The Public Option: It's Not About Politics; It's About the Economics of Reform
Thanks to Maggie Mahar"Finally, it's quite possible that, this year, Congress will pass the version of the public plan that appears to be gaining votes, one that lets individual states "opt out." Though I have to wonder . . .. How would a politician explain to his state's citizens that they are going to have to pay $2,000 more for a family plan because when it comes down to it, their state puts the interests of for-profit insurers ahead of voters?" Naomi Freundlich
The Public Option: It's Not About Politics; It's About the Economics of Reform
Last week, I argued that the insurance industry had declared war on President Obama's plans for healthcare reform because industry leaders sensed—or knew-- that support for a federal public insurance option was building. A week earlier, I told an audience at a San Francisco screening of Money-Driven Medicine that I thought the odds were at least 60/40 in favor of a national public plan. They were surprised that I was so optimistic, and this was a very liberal audience in San Francisco.
At the time, most progressive pundits had declared the public plan moribund. Reading the political tea leaves, listening to "informed Congressional aides," parsing the administration's statements, they were convinced that the public plan was, as the Buffalo News put it "the rotting corpse of health care reform." Why was I still hopeful? Because I continued to believe that, without Medicare E (for everyone) health care reform won't be affordable.Does that mean that Congress will do the rational thing and pass a plan that includes a public option? Not necessarily.
But when predicting what Washington will do, too many beltway reporters tend toward knowing, knee-jerk cynicism: "The White House made a deal." . . . "The fix is in." . . . "We've been betrayed."
I have been told that when it comes to the politics of reform, I'm both ridiculously hopeful, and hopelessly naïve. (My opponent on Lou Dobbs Tonight said something to that effect following the debate.) I agree that, when it comes to predicting what Washington will do, optimism based on my hopes for the future is pointless. But fatalism, based on what has happened during the past eight years, or for that matter, during the past 29 years, is equally foolish.
We have entered what may well be a new era. (It will take more than 10 months to tell.) At this point in time, it seems to me far more constructive to let prophecy err in the direction of hope.
After all, politicians respond to the public's expectations. If journalists continue to lower the bar, and voters expect little or nothing of elected officials, the very best legislators will simply give up, while the worst will take over Washington. To a depressing degree, this already has happened. But there still are legislators such as Senator Jay Rockefeller who have held on during some dark days in Washington, and who continue who demonstrate both integrity and remarkable tenacity.
Where Does the President Stand on the Public Plan?
And yet, and yet . . . Some of the most insightful progressives in the blogosphere still don't believe the public plan will survive. Friday morning, Ezra Klein, for example, dismissed the possibility out of hand:
"Even if Nancy Pelosi does get 218 votes for a public option [that will pay providers] Medicare rates plus five percent, there's virtually no way any such bill gets signed into law. . . . The White House will probably kill any such attempt themselves, as they don't want to face the combined fire of the doctors, hospitals, device manufacturers, pharmaceutical companies, and insurers, all of whom will flip out in response to the version of the public option that will cut their reimbursement rates."
Klein seemed very sure. (Though by the afternoon, as he responded to the many reports of "who had said what" swirling around Washington, he acknowledged: "Things have gotten real complicated, real quick, . . I've spent a fair bit of the day trying to figure out what went on in Thursday's endless series of meetings, and the best you can say is that, well, reports differ."
Exactly. You really can't trust the chattering classes to get the story right. Well-informed staffers are not reliable narrators—their blow-by-blow accounts provide only glimpses. They don't paint the whole story.
Still, some remain convinced that the White House will oppose any public plan that doesn't please Maine's Republican Senator Olympia Snowe. Snowe is opposed to a national public plan. She would individual states create public plans only if private insurers in that state don't offer affordable insurance. Unfortunately, those state plans would be too puny to compete in a way that would make the nation's giant for-profit insurers take notice. And while I admire Senator Snowe for her courage in standing up to her party, I doubt that the White House will let one Senator determine the future of healthcare reform. It doesn't make sense. And this White House is nothing if not pragmatic.
So when I predict that we will wind up with a strong public plan, I'm speaking of a national plan. It might well contain a provision that lets individual states opt out –if they choose. (Though, as I explain below, I doubt that, in the end, many states would take that route.) But what is important is that by virtue of its size, a federal public plan would have enough clout to make health care pricing more rational (note I said "rational"—that doesn't mean "rationing") by paying more for high quality care, less to suppliers who have been gouging patients.
