Resurrecting the public option

Don’t call it a comeback, but the public health insurance option is having a boomlet of sorts.  After being unceremoniously axed from the Affordable Care Act by the centrist Democrats who provided the clinching Senate votes in 2010, the idea for a widely available government-run health insurance plan spent years in the political wilderness.

But murmurs on the left about resurrecting the public option have been percolating lately.  And the public option’s biggest boost came from President Obama this week.  Writing a reflection on the effects of the Affordable Care Act for the Journal of the American Medical Association, Obama called on Congress to “revisit a public plan to compete alongside private insurers in areas of the country where competition is limited.”

Obama’s re-endorsement of a plan he shelved six years ago is significant.  The public option was a favorite among liberals, who saw it as a compromise on single-payer that gave Americans the freedom to choose insurance from outside the private sector.  And if the public option could price like Medicare, it could have imposed significant cost pressure on its competitor private insurance plans by benefiting from government purchasing power and holding down administrative costs.

Granted, Obama knows a public option has no chance of getting through Congress, so he won’t be converting his JAMA piece into legislative language anytime soon.  And he also seems to envision a much more limited public option than what was originally debated during national health reform.  His refocus on the public option comes principally from a desire to expand consumer choice particularly in those markets that lack a robust marketplace of competing insurers.  As the president notes, some 12 percent of Obamacare enrollees live in counties with only one or two insurance options.  These tend to be lightly populated rural areas that private insurers aren’t eager to do business in.  Obama wants a public option in these specific areas as a means of injecting competition into stagnant marketplaces.

It’s worth remembering that during the health reform negotiations, there was briefly a bipartisan proposal to include a public option “trigger,” where the public option would only go into effect in certain states that fell short of sufficient insurer competition and cost control.  This proposal was endorsed by both Obama’s then-Chief of Staff Rahm Emanuel and Republican Senator Olympia Snowe.  This trigger was modeled off of a feature of the Republican-led 2003 Medicare prescription drug benefit, which included a similar trigger if competition lagged in that market.  Had the Emanuel-Snowe proposal made it into the final bill, Congress would have no occasion to “revisit” the public option today—such an insurance option in non-competitive areas would be automatic.

But Obama isn’t the only one rediscovering the public option.  Hillary Clinton too recently endorsed building on Obamacare to provide a public option.  She also seems to envision the public option existing on a state-by-state basis, and wants to work within the law’s existing infrastructure to do so without involving Congress.  Specifically, she promises to “work with interested governors, using current flexibility under the Affordable Care Act, to empower states to establish a public option choice.”  What Clinton presumably has in mind is working through Obamacare’s innovation waivers to let states build and run their own public options.

This proposal, coupled with her plan to let people above a certain age (but below retirement age) buy into Medicare, was seen as a meaningful effort to appropriate some of Bernie Sanders’s agenda.  And indeed, Sanders, who has called for a Medicare-for-all single payer system, applauded Clinton’s new healthcare plans, saying that it was an “extremely important initiative” and “an important step forward.”

It’s worth remembering, however, that the details of the public option matter immensely, particularly details regarding its reimbursement structure, federalism, and eligibility criteria.  The strongest version of the public option would offer reimbursement rates tied to Medicare’s, benefiting from Medicare’s purchasing power and ability to offer providers low rates.  It would also be a single national plan run by the federal government in all fifty states.  This would maximize purchasing power and minimize administrative overhead.  And the plan would be offered to a broad base of customers, such as all non-elderly adults without access to employer- or government-provided insurance.

Eroding these characteristics leads to a weaker public option.  Based on her description, Clinton’s plan sounds like it will be run by individual states, meaning it likely won’t be tied to Medicare reimbursement rates.  Tying it to Medicare rates would almost certainly require an act of Congress, and it’s hard to see how Clinton or individual states could do so on their own.  And any move to tie the public option to Medicare rates would draw cries of unfairness from insurers afraid they couldn’t compete, and howls of socialism from conservatives fearing creeping single-payer.  Clinton’s plan therefore appears to be a relatively weak version of the public option.  (It’s not clear what eligibility requirements she would attach to it.)

But Clinton does seem to see the state-based public option as only an intermediate stopgap to something stronger.  According to her campaign website: “As she did in her 2008 campaign health plan, and consistently since then, Hillary supports a ‘public option’ to reduce costs and broaden the choices of insurance coverage for every American. To make immediate progress toward that goal, Hillary will work with interested governors, using current flexibility under the Affordable Care Act, to empower states to establish a public option choice.”  For Clinton, then, a weak public option may be the best she can do through existing executive authority, but the long-term end-game may be a more robust government plan.

Indeed, as healthcare experts Helen Halpin and Peter Harbage note, the genesis for the public option started as a state-based idea in California in the early 2000s.  Only later did politicians like John Edwards and policy experts like Jacob Hacker build on the state-based idea to propose a stronger national public option.  Perhaps we need to return to the idea’s state-level roots to truly resurrect the public option from health reform’s scrap heap.

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One thought on “Resurrecting the public option

  1. Pingback: The reconciliation option | J.DODGE blog

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