By Kip Sullivan, JD
Leaders of the campaign for a "public option" have circled their wagons around two sentences in HR 3200 (the House health "reform" bill). These sentences, which are not in the bill passed by the Senate health committee, appear in Section 223 of HR 3200:
Health care providers participating under Medicare are participating providers in the public health insurance option unless they opt out in a process established by the Secretary.
[T]he Secretary shall base the payment rates [for providers] on the payment rates for similar services and providers under parts A [the hospital services part] and B [the physician services part] of Medicare.
"Option" advocates are claiming these two sentences are "crucial" and “critical” to the success of the "option" and absolutely must be in any final "reform" bill. The Congressional Progressive Caucus has even warned President Obama that if these two sentences are not in the final bill, they will vote against it.
In this paper, I demonstrate why these two sentences accomplish nothing. All of us desperately need real reform of our sick health care system. The present system ruins human lives daily through preventable deaths, devastating bankruptcies, hideous disparities and gross injustice and indignity. We cannot afford to experiment with “reforms” like the “options” in HR 3200 and the HELP bill which, coupled with the enormous insurance industry bailouts called for by those bills, will merely perpetuate the current system.
It’s time for the “option” movement to insist that its representatives start speaking truthfully about the “option” provisions in HR 3200 and the HELP bill. They might start by admitting that the Two Sentences in HR 3200 are, by themselves, incapable of giving the “option” the tools it needs to survive, much less thrive. Read it all here.
From Kip Sullivan via PNHP:
But the actual provisions in the HELP Committee bill call for numerous “community health insurance options,” not the single "Medicare-like" plan promised by "public option" advocates. That means the individual "options" will probably be as small and weak as the co-ops now under discussion in the Senate Finance Committee. More importantly, these "community options" will almost certainly be run by insurance companies. Section 3106 is a mess, but its meaning becomes clear after several readings. Section 3106 does not create the "Medicare-like" program promised by Jacob Hacker, HCAN, Howard Dean, and other "option" advocates. Instead it proposes a program that authorizes DHHS to create numerous health insurance companies tied to geographic areas, and to contract with members of the existing insurance industry to create and possibly run those companies.
Leaders of the "public option" movement have an obligation to advertise the HELP Committee bill truthfully. It is not accurate to say the HELP Committee bill creates a "robust" or "strong" public option. It is not even accurate to say the HELP Committee bill creates one "option." The truth is the "option" is balkanized and very weak. In fact, HCAN, Andy Stern, Howard Dean and other "option" advocates who have praised the HELP Committee bill should do more than cease to praise it. They should tell Congress they oppose it.
Lawrence O'Donnell discusses Health Care Reform with Haynes Johnson and Jacob Hacker (author of the current Public Option strategy). Starting around 4:30 minutes in, O'Donnell makes a good case for Single Payer and why we should not stop fighting for it now:
Source
The original, "Bait and switch: How the “public option” was sold" by Kip Sullivan is linked here.
From Kip's Reply to those who wrote in response to that article:
How many times must universal coverage advocates rush onto the battle field to promote a multiple-payer solution and get slaughtered before they realize they can’t get to universal coverage that way? How many defeats will it take till they know that universal coverage without cost containment is not politically feasible? How many times can they be fooled into thinking that there are ways to cut costs other single-payer?
There are several reasons why the lessons of previous defeats don’t sink in with many universal coverage advocates. I’ll discuss two here: (1) insufficient knowledge of how social change happens; and (2) insufficient knowledge about the role that promoters of market-based solutions to the health care crisis played in marginalizing single-payer legislation in Congress. This view of social change is often expressed in the mantra quoted above, “Single payer is not within the realm of possibility this term.” The implication is that if single-payer advocates cannot demonstrate that they have at least 51 percent of the votes lined up, they should retreat to the sidelines and watch the “political yes buts” do their thing. It implies that social change must occur within a single session of Congress rather than over the course of many sessions. It implies that movements for social change should, in the event that they do not have a majority vote locked up at the beginning of any given session of Congress, put their campaign in moth balls and forgo the opportunity to educate the public and build their movement through lobbying, testimony, rallies and all the other tools associated with campaigns to move bills in Congress.
