Since Harry Reid announced a compromise that includes a triggered public option, the murmurs and shouts have centered around one theme: If there isn’t a public option, costs can’t/won’t be contained. Therefore, the song goes, the ‘sacrifice’ of the public option is a gift to insurers, and a sellout of progressives.
Instinctively, that doesn’t feel right to me, since other avenues land on the same square. But instincts and wishes don’t make things fact, so I decided to spend some quality time with the CBO estimates for the House and the Senate bills. My conclusion? The public option battle has very little to do with costs and everything to do with a proxy battle over single payer.
Since employer group coverage is unrelated to the public option at this time, the balance of my discussion will center only on individual policies for people who are either unemployed or self-employed who would be shopping on the individual market, or ultimately, buying insurance through the public exchange.
What the CBO says
Since the CBO estimates are what the Senate is working with, and represent a worst case scenario but based upon real numbers, it seems reasonable to look at what they say about these public option scenarios.
In their September 10th letter (PDF) to Senator Enzi:
You also asked whether the federally administered “public plan” that would be offered under the legislation as introduced would have a substantial effect on federal spending for health care. Under that proposal, the public plan would be managed by the Department of Health and Human Services, would pay negotiated rates to providers of health care, and would have to be financially self-sufficient (albeit with the government bearing some risk, as discussed below). Given those provisions, CBO’s assessment is that premiums for the public plan would typically be roughly comparable to the average premiums of private plans offered in the insurance exchanges—and thus the existence of such a plan would not directly affect the amount of federal subsidies for health insurance under the legislation.
So, under the public option as passed by the House (described in the first bolded section), the premiums would be comparable, not lower.
In the same letter, the CBO goes on to say they could actually be higher:
Second, a public plan is also apt to attract enrollees who, overall, are less healthy than average (again, because it would include a relatively broad network of providers and would probably engage in limited management of benefits). Although the payments that all plans in the exchanges receive would be adjusted to account for differences in the health of their enrollees, the methods used to make such adjustments are imperfect. As a result, the higher costs of those less healthy enrollees in the public plan would probably be offset partially but not entirely; the rest of the added costs would have to be reflected in the public plan’s premiums. Correspondingly, the costs and premiums of competing private plans would, on average, be slightly lower than if no public plan was available.
In English: Private insurance will be slightly less than the public plan because the higher-risk enrollees would gravitate toward and into the public plan.
Whether or not the conclusion is correct as far as higher premiums than comparable private plans, the inescapable truth of the CBO assessment is that it is not competition, but adverse selection which would drive up the cost of a public plan while allowing private plan pools to enjoy lower costs.
CBO’s later scores for the Reid merge under consideration in the Senate point back to this letter for their reasoning.
In other words, it’s expected that any rate reductions due to a public option will be because less healthy insureds choose that option, clearing their costs out of the private insurers’ pools, not because they force competition on private insurers.
What does “affordable” really mean?
It was instructive to me to ask this question on Twitter tonight and see the answers. Consensus seems to be $150 per person per month, or $1,800.00 per year per individual. (I didn’t ask about income levels, just what they viewed as ‘affordable’ or reasonable to pay per month for health insurance).
The CBO letter to Harry Reid on November 20, 2009 (PDF) looked at premiums as they are today and what they would be under the reform bill (with a public option) before and after federal subsidies. For single people earning up to 200% of the poverty level (which would include many recent college graduates and minimum wage earners), the monthly premium (after subsidy) would be $100/month, with an average additional cost-sharing subsidy of $600, so that their out-of-pocket expense is a maximum of $2,500, or 208.33/month. For a family of 4 earning 200% of the federal poverty level, the subsidized premium cost is $267/month.
These figures do not reflect any downward competitive rate pressure from a public option. Our family would fall in the range of 300% or so (less right now because one of us is unemployed, but close enough). For our family of four, the estimate is a premium cost of $508.33.
(Note: All of these estimates are based on the silver plan level, which is 70/30 actuarial value/cost sharing)
Coverage under these estimates includes prescription drug coverage, 100% coverage of preventive care services, hospital, outpatient, labs, etc.
Real life: If this were in effect in September of this year and going forward, I would have about $3,000 back in my pocket right now from the costs of diagnosis, treatment, prescriptions and supplies for Sticks’ illness.
Based on the consensus, admittedly informal but still instructive, the premiums would seem to fall right into line with expectations for affordability, public option or no public option.
If insurance is affordable without a public option, why the fight?
This has been what I’ve been trying to figure out, and ultimately, it seems to be this: The public option is the proxy term for “single payer”. Let’s look at the blowback over Senator Reid’s announcement of a compromise:
Jane Hamsher at FireDogLake shot an email out to her subscribers entitled “OBAMA FAIL“. In it, she writes:
Obama said “coverage without cost containment will only shift our burdens, not relieve them.” This plan does nothing to meaningfully contain spiraling health care costs.
So, for Jane Hamsher, cost containment appears to be attainable only with a public option, but there is no evidence to support her claim. (Note, the cost containments are indeed part of the bill, including the end to Medicare Advantage subsidies and other waste/cost-cutting measures.) Ironically, Jon Walker wrote a post yesterday on FDL pointing out that everything in the compromise was part of his theoretical sets of compromises to get the bill passed.
In other words, the compromises aren’t so bad if you’re Jon Walker but if you’re Jane Hamsher it’s a big fail for the President.
MoveOn.org sent out an emergency bulletin to its members requesting phone calls demanding the public option. In their email, entitled “Unacceptable”, they wrote the following:
If the health care bill doesn’t include a public option, it’ll be a huge giveaway to the insurance companies. But the deal isn’t final yet, so we need to send an immediate message to Congress and President Obama that any health care bill without a real public health insurance option is simply unacceptable.
And again, I ask the question, really? Because either the Senate bill never had a “real public health insurance option”, or there’s a mystery report that I can’t find supporting that claim.
Or, the public option is the code for “entry to single payer”, which is what I’ve always believed anyway.
Or am I just making the best of a bad situation?
A series of incredibly condescending, judgmental messages crossed my Twitter stream tonight accusing me of simply “making the best of it” even though it’s all BS anyway. Well, not so much. As I said, my primary goal has been to get a reform bill passed and to participate in education and advocacy around it. It’s complex and arcane. People are easily misled. So no, it’s not about me making the ‘best of it’. It’s about evaluating what can be done against what the goals are. Trading one door to single payer for another is not ‘making the best of it.’ I have believed that a Medicare buy-in for older insureds was always a better idea than seeding and starting a brand-new institution. Why make something new when we have something in place already?
If a national co-op based on OPM rates is part of the mix, there’s incentive for competitive rates. Since the public option, as we know it, didn’t serve a purpose even remotely near competitive rate pushes, why not get a plan that looks like the one Congress has? (Especially since that was a specific campaign promise of President Obama’s).
The interesting thing to me is that clinging to the public option as the competitive edge in spite of facts exposes the true progressive goal, while forcing insurers to fight their proxy battle on this battleground instead of the one they really want to fight: pre-existing conditions.
Now let’s go get this thing done. I think we’re just about there, if we can stand a few more days of “debate” on the Senate floor. Sit back and watch the Republicans hate Medicare after they loved it. Good times.
- On leaving the left, compromise, and dialogue
- Medicare actuary weighs in with predictable caution