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I’m for a public option. Just not this public option.

I see a ton of enthusiasm for the public option. I understand it. Emotionally, I agree. Intellectually, not so much. A public option is attractive on paper but has some serious and real pitfalls in my view. I understand why people don’t want to ‘let insurers win’ on this and also why they hate having commercial insurers as their health insurance choices, but there are still some very practical, non-procedural reasons to stop and think it all through.

The fight rolls on

Many, many senators have now made a public commitment to “the public option.” Notably, one of the key and vocal supporters of a public option is Senator Tom Harkin, who has not made that commitment. When asked, he answered thus:

“If we have a bill sent to us from the House that does not have the public option here, if we were to add it here, it would sink the whole bill.,” Harkin said during an interview on MSNBC, adding that he would not vote to revive the public option “if it meant that it would sink the whole healthcare reform bill.”

This statement confuses, bewilders and angers many public option supporters, I know. Jon Walker of FireDogLake, ardent public option champion and Jane Hamsher’s right-hand go-to HCR dude expressed the same sentiment I’ve seen from many others:

It is an insult to the progressive community’s intelligence to ask them to pin their hopes for a public option on Democrats taking up another health care reconciliation package to pass the public option later this year or next if it is presupposed Senate “supporters” are going to work against its inclusion in the current bill.

What we have here is a failure to communicate. Tom Harkin is arguing process. Jon Walker is arguing principle. The two are not meshing.

What public option are they fighting for, exactly?

Here’s one small process note: You really can’t start from scratch with items planned to go through the reconciliation process. Since the Senate bill, as passed by a supermajority, did not have a public option in it, that leaves the House version. So let’s review what that was, exactly.

  1. A new agency, required to be self-sustaining
  2. Funded with $2 billion dollars of federal money to be repaid within 10 years.
  3. It would be an option available only to individuals who did not have insurance available via their employers, offered on the national insurance exchange.
  4. The government would be required to negotiate rates with providers in a similar fashion to the commercial carriers.
  5. Policies would be subject to the same restrictions and regulations as any other policy on the exchange.
  6. The government could hire contractors to administer the plan; that is, private insurers.
  7. Under no circumstances could the public option be bailed out by the government. Premiums would have to reflect the actual claims experience and administrative costs associated with maintaining the plan.

That’s the public option skeleton. The first issue that emerges is an important one, and probably why Senator Harkin is shying away: It assumes a national exchange. The Senate bill is based upon state exchanges or co-ops selling across state lines but subject to state regulation. It’s not clear how a national public option that is supposed to be sold alongside private options on state-based exchanges could actually be done. But let’s say that it can.

Why I don’t support adding this public option to that sidecar over there

Three primary reasons:

  1. Adverse selection: Insurers will make even more profit with a public option because the sickest and oldest people will gravitate to the government option. This isn’t me making it up. The CBO also concurred, which is why they predicted slightly higher premiums under a public option than a private insurer option.
  2. Cherry-picking: This public option would encourage insurers to price their products just a smidge higher than the public option in order to encourage those most in need to turn to the government plan and ratchet down insurers’ risks. From the standpoint of a citizen with a choice, that’s not so bad until you start realizing what it means to the financial health of a public option. Combine that with a statutory requirement for solvency and adequate reserves, and it’s not hard to see who benefits most from a public option. Not us. Insurers.
  3. Duplication: I’m concerned that creating a new agency subject to the same rate structure as private insurers will slow a move to a single-payer model (or state-based single-payer) to a crawl or give incentives to privatize Medicare and move everyone to this option/system, which is less advantageous than Medicare.

Bottom line: Insurers will try to kill it with much love, merely by allowing it to exist as a repository for their castoffs, OR they will use it as a way to privatize Medicare with a weak public option for Medicare beneficiaries.

What public option is there, then?

Medicare. I have long believed that if we were to clean up the fraud and waste that is in Medicare right now, get EHRs online, shift reimbursement models toward true outcomes-based rates, a strategy emerges for expansion that goes like this:

  1. Years 1-10: Expand Medicare participation on an optional basis to two groups: Ages 55-65 and 25-35, with the younger group allowed to include spouse and dependents, the older group to buy in on an individual basis. Expanding Medicare to the younger group begins to build reserves in the trust fund, since the younger participants are less likely to drive costs up. But here’s the deal: Once you buy in, you stay in, voluntarily waiving the right to shift between private and public health care plans. Employers could contribute a portion of the cost for the opt-ins based on the percentages contributed for private plans.
  2. Years 11-20: Expand optional Medicare buy-in to the 35-55 group with the same terms. Opt-in, stay in. If Medicare solvency from the first group buy-in causes the trust fund to reach a certain benchmark, this group could even buy in earlier. Allow private insurance to exist alongside Medicare buy-in for all, but also permit supplemental policies or other product innovations to emerge.

In one generation’s time, the country shifts to Medicare for all, with a solvent trust fund, states are freed of Medicaid obligations, and health care access is based upon a strengthened Medicare baseline, lower cost curves, with room in the markets for private insurers to compete for other services.

Why Medicare instead of something new and shiny?

I admit that I haven’t crunched all of the numbers. I probably could, or could dig out some actuarial reports, but that’s better done by the CBO. This is what I do know: In the next 10-20 years, we hit the top of the baby boomer curve and peak enrollment in the old-age programs currently in effect. Medicare as it is today places only the most expensive group — the aging and elderly — under its umbrella, effectively creating the absolute worst-case scenario for cost containment.

Just as in private insurance, spreading the risk over a population that includes those less likely to drive up medical costs in the earlier years while including that portion of the population that will enter the system anyway within 10 years and phasing in the “middle group” over time seems like a way to smooth that bell curve of participation and cost while guaranteeing access to health care for all. It is similar to a pure single-payer model, but allows for opt-in during the phasing process; e.g. patient choice. By making the opt-in a one-time opportunity, revenues and offsets can be reasonably projected and accounted for, rather than simply having to calculate the worst-case among those who drive the highest expenditures.

This idea mirrors HR676, but smooths the shock to the system, giving time to build some decent reserves to offset current budget deficits, too. Most importantly, it utilizes a framework that, once modernized and reformed, offers the best and most efficient way to open the doors to a true, robust public option.

Why not just include it via the reconciliation process now?

Because we have not yet established the will of this country to say out loud that every citizen, every resident, every man, woman and child in this country is entitled to equal access to health care. Until we make that declaration by ending all pre-existing conditions exclusions for public and private plans alike, we can’t move to the next square. In this regard, I agree with those who argue for incremental reforms.

Establish the right to health care. Make it the law of the land. Fix what needs to be fixed inside the Medicare framework. Then throw open the doors and invite people in.

Note: @manyko2 on Twitter points out that part of this initiative would be locking down the Medicare trust fund. No borrowing. No shifting. It’s a trust fund that isn’t tinkered with. Also, @avivao pointed out that a lock-in to Medicare involves a great deal of trust. While that’s true, I think objections can be overcome by either setting benchmarks for Medicare before the lock-in happens, or allowing opt-out in certain circumstances (provider revolt, refusal in geographic location, etc.)

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