In short, it implies an absurd Catch-22. To get the “political yes buts” to join them, single-payer advocates must show proof of having a majority of Congress on their side; but to get a majority of Congress on their side, the single-payer movement must build and wage a campaign relentlessly over many years in the face of active discouragement from the “yes buts” – and without pestering Congress with ideas unfairly characterized as utopian.
These demands, when they are spelled out, are obviously irrational. Universal coverage under a single-payer system is going to be difficult to achieve. The difficulty may be on the order of the difficulty of ensuring voting rights for women and civil rights for black people, to name just two examples of movements that took decades to accomplish their goals. If the leaders and supporters of these movements had accepted the Alice-in-Wonderland rules recommended by the “yes buts,” the women’s suffrage and civil rights movements would never have happened. There have been three cycles of health care reform in the last half century – 1970-73, 1992-1994, and 2007 to date. At the dawn of each cycle, single-payer legislation had already been introduced. But early in the cycle, single-payer legislation was “taken off the table” (to quote a statement Sen. Max Baucus now wishes he had never made). Each time the Democratic leadership chose instead market-based proposals that had no track record and no evidence to support them. Each time they favored reform deemed more “politically feasible” than single-payer because it left the insurance industry in place. In all three cycles, the alternative, market-based proposal was promoted by one or two policy entrepreneurs (that is to say, it wasn’t an idea that bubbled up from the grassroots). I am not going to quote all of the history of those first two cycles detailed in this article, but it would be well worth your time to read. On to the thrid one - now... The cycle we’re in now bears many similarities with the last two cycles. When this cycle began (2007 is as good a year to pick as the first year of this cycle, although that is somewhat arbitrary), single-payer legislation was better positioned than ever before to be taken seriously by Democrats. Single-payer bills had been introduced in several states as well as the US House (Sen. Bernie Sanders would introduce a single-payer bill in the Senate in 2008). Polls were showing that two-thirds of Americans and 60 percent of doctors support single-payer (or “Medicare for all”) legislation.
But once again an articulate policy entrepreneur appeared on the scene to sell a market-based alternative to single-payer that would leave the insurance industry at the top of the health care food chain, and once again the Democratic leadership fell for it. This time the entrepreneur was not Paul Ellwood. This time the policy entrepreneur was Jacob Hacker, a professor of political science at Berkeley. Just as Ellwood and the Jackson Hole Group had before him, Hacker said enhanced “competition” among insurance companies was the solution to the health care crisis. (The name of Hacker’s latest paper is “Healthy competition.”) This time enhanced competition would not come from “managing” competition, but from the creation of a “public option.” This time the coalition that promoted the alternative to single-payer was not the Jackson Hole Group, but HCAN, assisted by a sister coalition called the Herndon Alliance.
The Herndon Alliance was founded in 2005 by many of the same groups that would create HCAN in 2008. The Herndon Alliance paved the way for HCAN’s promotion of the “public option” with some laughable “research” claiming to find that Americans want a “public-private-plan choice” approach and don’t want a single-payer system. I have written elsewhere about the bogus “research” conducted by the Herndon Alliance. Suffice it to say here the Herndon Alliance cooked up a new and more insidious version of the “political feasibility” argument.
Until about 2007, when the Herndon Alliance first began publishing its “research,” there was only one variant of the “political feasibility” argument, the one that said the insurance industry is too powerful to beat. The Herndon Alliance variant claimed single-payer is not feasible because Americans don’t want it. According to this variant, American “values,” not the insurance industry, are actually the greatest impediment to single-payer. According to the Herndon Alliance, Americans “value choice of insurance company” and “they like the insurance they have and want to keep it.” HCAN and Hacker picked up these refrains and promoted them vigorously to the public and to members of Congress. This inexcusable attack on single-payer no doubt helped key committee chairs in Congress (Kennedy, Baucus, Waxman, Rangel and Miller) feel more comfortable taking single-payer off the table and concentrating on the “public option.”
