A "weak public option" may be a myth

There's a recent post over at Blue Oregon about whether or not a "weak public option" is better than none and whether its worth fighting for.  The post has lead to a lot of feedback, currently 68 comments.  The thing is that I'm not convinced this is even a debate worth having.  I've made my belief that a strong public option is necessary pretty clear, but lets go back and look at what a strong public option (as opposed to a weak one) actually entails.  University of California Public Policy Professor, Jacob Hacker examined three crucial provisions (sorry, this file seems to have disappeared from the internet) that he argued make the difference between a good public plan and a not so good public plan.  Those three provisions were:

(1) a "Medicare tie-in" that allows the public plan to develop a broad national provider network with competitive payment rates quickly, (2) the creation of a national excahnge that can give a wide range of firms, as well as uninsured Americans, access to both the public plan and regulated private insurance options, and (3) providing the public plan with enough authority to reduce medical inflation through drug-price bargaining and innovations in the financing and delivery of care.

According to Hacker all three of the bills contain some elements of a "strong public option," but all have some problems.  For example the House Energy and Commerce Committee bill fails to set its imbursement rates to Medicare allowing providers to negotiate independently with the public plan under threat of opting out if they don't pay more than Medicare does, this would obviously drive up costs.

There are two things on my mind considering the question of whether a weak public option is better than no public option at all.

To begin with, health care reform does not stop with this fight, it will inevitably be tinkered with in the future.  With that in mind however, it will be extremely unlikely for a program passed now to be abandoned, once we create programs we really don't like to get rid of them.  So a weak public plan could someday become a strong public option.  I think the far greater risk comes from no public option at all where the American taxpayers end up footing the bill for subsidies that benefit insurance companies without any competitive pressure to bring costs down, I'm sure insurance companies would just love to have 50 million new customers financed by the Federal Government.  A weak public option on the other hand still has some bargaining and cost control power, just not as much as it should have.

Secondly, I don't think there's a lot to be gained by weakening a public plan.  I have a hard time imagining that the strength of a public plan as opposed to its very existence, is a deal breaker for many (or any) Democrats in Congress.  I'm sure various members have preferences on these matters, but I doubt that anyone whose vote is necessary will withhold their vote because the public plan is too strong, more likely they oppose the public option, period.  I don't know how those whip counts would look, but the scenario under which a public option is acceptable to members whose votes are needed, but a strong one is unacceptable just doesn't seem plausible to me.

The far more dangerous possibility is that a trigger will be inserted into the bill, this is merely a means of destroying the public option, the trigger will never get sprung, though I have little doubt that the conditions that allow it to be put into place will arise.  On the question of whether or not to accept a "weak public option," however, I think the answer is clearly that a strong public option should be fought for, but it can be strengthened in the future and if it must be weakened in order to pass, then that should be supported.  The worst possible outcome is no public option at all, and that's what we should be fighting to avoid.

health care reform and the budgetary death trap

The talk the of the day seems to be that Obama's prepared to jettison the public option.  This is an enormous mistake, to begin with, Survey USA recently found 77% of the public supporting the public option.  Even for Senators like Landrieu, whose electoral fears are understandable, the public option is not going to be electorally dangerous, support for any bill with or without a public option might be since public opposition to health care is overwhelmingly based on misconceptions about the proposals.  This is evidently driven by whip counts rather than the nature of the public debate, since no real conversation about the public option has even begun for the most part.

The deal is that I have a hard time believing either of two things, that any health care bill that achieves universal coverage has 60 votes in the Senate, and that the public option does not have 51.  Therefore, either way we're at the point of either magically and suddenly re-framing the way cloture votes are perceived (infinitely unlikely), or we get a new Senator from Massachusetts and convince all the Dems to vote to end debate regardless of their position on the legislation itself (still unlikely but a little more plausible than the first), or budget reconciliation.  In all of those scenarios we should actually only need 51 votes for the public option, which again, I have a hard time believing doesn't exist.

This is just flatly bad policy, the public option is the only force under the proposed bills that has any ability to significantly lower health care costs, by creating a strong, nonprofit competitor to insurance companies that can deliver health insurance with very low administrative costs.  Without that public option we do get improvement, but we get a budgetary mess (ironic given that the conservative Democrats opposing the public option claim to be so concerned about the budget deficit).  What we end up with without a public option is some network of subsidies and mandates within a government regulated private insurance exchange, this brings us to near universal coverage, which is good, and there is some reason to believe that it might lower costs marginally, while Hawaii's employer mandate has some major problems, it has managed to hold costs under the national average.  So its not out of the realm of possibilities that the growth in health care costs might be kept down just by dramatically reducing the number of uninsured, but there's no mechanism to force the insurance market to lower premiums and to keep administrative costs (and profits) down.


