Pulling the Trigger on a Loaded Gun
The Wall Street Journal reports that the President will call for a public option in tonight’s health reform speech:
President Barack Obama, in a high-stakes speech Wednesday to Congress and the nation, will press for a government-run insurance option in a proposed overhaul of the U.S. health-care system that has divided lawmakers and voters for months. [...] The president is likely to say that a government-run insurance plan, known as the “public option,” will not provide a level of subsidies that give it an unfair advantage over private insurers, according to aides familiar with the speech preparations.
Something I’m not entirely certain public option supporters really understand this, but the President’s not lying when he offers those reassurances to the insurance industry. As I’m watching Senator Ron Wyden explain on television right now, under the House and HELP bills something like 80 to 90 percent of the population wouldn’t actually have the option of enrolling in the public option. And of the minority of people who could enroll in the public option, most won’t, since the public option has been crafted specifically so as to avoid giving it an “unfair” advantage over private health insurance.
Recall Nick Beaudrot’s health care flow chart:
The bottom two gray boxes represent new clients for private industry under health reform. The little orange boxes inside those boxes represent new clients for the public option. In other words, even if the public option is put into place private industry is going to be fine. Indeed, this will be a bonanza for private industry one way or the other. The vehemence with which they’re fighting against the public option can be a bit misleading in this regard—it makes it appear to be the case that this is a make-or-break issue for their bottom line, but realistically they’re taken care of one way or the other.
But of course it doesn’t have to be that way. The public option doesn’t need to be designed to be so solicitous of the interests of private industry. Which is one reason I liked this idea from Nancy Pelosi that Brian Beutler flagged yesterday:
But I said it before and I’ll say it again: The health insurance industry, which is out there fighting the public option tooth and nail because it does increase competition, which they don’t want. They’d be better getting a public option now than one that is triggered because if you have a triggered public option, it’s because the insurance industry has demonstrated that they’re not cooperating, they’re not doing the right thing, and I think they’ll have a tougher public option to deal with.
In other words, industry could face a guarantee of a fairly weak public option or they could the dice, trigger-wise, and face the risk of much more robust public option.
42 Responses to “Pulling the Trigger on a Loaded Gun”
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September 9th, 2009 at 10:55 am
“The public option doesn’t need to be designed to be so solicitous of the interests of private industry.”
Uh, yes it does. That is, it does if you ever want to see a public option of any sort come into being. President Obama’s efforts to minimize industry resistence to health care reform is one of the main reasons everyone believes that some sort of reform bill will get passed. Some folks have bitched about how the Obama administration has bought off Big Pharma and the like, but they don’t seem to notice that it has resulted in less industry-wide opposition to the reform effort.
Mike
September 9th, 2009 at 10:59 am
The basic concern that I have is the quality of coverage that will be offered in the public option, and the minimum level of coverage that will be required of privated companies. It is easy to imagine an individual mandate forcing people to buy an insurance policy that is not worth having in the first place. In other words, out of pocket expenses will be so high that you simply end up paying cash for any services you need, plus the monthly premium. A lot of people are already in this situation. In that case, this reform will be, as you said, a bonanza for the insurance industry, and offer almost nothing for people in general. Not to mention, health care inflation will continue at an unsustainable rate, presumably resulting in a steady incremental degradation of coverage in the future.
September 9th, 2009 at 11:04 am
Matt republishes the chart showing a 55 million drop in employer coverage.
2007 177 million
projected 122 million
It shows public option enrollment of 10 million, some of that with zero subsidy.
The chart also indicates zero Medicare or Medicaid expansion from 2007 levels. Nick revised his flowchart to show over 13 million new Medicaid enrollees. But he didn’t adjust Medicare for aging baby boomers.
Given the huge employer coverage drop, Dirty Max’s no employer mandate is telling. Workers, prepare to pay.
September 9th, 2009 at 11:04 am
expect the real me to write something worthless real soon. Oh yea TRUSTFUND SCUM!!!!
