Will The Public Option Fail?
Public option proponents knew they weren’t going to get the plan of their dreams when the House leadership agreed to drop the Medicare + 5% reimbursement rate formula, but may have been surprised when the CBO came back with an analysis saying that public plan premium rates will be higher than the private plans available in the exchange. How does that work? Well, as Brian Beutler explains the problem with putting a good health care option together is you might wind up with too many sick customers:
“The House bill does a very good job of setting up rules restricting cherry picking,” says Edwin Park, a senior fellow at the Center for Budget and Policy Priorities. But, he adds, “private insurers have years of experience gaming rules,” and will continue to do so.
“Insurers, just in terms of how they do outreach, how they market, are still going to be able to cherry pick,” Park says.
The second is that the public option will just be a gentler creature–it won’t erect as many restrictions on available providers and services as its private competitors will, and that’s likely to attract riskier consumers.
This is the fundamental issue with any mandate/regulate/subsidize approach. A lot is hinging on the “regulate” part. You need to get the rules against cherry-picking and the implementation of the risk-adjustment payments right. Some people see the public option as an alternative to faith in the capacity of the regulators, but absent adequate regulation the distortions in the market could just wind up bringing the public plan down.
23 Responses to “Will The Public Option Fail?”
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October 31st, 2009 at 1:15 pm
This excellent post really sums up the debate on the “public option”, especially if you remember that the final bill (after reconciliation with the Senate’s corporate blowjob) will be much worse.
It is the best argument to kill the whole thing until the root of the problem (private, for-profit health insurance companies) is adressed.
October 31st, 2009 at 1:16 pm
As Kling would point out, if the intention of Congress is to cover the sick, then Congress can do so through via private premium increases or tax increases. Either way.
October 31st, 2009 at 1:22 pm
Obama is pretty popular with young healthy people so I think some of these predictions about who does and does not join the pool can be fixed with the bully pulpit. Or you could just reopen the goddamn bill and change the rates to Medicare + 5% when the Senate has a majority leader who understands the function of a political party.
Public option skeptics on the left REALLY suck. I read a zillion posts from guru Ezra Klein on how the CBO understates savings and now that the CBO is understating savings everybody goes OMFG. Just because the game in Congress is ‘Let’s fellate the CBO’ doesn’t mean you have to play it if you are a pundit who is fully aware of the CBO’s limitations.
October 31st, 2009 at 1:29 pm
Why oh why – Dropping the bill and starting over again isn’t much help to the people who are dying from lack of healthcare. Fixing 1/3 of the problem saves a minimum of 6,000 people a year or twice the people killed in the 9/11/01 attacks. You deny the possibility that things can get worse. I’d give you better odds on the US slipping into a Mexican or Brazilian kind of stratified society with no safety net than I would the US magically transforming ourselves into Sweden, especially after we couldn’t come close with a Democratic Congress and a Democratic President.
October 31st, 2009 at 1:30 pm
I think the real issue though is whether the public option will bring premiums down (or rather bring the rate of increase of premiums down), not whether the actual premium is higher or not. It will depend on the growth rate of premiums in the public option. If the public option acts as a vehicle for implementing CER research, etc for example its premium growth rate will presumably be lower than the system we have now and that lower growth rate will force private insurers to lower their premium growth rate as well lest they lose people to the for-now higher premium public option. The public option premiums can still be higher than private insurance because of the riskier pool but by its being there as a backstop it can slow the growth rate in premium cost.
October 31st, 2009 at 1:45 pm
Ah, the old regulation vs public option strawman.
Yes, some of us out here in your comment thread, having despaired of the possibility of enacting the Communistic single-payer system, did support the public option. The robust public option. That means broadly available, Medicare-based, and with significant market power unrestricted by nefarious backroom-double dealing with the foxes in the henhouse. And, yes, some of us believed that a true robust public option would do what regulation and enforcement have demonstrably not done in other sectors, e.g. financial markets, worker safety, food safety, environmental protection, etc.