By early 2009, it was clear the Hacker-HCAN-Herndon Alliance propaganda for the “public option” and against single-payer had worked with the Democratic leadership, and that the Democratic leadership would fall once again for a market-based alternative and remove single-payer from the table. The removal of single-payer legislation took place without the firing of a single shot in public by the insurance industry and the right wing. It took place at the request of the “yes but” wing.
In the House, single-payer legislation, HR-676, has been rammed back onto the table, thanks to hell-raising by the single-payer movement, including the arrests of some brave doctors and nurses who disrupted hearings in the Senate Finance Committee last May. Last Friday night, Speaker Nancy Pelosi agreed to allow a floor vote on whether to substitute HR 676 for HR 3200, the Democratic leadership’s “public option” bill. This is a significant victory for the single-payer movement, but it should not have come so late in the 2009 session. If Pelosi and the three committee chairmen who wrote HR 3200 had permitted HR 676 to go through the normal committee hearing process, single-payer advocates would have had more time to educate Congress and the public about why a single-payer system is superior to all other alternatives.
It appears almost certain that the reform cycle we’re in now will end the way the last two did – with the Democrats’ competition-based alternative to single-payer going down in flames. It is extremely important that progressives, especially progressives in the “yes but” camp, understand why this happened. Yes, the ultimate villain in these dramas was the insurance industry and their conservative allies. But universal coverage advocates must understand the role of the “yes buts,” and the policy entrepreneurs they listened to, in splitting the universal coverage movement and in seducing Democrats to support legislation that was no more likely to pass than single-payer legislation and wouldn’t have cut costs if it had passed. If they don’t see this – if they persist in believing the insurance industry is the only force single-payer advocates have to contend with – they will, wittingly or unwittingly, help perpetuate the pattern we have seen in the last three reform cycles. They will, in short, perpetuate the insanity of doing the same thing over and over, seeing it fail, and not learning from failure. The argument that any “public option” is better than none has rarely been articulated, but I suspect we will hear it more often as the reality sinks in that the “public option” in the Democrats’ bill is a joke. “Public option” advocates who learn for the first time that the “option” in the Democrats’ bill will insure few or zero people have only two choices: to abandon the “public option” movement, which is no doubt emotionally difficult to do for those who have invested heavily in the movement, or to continue to work for the Democrats’ version of the “public option” and rationalize that choice with the argument that a tiny “public option” can always be improved once it is established.
The problem with this argument is that the “public option” is not your typical government program. The “public option” is not like the space program or the various college loan programs, to take a few examples, all of which can be expanded or contracted as the years go by without seriously threatening the very existence of the program. The “public option” will be a business. And this particular government-run business may never get very big; it may not even survive. If it doesn’t get big, or doesn’t survive, it won’t develop the huge public fan base that protects popular programs like Social Security and Medicare. In fact, the reverse could happen. A miserable early performance may cause Americans to turn against the idea of a Medicare-like program for the non-elderly. Unlike public programs, businesses don’t have an indefinite time period to develop a supportive public. Businesses don’t automatically take root and go on living forever. The “public option” must prove its ability to survive and undersell the insurance industry quickly. Moreover, the “public option” will be attempting to break into a business that has been consolidating over the last few years. The insurance industry is extraordinarily difficult to crack.
“Public option” proponents who urge us to support even a token “public option” must remember how much is at stake here. At stake is not only the willingness of the public to believe that government health insurance programs can outperform the insurance industry. At stake as well is whether Congress will give the insurance industry a trillion dollars per decade of taxpayer money. A well-fed insurance industry is bad news for both single-payer and “public option” advocates. An insurance industry strengthened by a trillion dollars per decade of new tax dollars will not only be in a better position to oppose single-payer legislation, it will also be in a stronger position to lobby Congress and the regulators to ensure the “public option” remains stunted.
“Public option” advocates should start talking about the “public option” as if it were inextricably tied to an insurance industry bailout. They should write the phrase “public-option-insurance-industry-bailout” on a Post-it note and paste it to their bathroom mirror to remind them to be honest with themselves and the public about this fact.