Jacob Hacker has a very good article on this in which he compares Medicare Advantage to the traditional government run medicare program, and finds that traditional medicare has far lower administrative costs.

the Congressional Budget Office (CBO) has found that administrative costs under the public Medicare plan are less than 2 percent of expenditures, compared with approximately 11 percent of spending by private plans under Medicare Advantage. This is a near perfect “apples to apples” comparison of administrative costs, because the public Medicare plan and Medicare Advantage plans are operating under similar rules and treating the same population.

Hacker's example is even in a competitive market in which the Medicare Advantage private plans have to compete with traditional Medicare, and traditional Medicare delivers much lower administrative costs.  Some studies have challenged the assertion that Medicare is far more efficient than private insurance by deducting taxes from private insurance's non-delivery (normally referred to as administrative) costs.  There's a point to be made here regarding taxes, I'll grant that one, but to give them profits misses the entire point.  How we concluded as a society that my health should be an item that other people can profit on is beyond me.  Profits are a big part of the problem, and I'm more than happy to allow them to take a hit by trying to compete with a nonprofit government provided option, that hit is a part of where savings to the public will occur.  Without that hit, and without the public option being able to take steps to lower its costs (negotiating drug prices, pegging rates to medicare...) the public is going to take a major budgetary hit somewhere down the road.  One of the reasons we're talking about this is that health care costs will force Medicare and Medicaid spending to double over the next 30 years.  We need some force in the market to force costs down significantly, and subsidizing private insurers to cover people at 400% of the poverty level will only increase Federal health care expenditures unless something forces costs down.

Reform is good, period, having nearly 50 million Americans uninsured is unacceptable, but reform that fails to really address rising costs is just begging for trouble, its a huge mistake for Obama to abandon the public option, hopefully these rumors will not turn out to be true.  Furthermore, if he announces this in front of the AFL-CIO as is rumored, he's going to get destroyed, as well he should, its a terrible idea.

Wyden's game on the Public Option

Most accounts I've seen have Oregon Senior Senator Ron Wyden playing coy on the public option, suggesting that he might or might not support it.  I've had a difficult time figuring out what exactly Wyden's position is on the matter, but he did seem to take a small step towards, "standing in the way [of the public option]," as he said he wouldn't when he signed a letter along with major health care reform roadblocks such as Ben Nelson, Mary Landrieu, Susan Collins, and Olympia Snowe urging a delay in the reform effort.  That letter allowed for the push to slow to a halt leading into the August recesses, that allowed the anti-reform brigades time to organize and present their fake populist outcry against health care reform.

I'm not sure what Wyden's position is precisely here, beyond that he understandably likes his own bill.  When it was first drafted a couple of years ago Wyden's bill was an excellent roadmap for what passable health care reform might look like given the slim Democratic majority of 2006, with of all people Robert Bennett of Utah as its cosponsor.  The thing that's odd about this whole thing, however, is that Wyden won the argument before it began, his Healthy Americans Act was the first coherent presentation that I'm aware of, of the "health care exchange" model that forms the basis of the Senate HELP Committee bill, the House Education and Labor Committee bill, and the Obama outline plan.  There are only two major differences that I'm aware of:

1) to Wyden's credit, his bill seems to advance insurance portability a little bit more effectively than the health care exchanges presented in the House and;
2) Wyden's bill contains no public option

Clearly the second is the more contentious issue, oddly given that a public option advances the goal of health care portability more effectively than anything else in the insurance exchanges that are presented in the bills that have been passed out of committee.  This is very strange, given that its the first difference that Wyden's bill is more effective on, there may also be some very specific cost-containment measures in Wyden's bill that don't exist in other bills, but many of those could easily be added in by amendment.  That the public option has become the point of contention with Wyden is very strange, since a well organized public option that assumes Medicare providers will participate in the public plan, ties reimbursement rates to Medicare rates, and allows for drug price bargaining by Medicare and the Public Option would provide tremendous downward pressure on private health care costs.

Back when he introduced it, Wyden's plan was a good outline for bipartison, effective health care reform that promoted universal coverage.  Since that time however, it has become obvious that the goal of the Republican Party on many issues is to block the Democratic majority from any accomplishments, this was apparent from the stimulus debate and from Republican repositioning on the once bipartison Employee Free Choice Act, as well as to block any health care reform.  This is part of why the debate has had nothing to do with the actual proposals, with half the debate being about Canada and Britain (solutions that are not being proposed by anyone with power) and the other half being about blatant lies and distortions.  While Wyden's proposal could pick up Republican support in 2007 I seriously doubt that it could today.  Nonetheless I'm not opposed to having a vote on Wyden's plan, but his waffling on a public option is just plain bizzarre, as Jacob Hacker (linked in previous paragraph) argues compellingly, Wyden's plan too would benefit from a public option.  Its time for Wyden to stop playing whatever game he's playing here and get on board with the public option, its hard enough to pass health care reform over the objections of conservative Republicans, they don't need help from progressive Democrats.