But that’s not what we got, is it? No, encouraged by luke-warm, limp-wristed analysis by our self annointed, soi disant “progressive” friends, we got a piece of merde that will only end up magnifying the triumph of the HC crooks. The blue bitches, and sons-of-bitches have imposed their will. The so-called public option will increase insurance company profits by covering their sickest, highest-risk rejects. Of course it will cost more, despite being more efficient, more humane, and having dramatically lower administrative overhead. The result, despite deep analysis proving the contrary, will be used to convince the public that getting the government involved in health care was a conceptual mistake to begin with. If only Rahm can get Empress Snowe back on board it will be a total victory over the DFH class.
At least Peter Orzag is honest enough to rub our noses in it before this disaster becomes law. But it’s probably too late.
And if you think this is bad, wait until the full analysis of the new, improved big-bank bailout bonanza is seen. The one Matt supports. Geithner has already told Congress that this time there will be no upper limit on how much public money can be used bail out the greed-heads on Wall Street.
Ah, change David Broder and Peggy Noonan can believe in.
October 31st, 2009 at 1:45 pm
Look, it’s simple. Health care costs cannot be contained unless there are ways to place limits on the profits the system can provide those in the system, insurance companies, doctors, all elements.
There is no way limits on making money will be created by this or any other Congress. Hell, the SOBs won’t put limits on their own stealing, let alone more-or-less legitimate commerce.
Ergo, there will no health care reform legislation that works to do what the reformers want. Ever. The system may be tweaked to be less absurdly unfair, and that’s not nothing, but our society is unable to react to any situation which calls for collective responsibility.
October 31st, 2009 at 1:48 pm
I don’t see the problem. We want to cover the sick/unhealthy people and that will ultimately cost money. As long as they do get covered, and apparently for premiums that will only “somewhat higher” to that of a healthier group, what’s so bad?
October 31st, 2009 at 2:03 pm
John DE @ 8: The problem is that HCR had two core objectives. One was to increase coverage. The other was to decrease the increasing share of GDP being eaten by our healthcare “system.” Like other countries do: lower costs, better outcomes. I’d suggest T.R. Reid’s book, if you haven’t read it.
As JMG @ 7 notes, nothing in this bill will effectively hold down total healthcare costs. Therefore it will be a failure.
However, as you and others above point out, covering more people and making the system marginally more fair is not nothing.
October 31st, 2009 at 2:09 pm
More important than the public option is the expansion of Medicaid to 150% of poverty and the increase in Medicaid reimbursement rates to Medicare rates. Essentially 1/3 of households are being back-doored into single-payer.
October 31st, 2009 at 2:59 pm
“More important than the public option is the expansion of Medicaid to 150% of poverty and the increase in Medicaid reimbursement rates to Medicare rates. Essentially 1/3 of households are being back-doored into single-payer.”
Right.
Because programs directed specifically at poor folks have a track record of maintaining political support so very well over time…
October 31st, 2009 at 3:07 pm
Changing the name of Medicaid to Medicare Part Z or some such nonsense would be a great addition to this bill. Having a healthcare system labeled for poor people and one for everybody else leads to a lot of irrational behavior in consumer choice, especially in a country where politicians ridiculously define middle class as people making somewhere between $100,000 and $250,000 dollars.
October 31st, 2009 at 3:25 pm
This is what happened here in Maine with Dirigo.
I think the public plan sets the floor, and the insurers set their rates to fall just under.
And I won”t be surprised to see this happen with a national plan. The difference may well prove to be how hard you have to hassle to get things paid, which will move folks from private to public as they get sicker.
That said; we’re a family purchasing high-deductible coverage on our own. We have the worst insurance in the US. More downward pressure would be better. And more regulation about how they can and cannot gouge us as they work to move us off the private rolls and onto the public.
We need single payer.
October 31st, 2009 at 4:05 pm
Of course it’s going to fail.
You didn’t think they were going to let it succeed, did you?