To sum up: “Public option” proponents who claim that any “public option” is better than no “public option” because even a skinny little program can be beefed up later are sadly mistaken. A weak “public option” may not survive to be beefed up later, and whether it survives or not, it will serve as fig leaf that will let Congress justify an insurance industry bailout. A strengthened insurance industry is the last thing either the “public option” or the single-payer wing of the universal coverage movement needs. Please say after me: A weak public option is far worse than none at all. I am under no illusion that a single-payer bill would have passed Congress in 2009 given the world as it was in December 2008. I do believe, though, that if the “yes but” wing of the universal coverage movement had thrown their considerable weight behind single-payer prior to 2009, say, in 1992 when the last reform cycle began, we would either have a Medicare-for-all style system by now, or we’d be on the verge of enacting one now.
Will HCAN and Hacker put out a call to their followers to do all they can to win the floor vote on HR 676 this fall? Or will they give lip service to HR 676 and sit on their hands? When the 2009 session of Congress ends, will HCAN et al. offer their usual misinterpretations of why reform failed?
How quickly America enacts a single-payer system will depend in part on whether progressives learn the real lessons of the failure of the “public option” movement in 2009. If the “yes but” wing draws the same lessons it drew from the failure of the Clinton bill – that the “base” was not well enough organized, or that the Clintons didn’t “sell” their plan skillfully – unity within the universal coverage movement seems unlikely, and the day we get to a single-payer system will be postponed.
I believe the “yes buts” must confront some inconvenient truths immediately. The “political feasibility” rationale for doing nothing to assist the single-payer movement was never a good one or, at minimum, after two decades of constant use, has become an embarrassment and must be discarded. It is foolish to argue that even the tiniest “public option” will constitute a victory that can be built on later. If the “yes buts” see these truths, then unity within the universal coverage movement should be possible. And if unity comes to the universal coverage movement for the first time in 40 years, single-payer can’t be far behind. Please read it all here at PNHP's Official Blog and share with your progressive friends. More people will die if we fail. Our Grandchildren will be fighting the same battle in another 20 years.
An absolutely must read by Kip Sullivan
The people who brought us the “public option” began their campaign promising one thing but now promote something entirely different. To make matters worse, they have not told the public they have backpedalled. The campaign for the “public option” resembles the classic bait-and-switch scam: tell your customers you’ve got one thing for sale when in fact you’re selling something very different.
When the “public option” campaign began, its leaders promoted a huge “Medicare-like” program that would enroll about 130 million people. Such a program would dwarf even Medicare, which, with its 45 million enrollees, is the nation’s largest health insurer, public or private. But today “public option” advocates sing the praises of tiny “public options” contained in congressional legislation sponsored by leading Democrats that bear no resemblance to the original model.
According to the Congressional Budget Office, the “public options” described in the Democrats’ legislation might enroll 10 million people and will have virtually no effect on health care costs, which means the “public options” cannot, by themselves, have any effect on the number of uninsured. But the leaders of the “public option” movement haven’t told the public they have abandoned their original vision. It’s high time they did. “Public option” refers to a proposal, as Timothy Noah put it, “dreamed up” by Jacob Hacker when Hacker was still a graduate student working on a degree in political science. In two papers, one published in 2001 and the second in 2007, Hacker, now a professor of political science at Berkeley, proposed that Congress create an enormous “Medicare-like” program that would sell health insurance to the non-elderly in competition with the 1,000 to 1,500 health insurance companies that sell insurance today. Obviously the “public option” in the Senate bill (zero enrollees, 34 million people left uninsured) and the “public option” in the House bill (10 million enrollees (maybe!); 17 million people left uninsured) are a far cry from the “public option” originally proposed by Professor Hacker (129 million enrollees; 2 million people left uninsured). Have we heard the Democrats in Congress who drafted these provisions utter a word about how different their “public options” are from the large Medicare-like program that Hacker proposed and his allies publicized? What have Professor Hacker and his allies had to say?
In public comments about the Democrats’ “public option” provisions, the leading lights of the “public option” movement imply that Hacker’s model is what Congress is debating. Sometimes they come right out and praise the Democrats’ version as “robust” and “strong.” But I cannot find a single example of a a statement by a “public option” advocate warning the public of the vast difference between Hacker’s original elephantine, “Medicare-like” program and the Democrats’ mouse version.
