“The House Public Plan: Yes, It’s Worth It” write Jacob S. Hacker and Diane Archer in The New Republic. Jacob Hacker is Stanley B. Resor Professor of Political Science at Yale University. Diane Archer is director of the Health Care Project at the Institute for America’s Future and founder and past president of the Medicare Rights Center.
A Response
to “The House Public Plan: Yes, It’s Worth It”
By Sarah K. Weinberg, MD
Jacob Hacker and Diane Archer ask us to believe that:
…health reform is much more likely to succeed with a public health insurance option, even one with negotiated rates, than if private insurers are left to run the show.
So a public plan that will be available to less than half the population and will attract maybe 2% as enrollees is going to have any effect at all on big insurers? I don’t think so, and I’ll bet the big insurers and their investors don’t think so either. (United Health Group and Wellpoint stock prices are stable this morning.)
In a remarkable paragraph, Hacker and Archer claim that private insurance premiums will be lower because sicker people will selectively enroll in the public plan:
Let us start with the obvious: No one knows for sure the exact role that the public option will play. CBO may be correct that the public plan will attract a less healthy pool of enrollees, and that risk-adjustment (paying plans with higher-cost patients more) will not fully compensate for this. And it is surely correct that the public plan will have lower administrative costs than private plans. (It should be emphasized that if the public plan has higher premiums primarily because it’s attracting less healthy enrollees, then it is still reducing average premiums and hence federal subsidies for premiums. That’s because average premiums would be even higher if the people enrolled in the public plan enrolled in private plans. That’s what the CBO’s more recent letter discussing “downward pressure” on private premiums implies.) But while the CBO estimates are rightly the authoritative source for Congress, they are by no means infallible. CBO has made clear that an unusually high level of uncertainty attaches to its analysis of the public plan.
Private insurance premiums will be lower because sicker people will selectively enroll in the public plan, forcing its premiums upward. Huh?!
ALL the premiums will go up – the only issue is how steeply. As for the public plan providing significant competition, what business is going to worry about a competitor with restricted access that only has about 2% of the market?
They also assume that providers will voluntarily sign up for a new public plan with a miniscule number of enrollees:
…the public plan would pay the same rates as the private sector. Nothing in the bill requires this.
Especially if that plan tries to pay the providers less than private insurers, there’s no reason to believe this assumption. Buried in this thought is the assumption that private insurers currently pay providers handsomely – something any doctor or hospital can tell you is totally false. American health care costs twice as much as health care anywhere in the world for several reasons, of which the largest is the enormous cost of all the administrative bureaucracy our system requires. Gross overpayment of doctors is not a reason, even though there are some who do exceptionally well from providing overvalued procedures. In fact, private insurers “save” by cutting payments to providers, but not by cutting administrative costs or profits.
This statement is supposed to support the idea that healthy non-elderly Americans will be willing to pay more for a public plan that offers “the same transparency and accountability the public Medicare plan offers”? Hacker and Archer argue they will:
The vast majority of older and disabled Americans enroll in the public Medicare plan – even though by choosing (excessively subsidized) private Medicare [Advantage] plans, many can get broader benefits for less than they pay for Medicare plus supplemental insurance [Medigap].
Generalizing from choices made by 65 year old Medicare eligibles to the notion that the public will flock to the public plan that costs more because they like “transparency and accountability” is… um… a stretch. As a Medicare enrollee, I can tell you that I never have thought of Medicare as transparent and accountable. I’m enrolled in the public Medicare plan because, as the spouse of a federal retiree, I’m required to if I want to keep the federal BC/BS plan as secondary (Medigap) insurance. I suspect that other factors are more important when 65 year olds decide on their Medicare choices. Wanting to stay with the doctor(s) and hospital they already know rather than shift to a plan with a different list of preferred providers would likely be number one on the list, especially for anyone with health issues. (Of course, this is exactly what the peddlers of Medicare Advantage plans want – to attract the 65 year olds who aren’t seeing doctors regularly. These plans often make their enrollees miserable once they do get sick, and many then switch out to public Medicare.)
These eminent health policy thinkers also continue to assume that the public plan will hold down medical costs better than the private plans, just because it is public:
Over the past twenty years, the public Medicare plan has had a substantially slower rate of growth than private insurance.
However, it’s not the public nature of the plan that holds cost increases down, it’s the fact that Medicare covers an entire (willingly) captive population and has great power to dictate payment terms.
But then they point out that:
The CBO report on the House bill states that private insurers are better at controlling utilization than a public plan would be.
The only functioning utilization controls in the U.S. (possibly excepting the VA and the military) are the private insurers’ dirty tricks: delaying or denying coverage for expensive care; rescinding the policies of those who get sick; raising cost-sharing with the sick to astronomical levels, etc.
Hacker and Archer write that:
…the public plan is really the only tool available for testing and implementing reforms in the market for the non-elderly.
2% of the population spread across the entire U.S. is not going to be a group that will be useful for this kind of experimentation. This will especially be true when only a limited number of providers choose to participate.
In conclusion, we are asked to believe that any public option at all will make all the difference:
But it’s still immensely valuable to give Americans an out – another choice – to let the insurers feel the heat of not being the only game in town.
First of all, the majority of Americans won’t have any such choice – they’ll get what their employers offer them, like it or not. Next, we should recognize that the big insurers already ignore the small insurers in each market who have 5% or less of the available business.
Finally, industry opposition to the public option is held up as evidence of the wisdom of the public option:
The fierce and continuing opposition of the insurance industry suggests that they think that a public option will prove a serious counterweight…
I think instead that the insurers’ opposition has been just fierce enough to get them a public option small enough to drown in a bathtub – success beyond their wildest dreams. Because when this public option fails, they (and the Republicans) will say: “See – single-payer health reform doesn’t work!”
Hacker and Archer (and other apologists for HR 3962) are letting their wishful thinking get the better of their common sense. Enough already!
Dr. Weinberg is a retired pediatrician, a member of Physicians for a National Health Program for 20 years, and the Newsletter Editor for Health Care for All – Washington for 9 years. She is also one of the authors of the Washington Health Security Trust, proposed legislation that would establish a single payer health financing system in the State of Washington.