A public option by any other name still contains costs

Okay, there are tons of questions, lots and lots of discontent, and sadly it seems that the generational war fires are now fully lit. So let’s talk about the cost of health insurance.

That Public Option

House Bill

Under both bills, the public option is a corporation seeded with public money which must be repaid after 10 years. It must be completely self-sufficient, using premium payments to cover all claims and administrative expenses paid. Even though employees of this new entity would not technically be employees of the Federal government, I’m guessing that they would still have pay grades tied to federal pay grades and benefits which resemble the benefit packages for Federal employees. I make this point because it’s important to remember that the fact that it’s a government initiative does not change the requirements to make it work.

Under the House bill, the public option is offered on the exchange and premium rates are established based on negotiations conducted in the same manner as large employers. No preferential treatment, no breaks on rates like Medicare gets, none of that. The only leverage that I could see for possibly getting any kind of break might be payment turnaround and/or claims approval. Possibly early EHR implementation or other streamlining, but nothing really earthshaking.

House Bill advantages:

• National risk pool
• Equal footing with large employers when negotiating
• Non-profit entity precludes large payouts to executives

Exceptions in House bill: States are permitted to bypass the federal exchange with statewide exchanges, and by so doing, could bypass the public option.

Senate Bill

Assuming it remains in its current form with some sort of trigger, the Senate public option advantages are as follows:

• National risk pool
• Non-profit entity

Disadvantages in Senate bill (pre-compromise):

• States may opt out of the plan at any time, opt in later, leaving the funding for the public option at risk in any year where a state can exercise their option
• Limited eligibility for exercise of a public option

According to the CBO, who assumes worst case scenarios and is likely to be a bit pessimistic on this, it is actually likely that the Senate public option would cost more than competitive state private insurers.

Factors affecting premium costs

• Size of the risk pool. A national risk pool would spread high-risk insureds among a large enough population that costs would come down for a plan based on national rates.
• Adverse selection. Would those who choose the public option be those insureds who have higher claims than others?
• Requirement to repay amortized seed money over 10 years in addition to covering claims. This is a requirement that private insurers do not have, and which would drive up premiums for the public option.

Alternative approaches to lower premiums for older and younger insureds

• Both bills extend the time younger people can remain as dependents on parents’ policies to age 26. (The House has one year longer than Senate)
• The Senate ‘compromise’ has three known moving parts,which when interlocked, serve to bring costs down for everyone:
  • First, take the oldest uninsureds out of the pool. This is the group aged 55-64 which has the highest medical costs, the highest occurrence of chronic conditions, and highest ratio of doctor/hospital visits in the overall pool age 0-64. Senate solution: Allow Medicare buy-in for that age group.
  • Second, allow insurers to create a national plan which must be non-profit and whose rates will be negotiated alongside the plans offered to federal government employees (FEHBP). Those plans are essentially pooled claims plus 1% administrative costs.
  • Third, if the insurers do not step up to the national co-op in sufficient numbers or with sufficient savings, the original public option is triggered.

  By taking the 55-64 group out of the pool, creating a national risk pool, requiring non-profit status, with rates negotiated on FEHBP terms, there are powerful cost controls in place.

• Accelerate effective dates for subsidies to assist with premium costs. This is in the House bill. Not the Senate bill, but the House bill has far better provisions for implementation, including effective dates that bring near-immediate cost relief.
• Implement cost controls or allow overseas purchase of prescription medication (that’s the Dorgan amendment pending now).

To me, it’s incredibly important to stay focused on the meat of the matter and not what it’s called. If the Senate triggers the “public option” with a non-profit entity with no startup costs or amortization requirements, a national risk pool and premiums negotiated on the same basis that premiums for federal government employees are negotiated, how is that not a cost-effective alternative? Call it the “plan Congress has”, because that’s basically what it is.

Slaying the two-headed beast

This is only one side of a two-headed beast. ALL health insurance, whether Medicare, VA, private or group, is wrestling with out-of-control costs. Our $5,000 colonscopy was not an anomaly, nor is the sweetheart deal on meds for insured people (mentioned a couple of posts back). There will be significant cost reductions when a) we put a competitor in front of the profit hogs; b) force Pharmacy Benefit Managers to be much, much more transparent (the House bill does this); and c) focus on wellness rather than sickness. But it won’t be an overnight thing, no matter WHAT options are on the table.

My suggestion (not advice, just suggestion) to those who think they’ve been sold out: Look past the jargon. Do not adopt sacred cows that are really sick goats. Look at what these things DO, rather than what they’re called.

The road is long…with many a winding turn

Finally, remember this: Insurance companies have fought all reforms for years and WON on one point alone: pre-existing conditions. You think they care about a public option? No way. It’s all about the pre-existing conditions for them. It has been for years, and will continue to be. COBRA was the best we’ve gotten until now. We are two votes away from pre-existing conditions being eliminated for everyone. Not only that, we’re two votes away from having NO CAPS on lifetime benefits, help with our premium payments, standardized basic benefits, and limited cost-sharing.

Really, it’s not everything anyone wants, but it’s a helluva lot more than we have right now.

Bonus link: Federal Employees Health Benefit Plan Info.

Update: 12/9 – Open Left thinks it’s meaningful, too.

Tagged as: co-ops, costs, health care reform, medicare buy-in, Politics, public option