For example, on June 23, Hacker testified before the House Education and Labor Committee that “the draft legislation prepared by [the] special tri-committee promises enormous progress.” He went on to enumerate all the benefits of a “public option.” Yet the House tri-committee proposal bore no resemblance to the public plan he described in his papers and that the Lewin Group analyzed. Later, when Kaiser Health News asked Hacker in a July 6 interview why “your signature idea – a public plan – has become central to the health care reform debate,” Hacker again praised his “public plan” proposal and offered no hint that the “public option” so “central to the debate” was very different from the one he originally proposed. Now let us compare Hacker’s original model with the mousey “public options” proposed by the Senate HELP Committee and the House. Of Hacker’s five criteria, only one is met by these bills! Both proposals require the insurance industry to cover the same benefits the “public option” must cover. None of the other four criteria are met. The “public option” is not pre-populated, the subsidies to employers and to individuals go to the “public option” and the insurance industry, employees of large employers cannot buy insurance from the “public option” in the first few years after the plan opens for business and maybe never (that decision will be made by whoever is President around 2015), and the “public option” is not authorized to use Medicare’s provider payment rates. (The House bill comes the closest to authorizing use of Medicare’s rates; it authorizes Medicare’s rates plus 5 percent).
Is it any wonder the CBO concluded the Democrats’ “public option” will be a tiny little creature incapable of doing much of anything? More curious is that CBO gave the House “public option” any credit at all (you will recall CBO said it would enroll maybe 10 million people). The CBO should have asked, Can the “public option” - as presented in either bill - survive? How did the “Medicare Plus” proposal of 2001 (when Hacker first proposed it) get transformed into the tiny “public options” contained in the Democrats’ 2009 legislation? The answer is that somewhere along the line it became obvious that the Hacker model was too difficult to enact and had to be stripped down to something more mouse-like in order to pass. Did the leading “public option” advocates realize this early in the campaign? Or midway through the campaign when the insurance industry began to attack the “public option”? Or late in the campaign when they found it difficult to persuade members of Congress to support Hacker’s original model? Whatever the answer, will they find it in their hearts to tell their followers their original strategy was wrong? Those of us in the American single-payer movement must continue to educate Congress and the public on the need for a single-payer system. We must also convince advocates of the “public option” that they have made two serious mistakes and, if they learn quickly from these mistakes, that real reform is still possible. Conventional wisdom holds that if the Democrats don’t pass a health care reform bill by December, they will have to wait till 2013 to try again. But if the “public option” movement were to join forces with the single-payer movement, the two movements could prove the conventional wisdom wrong. This won’t happen, obviously, if the “public option” movement fails to perceive the reasons it failed.
It is conceivable the “public option” movement could decide the bait-and-switch strategy was wrong and that their only error was not to stick with Hacker’s original model. It should be obvious now that that would also be a tactical blunder. We have plenty of evidence now that conservatives will react to the mousey version of the “public option” as if it were “a stalking horse for single-payer.” We can predict with complete certainty they will treat Hacker’s original version as something even closer to single-payer. If a proposal is going to be abused as if it were single-payer, why not actually propose a single-payer? At least then, when a particular session of Congress comes and goes and we haven’t enacted a single-payer system, we will have educated the public about the benefits of a single-payer and have further strengthened the single-payer movement.
To sum up, “public option” advocates must choose between continuing to promote the “public option” and seeing their hopes for cost containment and universal coverage go up in smoke for another four years, and throwing their considerable influence behind single-payer legislation. At this late date in the 2009 session, it is unlikely that a single-payer bill could be passed even if unity within the universal coverage movement could be achieved. But if the “public option” wing and the single-payer wing join together to demand that Congress enact a single-payer system, December 2009 need not constitute a deadline. Please read it all at PNHP’s official Blog[Emphasis added by me]
by Don McCanne, MD - PNHP’s official Blog: ""
Offering a public plan option within a market of private health plans has been one of the more controversial proposals during the current national dialogue on health care reform.