October 31st, 2009 at 4:21 pm
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October 31st, 2009 at 4:27 pm
Simple principle: it would be wrong and un-American to force people into for-profit plans. Regardless of premiums cost, the law must provide assurance of availability of a non-profit public option that is as affordable as such an entity can make it. The law cannot be made into a profit-assurance law.
October 31st, 2009 at 7:48 pm
How about they allow people with employer provided insurance “opt out” of their company plan and go with the public option?
I would do it out of principle, even if it cost more than my current plan. I’m sure there would be many other healthy young people who might do the same.
I thought about opting out of my employer provided plan and just going uninsured as a protest. I had difficulty figuring out if I could. But If everyone under 40 did it, we could basically hold everyone older hostage.
I’m currently optimistic about what will come out for Obama’s signature. But I’m ready to withhold my health from subsidizing a bunch of idiots who make me pay more because they want to pay more.
October 31st, 2009 at 9:00 pm
Petey –
Except that as Medicaid increasingly A. serves clients who aren’t in poverty, and B. is accepted as broadly as Medicare is (due to reimbursement equalization), that will begin to change.
It’s quite possible that ten, twenty, or thirty years from now, Medicaid is the name for the single-payer plan for people before retirement, and Medicare is the name for the single-payer plan for after retirement, and that’s the only difference between them.
November 1st, 2009 at 12:42 am
It doesn’t really make any difference. There is not going to be enough money to keep the system intact. Sure, as a policy and political debate it’s fascinating, but as a practical matter the entire world those debates are predicated on is over.
Health care costs are going to deflate sharply like most everything else. I have little clue what will arise from the wreckage.
November 1st, 2009 at 1:58 am
Every new startup with 20 or fewer employees isn’t going to bother with the HR expense of providing healthcare. It will be wages, perks, and go join the public option. That’s the trick to the system and over time the public option will win, partly because it won’t suck but mostly because startups want to make widget X or product Y or service Z, not devote massive amounts of time to figuring out how to provide health insurance.
The natural churning of the labor market will fix health care in the US, even with a shitty public option and dumping by private insurance. It’s not dumping if you never START insuring people and that’s the route the most dynamic sector of the economy, new small business, is going to take.
November 1st, 2009 at 1:40 pm
Re: Because programs directed specifically at poor folks have a track record of maintaining political support so very well over time…
Healthcare prgrams aimed at the poor do have a good track record of maintaining political support. Has anyone (outside the rightwing fringe) proposed eliminating Medicaid or Schip? Both in fact have been expanded over time.
Re: I would do it out of principle, even if it cost more than my current plan.
Most people would not since the employer is usually paying a large fraction of the premium, making workplace insurance much cheaper.
November 2nd, 2009 at 3:33 am
Maybe I’m missing something here, but what’s the point in offering people a MORE expensive insurance plan?
November 2nd, 2009 at 11:38 am
The fact remains that big insurance by refusing care to patients and reimbursement to doctors over typos has ticked everyone off. They have a monopoly over the whole process and a well financed lobby team (including Liebermans wife) and representatives on both sides of the isle.
A friend of mine recently laid off just he and his spouse is paying $2,500.00 dollars a month for his COBRA. Health insurance costs more than his mortgage. Anyone taking up the insurance industry’s cause doesn’t know what they are talking about.
If you think the insurance companies are going to voluntarily lower their cost while having a monopoly over the process – you are being disingenuous …Over 60% of all US bankruptcies are attributable to medical problems. Most victims are middle class, well educated and have health insurance – (The American Journal of Medicine)
The insurance companies and their representatives in Congress would love to perpetuate a business model that is crippling our overall economy – a bunch of great Americans aren’t they?
90% of the wealth concentrated in 1% of the population is no way to run a country but a heck of a way to establish a royalty ruling class. Yacht sales can not sustain 350 million people. I’m for the public option, competition and a level playing field or break up the big insurers like we did to AT&T.
Paul Burke
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