Granted, any attempt to put a lid on health care inflation will make many in the industry unhappy. But I very much doubt that President Obama would "kill" attempts to revive a public plan because he is terrified of provoking the lobbyists' ire. On more than one occasion, President Obama has made it clear that while he's not willing to draw a line in the sand, he sees the public option as "the best possible choice." Now that he has strong public support, and what appears to be a growing consensus among Democrats in Congress, why would he possibly switch sides?
Some progressives just don't trust the White House. They point out that, even while Senate Majority Leader Harry Reid works to gather the votes for Medicare E, the press reports that the president is "noncommital." He's leaving the decision up to Congress.
Last week-end, Hot Air's Ed Morrissey lashed out, accusing the president of failing to lead by refusing to call out for the public option: "It's a passive-aggressive approach that leaves both progressives and moderates in Obama's own party twisting in the wind. Obama wants his advisers to take all of the flak from progressive action groups that will result from a retreat on government-run health insurance, but doesn't have the stomach to take that hit himself. The end result is confusion among legislators on Capitol Hill, and further entrenchment on either side of the issue."
This notion that "the president doesn't have the stomach to take the hit" seems to me a sophmoric reading of White House strategy. The president simply wants Congress to share responsibility for the final health reform bill. Wisely, he doesn't want it to be "Obamacare." That would make it too easy for anyone and everyone to blame the White House for anything they don't like about reform.
The road ahead will be rough. Passing healthcare legislation is hard enough. Inevitably, preparing to implement such enormous changes will lead to many bitter debates over the next three years.
It is imperative that the president is not seen as imposing his ego on the nation. Consider how much damage was done when the Clinton healthcare plan became known as "Hillarycare." Whenever the political becomes personal, the long knives come out.
In some circles, President Obama is just as controversial as Hillary Clinton was back then. He has enemies eager to demonize him, and then destroy him. It's critical that the majority of Congress "owns" the final bill. This will give legislators a vested interested in making it work.
And it appears that the president's strategy may be working. While Obama steps back, legislators are stepping forward. Appearing on the Rachel Maddow Show Friday night, The Nation's Washington Editor, Chris Hayes estimated that there are 58 votes in the Senate supporting a public option that allows states to opt out. Hayes is a fair-minded reporter (which is why Maddow often has him on the show.) I would trust his guesstimate as much as anyone's—which is to say that no one knows for sure.
Fifty-eight votes would not be enough to save Medicare E if moderate Democrats support a Republican filibuster. (It would take 60 votes to break a filibuster.) But I agree with Hayes and others, who speculate that while moderate Democrats may well vote with Republicans to block a health care reform bill they don't like, when it comes to cracking a Republican filibuster, they will stand with their party. First Democrats would break the filibuster with 60 votes, then when the vote came on a plan that contained a public plan 58 votes (or even 50 votes) would be enough to send it sailing through the Senate.
Looking Beyond the Politics
But assessing the public option isn't just about counting votes. Too often, D.C. reporters become enthralled with the day-to-day political theatre of reform: Who's winning, who's losing? Who's in, who's out? What did Olympia Snowe say this afternoon?
No doubt, the daily action can fascinate. But health care reform is not a spectator sport. And writing about it is not about picking the winning team. Readers want to understand the substance of the public option: Why do we need a public plan? How would it affect the cost and quality of care?
On these issues I was startled to come across a refreshingly lucid piece by the American Enterprise Institute's (AEI) Clark C. Havighurst on Politco.com's new "Health Care Arena." (Go to www.politico.com and click on "Arena" at the top of the page. Then, click on "Health Arena," again at the top of the page.)
