Who Needs the Public Option?
By Uwe Reinhardt
The New York Times
August 21, 2009
Nothing has been quite as riveting in recent media reports as the question of what President Obama and his staff really think…
How did the brouhaha over the choice of a public health plan come about in the first place, when the real issue before us has been helping the millions of currently uninsured, low-income American families gain access to adequate and reliable health insurance?
One would have hoped that the overarching goal of health reform would have been to put in place a reformed health insurance system that can offer Americans the same reliable, permanent, portable and life-cycle health insurance enjoyed by, say, Germans or Canadians or the people of Japan and Taiwan.
As I have argued in earlier posts to this blog, the choice of a public, government-run standard health insurance plan would certainly go a long way toward reaching that, but it is not a necessary condition for doing so. Germany, the Netherlands and Switzerland all do offer their citizens permanent, portable and stable financial security in health care without the inclusion of a government-run health plan in the mix. That achievement, however, requires fairly heavy regulation of the industry.
If I had to guess what features really make a public plan so attractive to many Americans, they would probably be the stability, permanence, portability and simplicity that such a public plan could offer. It is these features that make traditional, government-run Medicare so popular with the public.
Herein lies the main challenge facing the private health insurance industry. It must convince the public and the legislators who do not trust it that with the help of government — including a wide set of new government regulations — the industry can transform itself into a structure that can offer Americans the same permanent, reliable, easy-to-understand life-cycle financial security that citizens in other nations take for granted and Americans crave.
Thus, instead of the cliche that a public health plan would lead to a “government takeover of American health care” and thus its demise, the industry would be better advised to put before the public a fully worked out purely private-sector model that truly will offer individuals reliable, life-cycle health insurance with relatively stable premiums, and at premiums that are defensible.
http://economix.blogs.nytimes.com/2009/08/21/who-needs-the-public-option/
Posted comment by Don McCanne, MD:
The brouhaha over the public option is more than just symbolic. The accusation is correct: the public option was perceived as a means to move us toward single payer, while respecting the right of others to continue with their current coverage if they so preferred. The progressive camp was divided over this strategy since some of us believed that jettisoning single payer in favor of the public option would result in a bargaining position in which the public option would have to be traded away in exchange for some insurance market reforms. Those single payer advocates who agreed to support the public option now feel betrayed.
But the much more important goal is to establish a system that prevents financial hardship for anyone who needs health care – a system of social insurance, whether that is based on single payer or on a system of highly regulated private plans, as some European nations have.
Congress is trying to patch together a model based on private plans, but they have run up against a uniquely American problem – our very high health care costs. The average health care cost far a healthy family of four (the healthy workforce and their young healthy families) is now $16,771. With a typical family income of $60,000, generous subsidies will be mandatory for middle-income individuals and families.
We already have hit the wall on costs. Congress is proposing basic coverage (tier one) that has an actuarial value of 65 to 70 percent, leaving those with significant health care needs exposed to the balance of the costs (which is often higher than the stop loss because of the failure of our private insurance model to protect individuals from unanticipated out-of-network charges). Average-income individuals who need care will not be able to afford the out-of-pocket costs.
Even for those who remain healthy, our costs are now so high that a plan with reasonable benefits that would provide adequate financial protection in the event of need must charge premiums that are so high that a generous public subsidy is essential. The wall again – Congress is unwilling to use aggressive, progressive tax policies to pay for subsidies that are large enough to keep premiums affordable for average-income individuals.
There is an out. Congress will waive the fine for the criminal act of being uninsured merely because the premium is unaffordable. The standard “coverage” for the middle-income sector will then be “hardship waivers” (assuming a transition away from employer-sponsored coverage – the intent of many members of Congress). The only other option besides aggressive tax policies would be to make the basic plan so Spartan that it won’t provide adequate financial protection anyway. (Don’t say high deductible plans, because if the deductible is high enough to make the premium affordable, the plans do not provide adequate protection for middle-income individuals and families.)
The real problem with the public option concept is that it automatically leaves in place the most expensive and least efficient method of financing health care. A single payer or improved Medicare for all would provide us with more than simply an equitable and efficient method of financing care for everyone, it would also create our own public monopsony so that we can demand greater value from our health care system.