Tuesday, June 9, 2009

Parsing the Pubic--excuse me, "Public"--options in the so-called "Health Care Debate"

My perception, as we enter the great health care debate, is that a lot of my liberal and progressive friends--hell, most of my liberal and progressive friends--would consider anything short of universal health care via a single-payer option to be a mistake. They reluctantly concede that President Obama's promotion of the public option is where the administration seems to be headed because there is no way in hell that even a Democratic Congress is going to pass single-payer this year.

As I get into the nuts and bolts of this debate, I found this particularly useful delineation by Ezra Klein regarding the three different flavors of public option that seem to be on the table:

• The "Trigger" Plan: Olympia Snowe is pushing this compromise, as are some conservative Democrats. The basic idea is that the public plan would act as an invisible threat: It would be "triggered" into existence if the private insurance market was unable to offer, say, enough options in a particular region, or enough cost control. In addition, the public plan would only come into existence in this or that region, or this or that state. It would be effectively useless as an insurer. It could potentially have some competitive effect in that private insurers would still work to avoid its existence. Some have argued, however, that the conditions being mentioned in the "trigger" proposals have already been met.

• The Weak Public Plan: This is what people are talking about when they refer to a "level-playing field." This incarnation of the public plan -- first proposed by Len Nichols at the New America Foundation and later echoed by Peter Harbage and Karen Davenport at the Center for American Progress -- would have no special advantages over private insurers. It couldn't use the low rates that Medicare sets or access taxpayer subsidies. It couldn't force its way into networks. It would simply be another insurer, albeit with different incentives than traditional insurers.

• The Strong Public Plan: This would be like Medicare for the rest of us. It could throw the federal government's weight around. It could negotiate deep discounts with providers. It could muscle its way into networks. Outside groups like the Commonwealth Fund estimate that it would save the average consumer 20 percent to 30 percent. That would give it a massive competitive advantage over private insurers, and would probably result in tens of millions of Americans dropping their current coverage and entering the public plan to save money. A variant of this was in the draft of Ted Kennedy's bill that was leaked last week.

Klein and folks like Paul Krugman obviously favor the The Strong Public Plan, and would see The Trigger Plan as a virtual victory for the insurance companies, and The Weak Public Plan as not much of an improvement.

Here's Krugman:

What’s still not settled, however, is whether regulation will be supplemented by competition, in the form of a public plan that Americans can buy into as an alternative to private insurance.

Now nobody is proposing that Americans be forced to get their insurance from the government. The “public option,” if it materializes, will be just that — an option Americans can choose. And the reason for providing this option was clearly laid out in Mr. Obama’s letter: It will give Americans “a better range of choices, make the health care market more competitive, and keep the insurance companies honest.”

Harvard economist Dr. Greg Mankiw [who has spanked Krugman on multiple occasions] offers this response:

It seems to me that this passage, like most discussion of the issue, leaves out the answer to the key question: Would the public plan have access to taxpayer funds unavailable to private plans?

If the answer is yes, then the public plan would not offer honest competition to private plans. The taxpayer subsidies would tilt the playing field in favor of the public plan. In this case, the whole idea of a public option seems to be a disingenuous route toward a single-payer system, which many on the left favor but recognize is a political nonstarter.

If the answer is no, then the public plan would need to stand on its own financially and, in essence, would be a private nonprofit plan. But then what's the point? If advocates of a public plan want to start a nonprofit company offering health insurance on better terms than existing insurance companies, nothing is stopping them from doing so right now. There is free entry into the market for health insurance. If a public plan without taxpayer support would succeed, so would a nonprofit insurance company. The fundamental viability of the enterprise does not depend on whether the employees are called "nonprofit administrators" or "civil servants."

This raises a couple of key points, the foremost being that if The Trigger Option is the insurance corporations' attempt to keep the status quo going, The Strong Public Plan [with taxpayer subsidies] is the attempt by single-payer advocates to backdoor their system into existence.

In other words: almost nobody in this discussion is being really honest with the American people about their motives. Pretty much everybody with a dog in this fight has adopted the language of The Public Option as a cover for the same damn thing they've been working for all along. I guess that's par for the course.

The second take-away from the current disingenuous public debate on health care is that absolutely nobody is looking at the bazillions of little things the government could have been doing all along to make it easier for the uninsured and the under-insured to cope.

This is the government that, faced with rising medically related bankruptcies, allowed [thank you, Joe Biden] bankruptcy laws to be rewritten to be even more draconian on those folks with medical bills.

This is the government [both Federal and State level] that prevents physician's assistants and nurse practitioners from setting up low-cost clinics to deal with everyday minor problems on a cash and carry basis.

This is the government that only allows you to deduct medical expenses from your income taxes if they exceed 7% of your income (by which time, for a lot of people, they are already filling out that bankruptcy paperwork).

This is the government that fights tooth and nail against online pharmacies, even though the government's own studies have repeatedly shown those in the US and Canda to be cheaper and just as safe as the pharmacist down the street.

This is the government that prevents interstate competition from affecting any insurance rates.

On the other hand, I have to hand it to President Obama. He's very likely going to get a victory on health care this year, albeit I think he will end up with The Weak Public Plan.

Why will he win?

When Bill Clinton turned health care over to Hillary in his first term, the Clintons--wonks that they both are--thought that the devil would be in the details. So Hillary and Ira Magaziner and others sat down and developed the complete program, from soup to nuts to quotas for doctors in particular specialties ... and got crucified for it. Actually show people the details of a plan that intricate and I can find you something that everybody will not like--some dealbreaker.

But what President Obama is doing here is completely different. He's actually selling sizzle, not steak. He's selling himself as the arbiter of what's good in the details and telling everybody they only have to worry about two or three major principles, which are themselves so bland that virtually any plan he develops will appear to meet them. You cannot crucify him with details because there are no details available. Congress will simply pick one of the three options and worry about writing the rules later. It worked for FDR, and that's the model, isn't it?

Who gets screwed in all this? Pretty much in order:

1) Taxpayers, especially those bringing home more that $100K

2) Those who already have reasonably good insurance, who are inevitably going to pay extra taxes

3) The uninsured and under-insured who are going to be told they now have insurance, but who are going to discover pretty quickly that ... sort of ... somehow ... they don't. Not the type of insurance that will get them topflight cancer drugs, quick knee replacements, or an MRI before their next birthday.


Miko said...

I disagree with Mankiw's claim that we currently have free entry into the health insurance market. We currently have all sorts of regulations preventing insurers from operating across state lines, etc. A government-run program like the Weak Public option that wasn't restricted by these regulations could still end up with a competitive advantage over traditional insurers even without receiving extra tax funds (or back-room guarantees of the FNMA sort) and even if the insurance it offered was objectively worse.

Regarding (3) on your list of those who'll be hurt by this, don't forget that under Obama's plan to force people to buy insurance, they'll have to pay for this cartelized non-insurance too, and since they're being coerced into buying it, chances are the price will be high. The 100k types may be hurt most in terms of absolute dollars, but in terms of marginal utility, group (3) is going to be the real losers in this deal.

Anonymous said...

Give Universal health Care to ALL prior military as a pilot program.
Our military did earn such a benefit, and many need it.

Lets see how well it works for those who deserve it because they earned it. As compared to the ever present subsistence class.

Got to start someplace. lets see how well Military health care can be managed.

Hube said...

Give Universal health Care to ALL prior military as a pilot program.

Amen, brother (or sister)!