Politico.com editor Fred Barbash had excerpted the post from an essay by Havighurst in the AEI "Outlook" series. I say I was "startled" by the post because I normally wouldn't expect the conservative AEI to back Medicare E. And, in truth, it's not Havinghurst's first choice. But, he is realistic:"As long as health insurers' only significant function is the simple one of financing health care, government itself is probably capable of performing that role nearly as well as they do, without incurring competition's added costs. Moreover, a government-run plan would be, like Medicare, in a strong position to give consumers and taxpayers relief from very high prices by exercising its monopsony power vis-à-vis providers and suppliers. Indeed, it is this threat to health industry incomes that has naturally given rise to a strong coalition of special interests dedicated to the proposition that any reforms should create an even larger province for private insurers.He continues:
"Significantly, no one in this coalition is arguing with much conviction that private plans should be preserved because of their potential ability to control overall costs and to offer valuable economizing opportunities to differently situated consumers. It seems to be mostly special-interest politics keeping private health plans in the game.""The question then arises why so many consumer-voters themselves seem to be wedded to a private system when a public one resembling the politically popular Medicare could yield significant price reductions (which might, of course, be offset by providers' shading of quality or boosting of output, things Medicare has never been able to control). Some, to be sure, have purely ideological objections. Others may simply and reasonably fear that, in the long run, government would not meet their needs as well as the private plans to which they are accustomed. Still others may accept conservatives' arguments that government-dictated low prices would have destructive long-term effects on the supply of health services and on the flow of therapeutic innovations. As noted above, however, circumstances (and some special interests) have long conspired to keep consumer-voters mostly ignorant about just how much they are actually paying for their current coverage with all its wasteful features. Naturally, few legislators and no special interests see any advantage in having ordinary consumers enlightened about how much skin they already have in the health care game."
I should emphasize that this is only an excerpt from Havighurst's essay. He would prefer to see creative private sector plans offering consumers choices and more reasonable prices. But he is does not believe that this will happen. Thus, he makes the case for a public plan.
Everything he says is true. A national public plan would be less expensive, both because it won't incur "competition's added costs" (it won't need to market and advertise, trimming $2000 off the cost of a family plan according to the Commonwealth Fund. and because it will have the size needed to secure fair prices. Today, some marquee hospitals force private insurers to pay 15% to 20% more than it costs to care for patients.
As Havighurst notes, private insurers' supporters have not even tried to argue that private plans will do a better job of controlling costs. Given recent history, it would be a hard case to make. For the past ten years private insurers have simply watched as the reimbursements that they pay to hospitals, doctors and patients rose by 8 percent a year, year in year out-- and then passed those costs on to patients in the form of higher premiums.
Medicare's pay-outs also rose, though by a lesser amount (around 6 percent a year). Meanwhile many within the Medicare administration knew that they could trim spending further, if only they were given the authority to being eliminating some of the waste in the system. In its twice-annual reports, the Medicare Payment Advisory Commission (MedPAC) continued to offer an excellent blueprint for doing just that.But for eight years, the Bush administration was convinced that the problem of rising health care costs was best solved by privatizing Medicare. Let private insurers deal with it. (This ignored the fact, of course, that insurers had not been able or willing to rein in spending in the under-65 market.) Now, however, Medicare's hands are no longer tied, and, as I mentioned in my October 16 post, it is beginning to cut fees in areas where it knows overtreatment may be exposing patients to unnecessary risks. A public plan would follow Medicare's lead.
Why Medicare E is Inevitable
In the end, I would argue that health form legislation will contain a public plan because common sense dictates that it must.
This is not about how much power Olympia Snowe does or doesn't have. It's not about what Max Baucus said to Harry Reid. It is about the economics of health care reform.
As Timothy Stoltzfus Jost, a Law Professor at the Washington and Lee University who has written extensively about health care pointed out Friday on Politico.com's Health Arena:'Republicans oppose [the public option] for many reasons, but in part because it is really necessary if the reform is to work--to bring down costs as well as to expand access.
In the end, am I certain that we will wind up with a public plan in the bill that passes Congress this fall? No.
But any realistic assessment of reform suggests that, ultimately we will require a government plan to rein in run-a-way reimbursements. This is why I am convinced that even if it is not part of this year's legislation, it will be added sometime in the next three years. As it dawns on legislators—and the public—just how much universal care will cost, Medicare E , which will have lower administrative costs, and the clout to insist on better value for our health care dollars, is a no-brainer.
Finally, it's quite possible that, this year, Congress will pass the version of the public plan that appears to be gaining votes, one that lets individual states "opt out." Though I have to wonder . . .. How would a politician explain to his state's citizens that they are going to have to pay $2,000 more for a family plan because when it comes down to it, their state puts the interests of for-profit insurers ahead of voters?
In the end, when it comes to a subject as important to voters as affordable health care, I suspect they will have more power than the lobbyists. Even the most depraved politician understands that all of the campaign contributions in the world won't help you if your constituents have decided to "vote the bum out of office." As I have said in the past, I think that healthcare lobbyists are in for some surprises.
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