The opponents of the public option, especially the private insurance industry and the Republican members of Congress, insist that a government-sponsored plan would be an unfair competitor and drive the private insurance industry out of business. Theoretically, the government would do this by extracting unfair concessions from the health care providers, pricing the public option at a lower level than the private insurance sector could ever meet. (This ignores the more important evidence such as the demonstrated greater efficiencies of our public Medicare program when contrasted with the private Medicare Advantage plans.)
The supporters of a public option, especially the progressive community, contend that the public option would be a superior product made more affordable by reducing administrative inefficiencies. They contend that competition would motivate a massive shift to the public option, bringing us much closer to the single payer model that many in the progressive community prefer. (Much has been said about why this approach actually sacrifices most of the single payer advantages and would likely never lead to a single payer system.)
Professor Jacob Hacker of the University of California at Berkeley (and formerly at Yale) has been a leading proponent of reform based on a national insurance exchange of private plans with the addition of a public plan option. And what does he have to say about the impact that a public plan option would have on market share for the private health plans? He says that under his proposal, “more Americans have private insurance after reform than do before — either through their employer or through the new national insurance exchange.”
Get That? Even with a Medicare-like public plan option, the market for the private insurers will expand! That is the real tragedy of this debate over a public plan option. It has led us away from the debate we should be having instead: an affordable single payer national health program for everyone, versus expansion of our over-priced, inequitable, and inefficient system of financing health care through private plans and public programs
Forget about the public plan option! Let’s get rid of the private health plans, and go with single payer!
by Don McCanne, MD - PNHP’s official Blog
Emphasis mine....
This is a very important paper because addresses one of the most controversial issues in the current health care reform debate: Should a Medicare-like plan be offered in competition with a market of private health plans? UC Berkeley Professor Jacob Hacker adds to his previous contributions on the private plan/public option model of reform by describing in detail what a properly-designed Medicare -like option would look like.
To understand this fairly complex model, you really need to read this 31 page report. But looking at just a few of the problems that he addresses can give you an idea of where this approach is headed.
How would the public option control costs?
From the report: “The great virtue of public plan choice as a means of cost control is that it proposes relatively minimal disruption to existing arrangements compared with other comprehensive reform proposals. It only says that a public health insurance plan will be offered alongside private plans as a coverage option for those without insurance through their employer. It is the competition between private plans and public health insurance, with its distinctive cost-control advantages, that presses both public and private plans to provide more for less and ensures that the goal of affordable quality coverage can be maintained over time at a price the nation can bear.”
DM: In the Medicare Advantage program we have already tested this concept, and the private plans required more money, not less, than the “competing” traditional Medicare program. With a single, universal public program, cost efficiencies would apply to our entire health care system.
How would this proposal spur improved quality?
From the report: “… a new public health insurance plan for the nonelderly (and Medicare, through its association with the new plan) can and should be centrally involved in obtaining better information to improve physician and patient decisions, as well as insurer decisions about coverage, pricing, and benefit structure. Because of its broad and national reach, the stability of its enrollment, and the unparalleled opportunity for data collection and use, the new public health insurance plan is the player in the system that will have the largest incentives to make these investments.”
DM: So the public program would bear the costs on research and data collection. Would those costs be allocated exclusively to the patients in the public program? Would the private insurers have a free ride? Since the mission and income needs of the private insurers are different from the public plan, would they even use the results of the research, especially if greater spending would ensue? Would the government even have access to the proprietary information of these plans competing in the private marketplace? Obviously a single, universal public program would have a more complete and accurate information database that could be applied to improve the quality of our entire health care delivery system, rather than allowing private plans to pick and choose based on bottom line issues rather than optimal quality.
What should the public plan look like?
From the report: “More specifically, the new public plan should be national (with the same basic terms nationwide for patients and providers), governmental (a true public health insurance plan, not, say, a nonprofit insurer operating under federal charter), comprehensive (providing defined benefits on the same basic administrative platform), and built on Medicare’s infrastructure.”
