you get outside of employment?
Laurie, My mistake on the date of the SEIU Conference vid. Here is candidate Obama…
http://www.youtube.com/watch?v=B-_SGGcJu_c
Or John Conyers…
http://www.youtube.com/watch?v=jVPt7j1jR4U
Should I post more, or will that interfere with your “reality?”
Again, Matt, you offer spliced clips that are exactly the sort and type that I used to offer when I produced perspective media for national personalities. Not impressed. Obama has said that the single payer option does not fit our country.
If you won’t look at what people supporting the public option are actually saying, then nothing will convince you. Most unfortunate.
You mean like this one? A bit more recent and certainly uncut. And, should you choose to look at something other than a preproduced clip designed to elicit an exact response, you can Google what the President has actually said since.
http://www.youtube.com/watch?v=l7wTDK-LwqE
Laurie, I don’t think there’s much use continuing. He was a proponent until he realized that the idea is a loser among the public. Now, he is backing a plan that is designed to create a single payer plan incrementally. If you can’t see that, we’ll all see in a few years (if the public option becomes law).
Fair enough.
Interesting, though…We have a President who seems to have been swayed by public pressure to see that a policy is a “loser”, yet you still damn him for it. You do make one good argument…If (and I don’t think it’s going to happen) we do get a single payer option, it will only be because of majority, popular support for it.
I’ve followed this discussion with interest and have no interest in fueling the fire. You’ve both made some legitimate arguments but from my perspective I think the public has spoken about its lack of interest in a single payer option, for the moment. I aslo don’t see the public plan becoming a viable competitor in this market — no cute little gekko in government pinstripes will be gracing the airwaves. It;s not all about cost and if coverage is the same I think many people will go where they get best served even if it costs a little bit more.
OK, now let’s move on to my immigration posting. Much more interesting. Matt, what’s the answer to finding an acceptable “amnesty” solution?
I find it interesting that people still believe this will not lead to a single-payer system. I get emails from Moveon.org (I’m signed up) and that is their #1 goal. They want everyone on a government insurance plan.
I agree with those who have said that why even go here. Government intrusion is not a good thing.
Also, one thing that I didn’t catch anyone discussing here was whether or not this is constitutional. I have read several articles now that say this will end up at the Supreme Court if our government mandates Americans to purchase insurance, especially if Congress uses the commerce clause as their justification.
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Thanks Dominique. My failure to mention the constitutionality of this act is important and I’m glad you pointed it out. This would be an interesting issue, if it passes and is overturned by the Supreme Court, for Congress and the President to challenge the right of the Supreme Court to overrule laws enacted by our elected officials.
As to the goal of MoveOn or any other progressive group in seeing a single payer government run insurance I don’t think that is any different from any other political group pursuing their individual agenda and has nothing to do with whether we will get from here to there. The private insurance industry will aggressively protect their turf and they have substantially more money and support with which to do so.
You make very valid points Mike. If passed, not only will there be yet another competitor but this competitor gets to make the rules. This bill is a huge breach of freedom and liberty.
Interestingly the public option has now been dropped from the bill. Without the public option I wonder what is next?
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