The public option is dead: Long live the public option.
Wait. Maybe it is dead. The rocky road to health reform is
likely to induce severe mood swings, considering the elation after
Harry Reid's announcement yesterday and the gloom after Joe Lieberman's
threatened defection today. Maybe the health reform process needs a
sign like the ones carnivals put up over the Tilt-a-Wheel: "Must be this tall to ride this attraction."
The public policy option presented by Harry Reid may not meet the consensual definition of "robust," but it isn't the opposite of
robust either. We'll need another adjective to describe it if it
passes: Hale? Stout? "Ruggedly mild with a hint of oak in the
aftertaste?" But while they're working on terminology, Democrats should
be mapping their course of action should Sen. Reid succeed. Much of the
work will begin, not end, when and if this bill passes.
Putting Sen. Lieberman aside for a moment (and who wouldn't want
to?), what can we expect to see if the final health reform bill
conforms to Sen. Reid's outline? The crystal ball is somewhat murky,
since some of the most critical features of the bill aren't fleshed out
yet. But we know that progressives are counting on the public option to
be a check on insurance industry abuses, and to slow down the health
care cost spiral.
Maybe, maybe not. The public option will only impact the system
globally if it has clout (which comes from volume), cost savings, and
an attractive package of benefits. How likely is that under the
proposed Senate bill? Here's what we can surmise so far:
The opt-out: I was surprised at the anger my last post on opt-outs provoked
in some progressives. "Ideological rigidity," said some. I still think
the opt-out weakens an already-compromised public option, and that it
clashes with some of the moral rhetoric from Democrats. But, as I wrote
at the time, "Is a 60-vote, non-reconciliation outcome in the Senate
worth (it)? Maybe in the end the answer will be 'yes,' but that
question should only be posed after all other options have failed."
Well, apparently they've failed. Now the opt-out is looking like a shrewd
tactical move, and let's hope it succeeds. But every such tactical
reduction reduces the public option's ability to effect system-wide
change. That's not ideology, it's common sense.
A number of people expressed great skepticism when I said that a
number of states would exercise the opt-out provision if it were
enacted. Now, two short weeks later, even the Democratic
candidate in the Virginia governor's race is suggesting he'll opt out
if elected. So a public plan that was forecast to win 5% of the
expanded insurance market is now likely to gain something less than
that.
What will the final number be - 4%? 3%? We don't know. But those
progressives who are waxing euphoric need to come back down to earth.
Their mission, should this bill pass, will be to keep the number of
state defections as low as possible. They can't do that by repeating
the old mantra, "people would never be so foolish ..." After all, they
said that during the 2004 election, too. Campaigning against opt-outs
will be Job #1 if this bill passes. If that happens, then, to
paraphrase Joe Hill: "Don't celebrate, organize."
Medicare rates: The Reid plan isn't technically "robust,"
because it doesn't tie public option doctor/hospital reimbursements to
Medicare rates. Again, that may be smart politics - but it weakens the
PO's cost-competitiveness. This is a complex issue, but the bottom line
is this: If the public option has to negotiate its own rates with
health providers, and it's only likely to get an average of 5% in any
given market, it's not going to have a lot of clout to get favorable
pricing. Sure, it will save on marketing costs, but so will any other
insurance plan in the exchange. So how much of a cost-check is it going
to be?
To make matters more complicated: If a public option is tied
to Medicare rates, that might cause more doctors to drop out (or "opt
out") of Medicare. That could create an access problem. But that issue
could be managed by giving the public option the flexibility to make
exceptions in its rate structure by region and/or type of provider.
Mandates again: There's talk of easing the employer mandate,
while keeping the individual mandate. That could get tricky, because it
could shift a greater portion of the cost back onto working families.
And mandating the purchase of private insurance in states without the
public option could be unpopular.
Paul Krugman
may be overly sanguine about the likelihood that health reform will be
well-received after (or if) its implemented. Those polls showing that
the Massachusetts reform is popular among doctors are not surprising,
since they benefit when more people have insurance. The fact that only
2.6% of that state's residents remain uninsured sounds good, but that
figure was 5.7% before reform. So they've cut their uninsured problem
by slightly more than half (55%). Similar results nationwide would
leave more than 20 million Americans uninsured (assuming 47 million
now), which could be politically unpopular.
And while one poll shows that only 11% of Massachusetts residents
polled would repeal reform, that's in a state that lacks the rampant
right-wing extremism we see nationally. Other polls there have shown
that most people personally affected by the state's reforms are unhappy
with them. On the national level, these disaffected people may well
turn out to be swing voters, especially after the Media Noise Machine
has worked on them.
Benefits Design, Insurance Exchanges, and Cherry-Picking: As
Professor Krugman points out, Massachusetts has been proactive in
mandating benefits design, showing a level of political will that may
be absent on the national stage. If the insurance exchanges do not
mandate a decent level of coverage, families who pay those large
insurance premiums may still face financial disaster should a major
injury or illness take place.
In states where the public option provides more generous benefits than private carriers do,
the end result may well be what the insurance industry calls
"cherry-picking." That's what health plans do when they design their
benefits and administer their plans in ways that make life especially
difficult for those who need more care, or who are more likely to need
it in the near future. If insurance exchanges aren't given the tools to
manage the cherry-picking problem, the public option could become a
toxic waste site where for-profit carriers dump the sick and needy. The
end result would be a public option that actually costs more than private insurance.
The Keyword is 'Evolution': So, do I dislike the Reid bill? Not at all. I suspect it's the best we're going to get, and we'll be lucky if we do
get it. As I've confessed before, I've consulted for health insurers in
the past (as well as employers, unions, foundations, tech companies, and others -
which I do more often). Part of that job is to point out all the bad
things that could happen, so that people can plan accordingly. Each of
the above problems can be addressed, but only with awareness and
forethought.
The keyword in this planning process is 'evolution.' If a
watered-down plan is all we can get - and it looks like it is - it's
wise to design it so that it can evolve toward a better system in the
future. The public option is one way to do that, by forcing insurers to
lower costs or lose market share. Lawmakers are right when they point
out that, as its now designed, it's not the most significant part of
the program. But if it's there, and we don't eviscerate its cost-saving
potential, it can be a powerful lever for future change.
We're likely to see continued voter dissatisfaction after this bill is passed. That can be a good thing,
if mechanisms have been put in place that permit quick response to
those dissatisfactions when they arise.That's a good reason to support the Wyden Amendment, which would allow anyone to elect the public option. It's also an argument for improved regulation of insurance company benefits, and for retaining the option of using Medicare rates at some point in the future.
As for how to handle Sen. Lieberman - Hey, I wish I knew.