DM: So a bona fide public program is proposed, but…
How could the public and private plans compete “on a level playing field”?
From the report: “… a level playing field requires a set of safeguards that are easily remembered as the “three R’s”: rules, risk adjustment, and regional pricing.”
Rules: “Both the public and private plans should also have to abide by the same fundamental rules, the main purpose of which is to prevent plans from profiting by selecting healthy people rather than delivering value. These rules include: community rating, guaranteed issue, limits on marketing, standardized and defined benefits, reserve requirements, transparency…”
Risk adjustment: “…there is also a need for risk adjustment. That is, plans should be paid different amounts by the exchange based on the expected and realized risk of their enrollees. Enrollees and plans should not be penalized when a plan attracts less healthy enrollees. While prospective risk adjustment technologies have come a long way, they are still imperfect. Thus any risk-adjustment system should mix prospective risk adjustment with a retrospective risk-adjustment process at the end of the year that redistributes funds among the plans to ensure that those with very unfavorable mixes of risk are protected. Of course, the public health insurance plan must be part of this arrangement.”
Regional pricing: “… the bids made by both the public plan and private plans should be made on a regional basis. In other words, although the exchange should be nationally administered, the bids should be regionally specific. Many private plans will only wish to provide benefits in certain regions where they operate. The public health insurance plan will of course be truly national. Without regional bidding, the public plan will be disadvantaged in areas where private premiums are low and advantaged where they are high. Neither is conducive to a truly level playing field.”
DM: Merely to counter the attack that the government doesn’t play on a level field, we would have to establish a set of administratively complex rules of competition with which the government must comply, include the difficult task of determining and adjusting for the relative risks in the public and private pools in spite of the private insurers proclivity to game these risks, and then require our national public program to bid in each region to provide fairness for the government program? This adds considerable administrative inefficiency to a government program that should be offering greater efficiency. A single, universal national health program would not require these extra rules, risk adjustments and health plan competitive bidding processes.
How would the premium for the public plan be established?
From the report: “A strong argument can be made for the federal government setting subsidies on the basis of the average weighted premium of plans, as opposed to the cost of the least expensive plan. First, this would reduce the chance that lower-income enrollees would feel pressured by costs to enroll in the least expensive plan. Second, it would at least crudely adjust subsidies to reflect the variance of plan premiums as well as the level. In areas where the range of plan premiums is larger, subsidies based on the average will much better protect enrollees against premium costs than subsidies based on the lowest-cost plan. For these two reasons, the weighted-average-premium approach is preferable to the lowest-cost-plan approach for setting subsidies, and the graphics that follow focus on showing how this approach would work. However, either approach would create the necessary incentive for enrollees to prefer less expensive plans.”
DM: Instead of a complex process to determine a premium for a public program based on the actuarial value of the benefits provided, a single payer program would do away with premiums. The system would be financed with a simpler and much more equitable tax. Also, everyone who believes in health care justice should be deeply troubled by the statement that this approach “would create the necessary incentive for enrollees to prefer less expensive plans.”
Since premiums would be unaffordable for the majority, how would subsidies be administered?
From the report: “… the subsidy could vary with the income of the enrollee. Low-income enrollees would certainly receive even greater assistance, as well as help with cost-sharing. Because most enrollees through the exchange will be workers whose employers have contributed on their behalf, and because coverage should be kept affordable, the subsidies should cover a good portion of the premium for all enrollees. Since the average employer/employee split of health premiums is roughly 80/20 in the private market today, 80 percent seems a reasonable baseline contribution.”
DM: The purpose of government subsidies is to transfer payment for health care from the wealthy to those who cannot afford to pay for their full, evenly-divided allocation of our national health care bill. That now includes middle-income Americans. A subsidy system requires a separate administrative task for everyone included within the system of health care coverage, with further adjustments depending on out-of-pocket expenses, and periodic reevaluation of eligibility requirements. These administrative excesses are made necessary only because we couple the payment of health care to the specific benefit package - the insurance plan. A single payer system eliminates this administrative nonsense by replacing premiums and cost-sharing with tax financing - again, a much simpler and more equitable approach.