September 9th, 2009 at 11:06 am
Matt, why do you rape babies and slow-roast puppies over an open fire?
September 9th, 2009 at 11:11 am
Whatever your policy preferences, I think the idea that insurers can avoid a real public choice insurance plan but, man, if we put it into a future world where a “trigger” means politicians will in that imaginary future get all tough on insurers, whereas there’s no such will for toughness now, is pretty far fetched.
Plus, let’s assume a sudden tough guy ‘trigger’ on a real / robust public choice insurance plan, then, if I were an insurance executive or investor, why would I give a shit about 5 or 6 or 10 years from now?
Haven’t I just been given full incentive to smash and grab every dime of patient-squeezing profit before the ‘trigger’ kicks in? What evidence do we have that insurance executives and investors prioritize 10 years from now over now? Would this be an “unintended consequence”?
September 9th, 2009 at 11:12 am
Re “Pulling a Trigger on a Loaded Gun”
Max Baucus asks you to pull his finger.
September 9th, 2009 at 11:14 am
one of the rules of dramaturgy — if there’s a gun on the table in the first act, it will be fired in the third act.
September 9th, 2009 at 11:17 am
If employers are not required to provide insurance, what will happen to that “Do you have employer-provided insurance” diamond?
September 9th, 2009 at 11:18 am
Either way it’s kicking the can down the road, but at least we’re pointed in the right direction which is no mean achievement given how bad the Senate is and how loco the Republicans are.
Matt:
“The vehemence with which they’re fighting against the public option can be a bit misleading in this regard—it makes it appear to be the case that this is a make-or-break issue for their bottom line, but realistically they’re taken care of one way or the other.”
They know what it means if the camel gets its nose under the tent. Ronnie Raygun was hyperbolically dire about Medicare and now years later everyone loves it.
September 9th, 2009 at 11:23 am
The fierce urgency of a trigger mechanism for someday soon.
September 9th, 2009 at 11:24 am
The Damnocrat Baucus plan sounds alot like Red John McCain’s:
No employer mandate
Individual mandate with big fines
Tax credits
And Repugnicants can’t live with it?
September 9th, 2009 at 11:24 am
It really is shocking how Matt Y can make the argument that it’s more important to get things started than get things right one week, and then turn around and start talking about how irrelevant a weak program is.
Just like 2 months ago he was reassuring us all that even a weak public option was better than no public option and a month from now he’ll tell us that an eviscerated version off the Baucaus bill really is an awesome deal.
September 9th, 2009 at 11:29 am
MBunge, we actually bitched that the industry bought off Obama, not the other way around.
bdbd, what you’re referring to is generally known as Chehkov’s Gun. It’s named after Anton Chehkov who coined the phrase you quoted.
September 9th, 2009 at 11:31 am
one of the rules of dramaturgy — if there’s a gun on the table in the first act, it will be fired in the third act.
Except in DC where the gun gets stolen during the second act by lobbyists, who also grab the table and the actors’ clothes.
September 9th, 2009 at 11:37 am
I think you are misreading the insurance companies. They know that even on equal footing they will not be able to compete with a public plan. Once that is demonstrated, they’re toast. With triggers, they might have a chance to game the system somehow.
September 9th, 2009 at 11:44 am
If employers are not required to provide insurance, what will happen to that “Do you have employer-provided insurance” diamond?
Not much. Employers already aren’t required to provide insurance, so why do any of them do it right now? It sure isn’t because they’re benevolent and kind-hearted.
Employers in certain industries believe that they get a better quality of employees by offering health insurance in addition to salary, and that the improvement in productivity and reduction in turnover as a result is worth the cost. Employers in other industries (like fast food and Wal-Mart) don’t think it makes enough difference to be worth it so they don’t.
An employer mandate, if it existed, could change the second group of employers. But nothing in the bills being considered would change the first group – if health insurance attracts better employees now, it will continue to do so.
P.S. I think Obama’s speech should address the concerns expressed by Jason in comment 2. Not because he’s right, but because it’s a common point of view that needs to be addressed.
