A GOVERNMENT-RUN health insurance option serves two essential goals of health care reform. It provides needed competition in places where a single private insurer dominates the market, and its national size gives it appropriate clout to drive a better deal with hospitals and drug companies.
These very attributes have made it the target of the wrath of the insurance, pharmaceutical, and hospital industries, even as it remains the most promising vehicle for driving down health care costs. President Obama and his team, eager for a compromise amid signs of seesawing support for his reform agenda, have begun downplaying the necessity of a public plan as a pillar of a reformed health system. Obama may yet be forced by opponents in the Senate to trade away the so-called public option, but he shouldn’t do so without assuring that its goals can be met through other means.
Of the many goals of health care reform, bringing down costs is the most obvious benefit for all Americans. A public plan would achieve savings from not only its bargaining power but its lack of having to pay dividends or exorbitant private-sector executive salaries. With an immediately recognizable national brand, a public plan’s marketing costs would be lower. Competition with this public plan would force private insurers to get their costs down and adhere strictly to regulations forbidding insurers from excluding customers with preexisting conditions or charging them higher rates.
Critics of the public plan worry, with some merit, that the government could decide to subsidize the public plan at the expense of private insurers, but that’s a fear that may never come to pass: All the current proposals guarantee an even playing field. And it’s ironic that private insurers would extol the benefits of the free market, because in many states there is precious little competition now. According to the American Medical Association, a single insurer covers 70 percent or more of people in nine states, while in at least 17 other states a single insurer covers at least 50 percent. Virtually all reform proposals include an individual mandate, forcing the nation’s 47 million uninsured people to buy insurance. Congress should feel mandated to ensure they have more than Tweedledee and Tweedledum – and in some places just Tweedledum – to pick from.
Opponents of a public plan are quick to point to Massachusetts as a state that has achieved near-universal coverage without a public plan. But Massachusetts has had a long history of consumer-friendly regulation of health insurance. All its major insurers are nonprofits, functioning much as a public plan would. If all states had an insurance market like Massachusetts’, no one would be talking about including a public plan in national legislation.
An alternative to a public plan favored by some Senate Democrats is a proliferation of the health cooperatives that already exist, especially in the West. The most successful function like nonprofit health-maintenance organizations with networks of providers who emphasize preventive care and don’t engage in the over-utilization of tests and procedures common among providers working on a fee-for-service basis.
Such cooperatives resemble the “accountable care organizations’’ that a Massachusetts commission on health-payment reform recently recommended as an alternative to fee-for-service medicine here. By all means, Congress should support health cooperatives – one proposal calls for $6 billion for their start-up costs. But it is not at all clear that cooperatives could get started quickly enough to provide consumers with real choice. It is also difficult to imagine them gaining the market power to hold down costs as a national public plan could. Republicans are already slamming them as “Trojan horses’’ for a public plan, so making them a replacement for a public plan might not win Obama and the Democrats any bipartisan support.
Unless critics of a public plan can come up with a better way to control costs and ensure meaningful choice for the newly insured, Obama should stick to his guns on the public plan.
