A Modern Public Plan
It is astonishing, but the question of whether a small slice of Americans should be able to choose between a government-run health insurance plan and private health insurance plans is threatening passage of much-needed health care reform.
Senate Democrats barely mustered enough votes to start debating their reform bill, and some senators who voted to allow debate have said flatly that they will not support the final bill if it retains its public option clauses. If they mean what they say, their defection could make it extremely hard to overcome a Republican-led filibuster.
We got to this juncture because, in an already overheated political debate, no issue has drawn more demagoguery and less rational analysis than the public option. And while both political parties exaggerate what a public plan could do, Republican critics are particularly divorced from reality.
They say the public option would start a government takeover of all health care; interpose government bureaucrats between patients and their doctors; sound the death knell for private insurance; and lead many companies to dump insurance benefits. They also say it could cost taxpayers a lot.
Democrats, meanwhile, claim that competition from a public plan would help drive down insurance premiums and the overall cost of medical care.
We wish the proposed public plan could be powerful enough to demand low rates from health care providers, charge much lower premiums than private plans and attract large numbers of enrollees. But neither the House nor Senate versions would have that kind of power.
Here is what a public option — as structured in the House and Senate bills — would do and would not do:
HOW IT WOULD WORK Both bills would create new insurance exchanges, with an array of plans to choose from, for a limited number of Americans — those who lack group coverage and must buy policies directly from insurers and those who work for small employers, about 30 million people within a few years. With millions of potential new clients, all major insurers are expected to participate. And Congress willing, a new public plan would also be available.
The government would run the public plan, but both the Senate and House versions would require it to compete on a “level playing field.” It would have to follow the same rules as the private plans, meet the same benefit standards, maintain the same reserves, and support itself entirely with premium income, with no federal help beyond start-up money that would have to be repaid.
The secretary of health and human services, as the head of the plan, would have to negotiate rates with health care providers just as the private plans do.
WHAT IT COULDN’T DO Because of intense opposition from conservatives, both bills shunned a more robust public plan that would have had the power to virtually force doctors to serve its beneficiaries — at Medicare rates that are typically less than private plans pay them.
As a result, the current weaker versions could find it difficult to compete with well-entrenched private insurers. The Congressional Budget Office believes public plan premiums would actually end up higher than the average private plan premium. This is partly because the public plan would probably attract the sickest patients, whose bills are highest, and who might fear that private plans would find some way to jettison them.
All told, the C.B.O. estimates that the House bill’s public plan would attract only six million enrollees. The Senate version, which would allow states to opt out, might attract only three million to four million.
This is not going to destroy the private insurance market or start a government takeover of the health care system, or put bureaucrats in control, any more than private plans do. Nevertheless, in a recent Senate debate, Republicans insisted that more than 100 million Americans might enroll in a public plan, the vast majority of them dumped by employers from coverage that they were satisfied with.
That overblown claim is based on a study showing that a much more robust plan could offer far lower premiums than private plans, and if available to virtually everyone, it could attract huge numbers of enrollees.
In that no-longer-relevant scenario, private plans would indeed lose a lot of their subscribers. But workers would still not lose their employer-sponsored benefits. Their employer’s subsidy would follow them to the exchanges, where they would have a much wider choice of plans than they now do. Even in a nightmare scenario that lives only in Republicans’ fevered rhetoric, workers would be better off than they now are.
Although the public plan is supposed to be self-sustaining, critics worry that if it starts to fail, future Congresses will bail it out with taxpayer money. We hope they are wrong. If the public plan gets into financial trouble, it should simply raise its premiums or close.
SO IS IT STILL WORTH DOING? Even with the constraints, a public plan could be a useful part of health care reform. Most important, it would compete in markets dominated by one or two private insurers that can charge more and not worry about losing customers.
The presence of a public plan could serve as a brake on unwarranted premium increases by the private companies. The C.B.O. said a public plan with negotiated rates would place “downward pressure on the premiums of private plans.” A public plan would also provide a safe harbor for people who do not trust the insurance industry and would prefer a government plan even if its premiums were higher. And it would be a place to test innovative ideas for controlling costs and improving quality.
The C.B.O., a notably cautious evaluator, could be wrong in its assessments. The plan might turn out to be better at negotiating lower rates. And with no need to turn a profit, it might be able to charge less than private plans and attract millions more people than expected. That could force private plans to lower their own rates.
We are not holding our breath. The public plan could face enormous practical problems entering markets where private insurers already have well-established networks of providers or where hospital groups already have the upper hand in negotiating with insurers.
Even a weak public plan would be better than no public plan. It would expand the choices available to millions of Americans and could help slow the relentless increases in the cost of health insurance. Congress certainly owes Americans a more rational and informed debate.
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