September 9th, 2009 at 11:46 am
IOW, if Obama demands a public option tonight, the insurance compnaies will probably support that, knowing the result will be weak, as shown in the flow chart. Sounds like win-win to me.
But this is where Matt and Ezra Klein should realize they’re just shooting themselves in the feet now. Their commentary on this is losing credibility on a daily basis.
Nobody knows what’s going to happen, but from what we’ve seen about what can happen, it’s going to be bad, and a bill that should be opposed. Adding hundreds of billions of spending for “coverage” that does little or nothing and adding a whole new government requirement (”Show me your card”) to the life of the American citizen is going to be grist for the Republican mill.
What is emerging is a bill that taxes everyone to make sure that hospitals, clinics, and doctors get paid. Some money will be spent hiring people to tell us to stop smoking, eat more fruit, and walk half an hour each day. Almost none will be spent providing care to people who otherwise would simply let small wounds fester and drain, small fractures heal themselves, and control the pain with alcohol.
It’s like building a boat, which is not an inherently bad idea. Whether you should build a boat is a different matter. It may be that health care is a business which should be left to other people who are not Americans and can actually do a good job.
September 9th, 2009 at 11:49 am
Well, not quite. Some of those in the bottom two gray boxes already have insurance. Some of them will end up in the Medicaid expansion. When all is said and done, with the public option, private insurance will have about 22 million new customers. 32 million if there is no public option. That’s a 30% difference. Considering that the regulatory reforms will probably eat into the company’s bottom line, it makes sense why they’re fighting it so hard.
September 9th, 2009 at 11:51 am
The insurance industry, their lobbyists, their huge bankroll, the republican accomplices, and reliable tools (fear, paranoia-based rage e.g. commies, socialists, nazis) have become a potent and toxic mix for manufacturing dissent on any issue really.
I think the insurance industry feels it is pretty good control of the discussion.
Although your and Ms. Pelosi arguments are sound and reasonable that’s not the world that the insurance cohort works in.
Scary thought: the hysterical paranoid fringe is becoming a mainstream voice.
September 9th, 2009 at 11:52 am
Re Chris at 17: “Employers in certain industries believe that they get a better quality of employees by offering health insurance in addition to salary, and that the improvement in productivity and reduction in turnover as a result is worth the cost.”
————
And we have seen no evidence that that trend will not continue, right? Yeah, right.
Democrats don’t seem to realize that when you say you are going to fix healthcare, you need to actually fix healthcare. Because when things turn to shit in the next few years, EVERYBODY is going to know WHO to blame.
And Max Baucus won’t be around — he will be off pulling in the big bucks as a lobbyist for AllState and cracking Billy Tauzin up with stories about “negotiating” for the Democrats.
September 9th, 2009 at 11:55 am
This is the same Nick that asked me for a link to employer coverage statistics.
New data comes out tomorrow!
September 9th, 2009 at 12:04 pm
Triggers are bullshit.
Triggers are like saying that you’ll stop smoking crack next week, after you’ve just smoked a shitload of crack.
September 9th, 2009 at 12:06 pm
Does Matthew Yglesias understand the insurance industry or the definition of competition? Methinks not.
Please follow insurance industry profits, which are in the small business and individual insurance segments — and it’s these segments from which a public option would draw a disproportionate share of its members. It’s called critical loss — even small diversions of profitable or potentially profitable customers would create significant waves.
In addition, this profitability trend is even more pronounced in those markets with de minimis competition among payers, because employers are even more likely to self-insure at smaller and smaller sizes (with the assistance of stop-loss insurance), which means that virtually all profits come from the smaller segments.
And finally, add to that the fact that a lot of the funding will be coming from the withdrawal of “excess” payments in another profitable segment, Medicare Advantage.
I am not at all optimistic that a PO would have the desired effect that its proponents imagine, or that it would be even better or more effective than a truly regulated insurance and provider market (have to regulate both to assure yourself of true cost control), but I wouldn’t underestimate how powerful the shock would be to the insurance market.