What about the all-payer alternative?
From the report: “…allow private plans that pay providers on a more or less fee-for-service basis to piggyback on the public plan in setting their own prices… In practice, all-payer rate setting of this sort would mean that private fee-for-service plans within the exchange would use the same fee schedule that the public plan did. Allowing private plans that use fee-for-service payment to piggyback on the public plan’s rate thus would have broader benefits than simply reducing the opposition of private insurers to the idea of a public plan. It would make cost control more effective, encourage administrative simplification and care improvement, and increase the degree of coordination in American health financing.”
DM: Okay. So we combine the public and private payers into an all-payer program. Then why would any individual in his/her right mind, other than an insurance executive or shareholder, want to keep this worthless, wasteful, expensive industry in play?
PNHP has been under attack by our friends in the progressive community for being opposed to the public Medicare-like option. That is a misstatement of our position. We are opposed to a fragmented, dysfunctional health care financing system that is causing financial hardship, physical suffering, and, all too often, death. Adding a public option will have only a negligible impact on the fundamental flaws that are causing so much personal grief.
Our friends and our enemies know what would fix our system: a single payer national health program. We think we understand the position of our enemies - largely based on greed. Why else would they support such a cruel system?
But our friends? Why do they attack us as they retreat to a secure position within the ranks of the private insurance industry? Besides, just wait and see what the insurers and their purchased representatives in Congress will do with Jacob Hacker’s “Healthy Competition” proposal. You’ll have to look quick because the window of opportunity for reform will have slammed shut.
By Jacob S. Hacker, Ph.D. | Institute for America’s Future and Berkeley Center on Health, Economic & Family Security | Policy Brief [PDF}
Executive Summary
The debate over health care reform has increasingly centered on the issue of “public plan choice”–whether Americans younger than 65 who lack employment-based coverage should have the choice of enrolling in a new public health insurance plan modeled after Medicare. The central argument for public plan choice is that such a plan, offered as a choice within a new national insurance "exchange," provides an essential set of security guarantees, ensuring that Americans without insurance from their place of work can find a plan that offers them quality, affordable health care through a broad choice of providers in all parts of the country.
For public plan choice to provide such guarantees, however, the public plan must be properly structured, compete on a truly “level playing field” with private plans, and have the authority to use its bargaining power as one of many tools to encourage greater value in health care delivery. The most effective and easily implemented model for the new public plan is a “Medicare-like” plan that builds on Medicare’s administrative infrastructure and basic framework of coverage but is separate from Medicare’s risk pool and departs from Medicare in a number of key respects regarding payment and benefits.
To create a level playing field requires attention to the “three R’s” of workable public-private competition: rules that are the same for both the public plan and private plans, risk adjustment that protects plans from being competitively disadvantaged if they enroll a less healthy group of people, and regional pricing that allows private plans and the public plan to compete within regions on the same terms, rather than having the public plan compete on a national basis with regionally based private plans (whose premiums may be lower or higher in any given region).
Finally, giving the public plan the authority to bargain for reasonable rates is an essential item on the menu of cost control — and one that the Congressional Budget Office (CBO) and other budget watchdogs are likely to “score” as producing savings (in contrast with many other currently favored cost-control strategies). Nonetheless, there are reasonable concerns about how the new public plan will use its bargaining power — concerns reflected in current proposals for a price-taking (rather than price-making) public plan that would have limited ability to secure fair rates. However, a watered-down public plan would be a grave mistake. Instead, the public plan should include safeguards designed to ensure that providers are fairly represented and that bargaining for lower prices does not negatively affect patients’ access to care or shift costs onto private insurers. Indeed, a better alternative to a public plan without price-setting authority would be allowing private fee-for-service-style plans to piggyback on the public plan in setting their own prices.
Public plan choice is rooted in existing precedents that have shown themselves to work, rather than speculative convictions about how a delicately balanced new system will operate. It must be part of any successful reform package. Without public plan choice, Americans without workplace insurance will be put in jeopardy, private insurers will lack an effective check on their actions, and the opportunity to place our crumbling framework of health financing on a secure foundation will be lost.
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