Friday, September 18, 2009

Public Option or Bust!!!!!

I outlined HR 3200 the other day. The bill has some serious deficiencies in several different areas, but it has turned out to be far better than the Sen. Baucus's bill that the Senate Finance Committee is poised to take up. The biggest difference between the two bills is that HR 3200 has a public option and the Baucus bill does not. Let's take a look at why the public option is so important, and is an absolute necessity for this approach to health reform.

It doesn't take a rocket scientist to see that single-payer is the most efficient approach to universal coverage. HR 3200's biggest deficiency is simply that isn't single-payer: it doesn't get rid of the private insurance companies that take a piece of the action for their Wall Street investors on every transaction. Instead it uses mandates, an expansion of a Medicaid, and subsidies to get us to universal coverage.

The bill will only leave 3% of Americans without insurance, which wouldn't happen under single-payer, but it's way better than 20%. So it does pretty well in terms of goal 1 and thus goal 3 of health care reform. However, it doesn't do too well in goal 2. Outside of important reforms in Medicare, the bill does very little to drive down costs except with the public option. With private insurance companies still covering most Americans, the plan doesn't get rid of their incentives that drive up costs so much, profits and competition.

The consumer reforms in the bill to prevent under-insurance are great. They would put a big dent in the incidence of medical bankruptcy. But they probably won't save money overall. They will force insurers to pay for their sick clients' coverage, but those costs could easily be passed on to everyone in higher premiums.

Expanding insurance coverage increases health care costs simply because more people are getting health care. Proponents of the mandates-and-subsidies approach claim that prevention of illness by expanding coverage will bring down costs because people will be healthier. However, most studies indicate that preventive care, although it is crucial for having a healthier society, does not reduce costs and probably increases them (see this PNHP blog post).

The bill uses an "exchange" where individual and small businesses can go to shop for insurance plans. This actually does bring down costs a bit because insurance companies don't have to spend as much on marketing, but the savings are small compared to the cost of expanding coverage. Giving people subsidies to buy insurance on the exchange is great in terms of affordability for low and middle-income families, but it encourages private insurance companies to keep premiums high with the bill going to taxpayers. Not very efficient, except one provision in the bill that reins in these bad incentives.

The public option! It's another plan consumers can buy on the exchange, run by the government as a non-profit entity, but otherwise similar to any other insurance plan. With lower administrative costs and the ability to charge Medicare rates to providers, it will be able to offer low premiums. The CBO estimates that the bill will cover 10 to 11 million Americans, so it will bring down costs in that way alone. On top of that, it will force private plans on the exchange to offer lower premiums if they want to compete.

A public plan with 10 million Americans is disappointingly small, but it could still save a lot of money. The Commonwealth Fund found that having a public plan paying at Medicare rates on the exchange would save $265 billion in administrative costs over ten years, whereas expanding coverage with just an exchange would increase costs by $32 billion. While $265 billion over ten years is less than the $400 billion in administrative costs single-payer would save in one year, it's not chump change.

Requiring individuals to buy insurance without a public option is a big handout to insurance companies: it gives them tens of millions more customers with consumers and taxpayers together paying $297 billion more over 10 years than they would otherwise! If the subsidies aren't high enough, people won't be able to afford coverage. It would be highly unsustainable over time and lead policymakers to a difficult choice: pay ever-higher subsidies that would pad the profits of insurance companies, or force working families to pay more and leave some unable to afford insurance. The mandate-and-subsidize approach is inherently inefficient, and it needs a public option for it to work for consumers and taxpayers in the long run.

If the Democrats drop the public option because moderates don't like it, progressives should vote against the bill because it would be so inefficient that it would basically amount to corporate welfare for the insurance companies. Conservative Democrats have been threatening to vote against health care reform because they don't like the public option and the cost of the bill (HA I guess they don't see the inconsistency there!). If progressives stand strong for the public option, it forces the Congressional leadership and the White House to play hardball with the centrists if they want the votes for health care reform.

According to polls, 77% of Americans support the public option, so the Democrats don't have any excuse as the majority party in both chambers of Congress, whether they come from a blue state or a red state. Last I heard this was a democracy. Is it too much to ask for Democrats to do what 77% of Americans want?!!!!!

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