September 9th, 2009 at 12:12 pm
My state is dominated by nonprofit health insurance, and we also have the highest premiums in the country. I understand that that the 2006 reforms probably caused the bulk of the increase in premiums… but it’s not greedy insurance companies lining their pockets. Expecting a public option to have any impact of cost strikes me as pretty magical thinking.
September 9th, 2009 at 12:16 pm
Ah, a new medicaid for the low middle class. I thought it would end up being something like that.
September 9th, 2009 at 12:29 pm
J.W. Hamner: That’s why the fight over Medicare rates is so important. The reality is that the entire health care sector has to be de-escalated and re-oriented: specialty care and overutilization have to be de-escalated and services need to be re-oriented in the direction of primary care. This is going to take a long time, a minimum of 10 years.
There are two issues:
1. Health care providers are never going to agree to this if they see that their downsizing is simply contributing to insurance industry profits. Indeed, that will be their primary argument for why it shouldn’t happen (because that’s what they are arguing right now).
2. With everyone covered and with insurance profits somewhat limited by having to compete with a low overhead alternative, it will become that much more obvious that the “cost” of health care is due to the “cost” of health care services, and the focus will, at long last, be directed there, rather than on the cute little game of fingerpointing that goes on now between providers and payers (”hey look over there while I steal your money!”).
Nothing that comes out of this exercise, not even Medicare for all, will truly cure what ails American health care. It’s just too messed up to fix all at once.
September 9th, 2009 at 12:43 pm
The reason a public option is a good idea is because there are going to be subsidies. Why would we want to subsidize the private insurance company’s profits when there is a better option?
The House’s bill has an increasing number of people available for the Exchange/public option. It starts out with just the uninsured but then grows to include more people over time.
September 9th, 2009 at 12:56 pm
The vehemence with which the insurance industry is fighting the public option is based on their thinking that a public option would both be a beachhead from which their enemies could destroy their industry, in favor of public health insurance, and also because it would represent the first actual legislation pushed mainly by liberal interests to get through Congress in decades. They share a collective desire with other industry interests to keep the liberal part of the American population feeling discouraged and hopeless. “Change” is a very scary concept for people like that.
September 9th, 2009 at 1:08 pm
With everyone covered and with insurance profits somewhat limited by having to compete with a low overhead alternative, it will become that much more obvious that the “cost” of health care is due to the “cost” of health care services, and the focus will, at long last, be directed there, rather than on the cute little game of fingerpointing that goes on now between providers and payers (”hey look over there while I steal your money!
Agree with anon.
September 9th, 2009 at 1:23 pm
I’m really not sure why Petey gets so much shit in these comments, when he’s generally been right about everything he’s said about policy.
September 9th, 2009 at 1:34 pm
I’m really not sure why Petey gets so much shit in these comments
Because he’s a rude, attention-grabbing ass. Lots of people disagree with Yglesias, but Petey makes it personal and crude.
September 9th, 2009 at 1:50 pm
Lots of people disagree with Yglesias, but Petey makes it personal and crude.
Yglesias asks for a lot of that, though. Comments wouldn’t get so personal if he wasn’t seemingly flaunting his complete ignorance of the experience of middle-class-to-poor people while blithely embracing center-right economic policy. Which is to say, he wouldn’t get so many “trustfund scumbag” comments if he didn’t seem to go out of his way to act like a trustfund scumbag.
September 9th, 2009 at 2:38 pm
Please. Petey = performance art. Strong, authoritative-sounding opinions that provide the illusion of substance. And are wrong 99% of the time. I’m amazed that he seems to fool so many people.
But then, maybe all of political blather is performance art. But no, I don’t think so. Petey is something special. I remember his insistence during the primary season that Obama’s position on individual mandates was a disaster. He repeated this dozens of times, maybe hundreds of times. And yet whenever he was asked to explain *why* Obama’s position on mandates was so bad, he failed to do so. Not once. He was obviously clueless about policy. But he liked to strike the tone of a “principled voter” who could identify make-or-break issues and stick to his guns on them.
Same thing with the “trust-fund scumbag” comments. I’ll admit that it’s become a lot more evident to me in recent months that Yglesias is a pretty useless hack who happens to be a good writer, but the “trust-fund scumbag” comments really came out of the blue and were not related to any substance at all. They just *sounded* as if Petey was taking deep moral offense because of his deeply held moral principles.
September 9th, 2009 at 3:11 pm
Something I’m not entirely certain public option supporters really understand this
Of course we realize that, otherwise none of us would have shouted at Obama when he first hinted that he’d drop it.
He’s tried to drop the public option completely, now he’s trying to sell us on a weak public option. Is that where we want to end up? No but it’s better than where we were at last week and we’ll keep fighting to make it a strong public option
You on the other hand, are the one who wanted us to drop the fight for the public option, completely. If you had gotten your wish, there wouldn’t even be the possibility of a triggered public option. Instead, we’d now be arguing over whether it’s really necessary to include recission protections in the bill instead of debating how strong the bill should be.
BTW, your newest argument, that we’ll end up with a great public option if we settle for the trigger plan instead makes no sense. Odds are they’d never pull the trigger. And if they did, nothing would prevent them from sliding in this option after pulling it. (So we’d end up with a weak public option only after years more gouging by the industry.)
September 9th, 2009 at 3:56 pm
Barbar, I follow you right up to the point where you say, “…of course, he is a trust-fund scumbag.” Maybe Petey is just being punished for being ahead of the curve.
September 9th, 2009 at 5:17 pm
I don’t get this part:
We have, now, a massive House majority led by the most progressive Speaker in decades, a near-60 Senate votes, and a mildly progressive White House. This, apparently, is enough to get us a “fairly weak” public option. Given that, what risk of a “much more robust” public option is there?
If we pass a crappy public plan with a trigger, and the insurance companies continue failing, then it’s a new political debate once we’ve pulled that trigger — a new debate with the same big money companies, lunatic wingers banging on about Islamocommunonazism, etc. Only now, the debate will happen in the wake of an unsuccessful implementation of a public plan that the Democrats own. And what are the odds that this debate, 10 or 15 years from now, comes with an unbreakable House majority, 58, 59 Senate seats, and and a Democratic White House?
Does anyone believe President McCain/Palin/Jindal/Hannity, or a Republican Senate, would actually implement a meaningful trigger? Correct me if I’m wrong, but if we put this off, aren’t we likely to end up simply re-debating this on worse terms (a narrative of Democratic policy failure) under worse political conditions (ie. not controlling Congress and the White House)?
September 10th, 2009 at 7:37 am
34, you think he is just a hack? I always assumed he is like … um, sorta like infantile-narcissistic rich boy (I guess “trustfund scum” is a short for that), but I suppose I could be wrong and you might be right…
September 10th, 2009 at 10:32 am
Who knew the uninsured would rise so little from 2007 to 2008?
2007–45.7 million (this is after two GWB reformulations knocking 2 million off the figure)
2008–46.3 million
As for employer sponsored coverage, that dropped by 1 million:
2007-177.4 million
2008-176.3 million
It has a long way to go to reach Nick and Matt’s 122 million, 54.3 million need to lose employer paid coverage.
http://www.census.gov/Press-Release/www/releases/archives/income_wealth/014227.html
September 10th, 2009 at 5:11 pm
The public option will play on a steeply tilted playing field if it can compete nationally, while private plans can only compete state-by-state. Plan supporters (and maybe others) in Congress fiercely oppose national private competition.
September 11th, 2009 at 12:08 pm
[...] to Congress tonight, President Obama will reaffirm his commitment to a public option — a dinky public option. This awesome chart from Nick Beaudrot shows exactly how dinky it is; the pink boxes represent the [...]
September 14th, 2009 at 2:38 am
This is nice information I didint knew all this… I need to learn more.