Public Options

I will destroy my credibility with a lot of fellow progressives by saying this, but here goes: We should let the public option go.

The idea that true health-care reform requires a government-run plan has become an article of faith among many progressives. And as both a progressive and a health policy wonk, I can understand why. It’s the closest thing to a single-payer system that’s received serious consideration, and I’d much rather see subsidies funneled through a government-run plan than help pay for a CEO’s private jet. The public option would get us to the fundamental goals of health-care reform more efficiently in many ways than reforming the private system. It would also bring additional consumer choice to the many markets across the nation in which one or two large insurers dominate.

But despite the advantages of a public option, I’m willing to go with a less-optimal approach if it means we don’t blow a historic opportunity to get universal coverage that people can afford and count on. And yes, there are ways to make it happen in a private system—measures other than the public option that progressives should be putting their energy behind. We can get the three essential ingredients of health reform—an individual mandate that ensures universal coverage, subsidies to make coverage affordable, and tough insurance regulations that make coverage reliable—without a public option. And cold political reality suggests that we’ll almost surely have to.

Sixty House Democrats vowed they won’t vote for a reform bill that doesn’t include a public option (including Texans Lloyd Doggett, Eddie Bernice Johnson and Sheila Jackson Lee). House Speaker Nancy Pelosi has said, “There’s no way I can pass a bill in the House of Representatives without a public option.” Progressive groups like MoveOn.org, which has organized “Public Option Now!” rallies across the country, have bolstered the progressive Democrats’ determination.

But Senate passage of a bill with a public option is a dicier proposition, with just 46 senators likely to support it. And when he addressed Congress on Sept. 9, President Obama carefully avoided alienating public-option supporters—but also made it clear that what he’s fighting for are the fundamentals of health reform, and not the public option:

“To my progressive friends, I would remind you that for decades, the driving idea behind reform has been to end insurance company abuses and make coverage affordable for those without it. The public option is only a means to that end—and we should remain open to other ideas that accomplish our ultimate goal. … For example, some have suggested that that the public option go into effect only in those markets where insurance companies are not providing affordable policies. Others propose a co-op or another non-profit entity to administer the plan. These are all constructive ideas worth exploring. But I will not back down on the basic principle that if Americans can’t find affordable coverage, we will provide you with a choice.”

Progressives should take their cue from the president on this one and focus on the “ultimate goal.” That likely means trading the public option to get the essential ingredients of genuine health-care reform. It also means taking our cues from countries like Switzerland and the Netherlands. They provide universal coverage within private systems using three key approaches.

The first: requiring everyone to have coverage. This is sometimes called an “individual mandate,” and it’s part of all three proposals before Congress (the combined proposal of three House committees, called the “Tri-Committee” proposal; the Senate Health, Education, Labor and Pensions Committee proposal; and the initial proposal of Senate Finance Chairman Max Baucus). The bills would impose a penalty on individuals who don’t have coverage (with limited exceptions, such as for financial hardship).

The rationale for a mandate is sound: Requiring everyone to have coverage creates a larger group across which to spread the risk of high medical costs. Otherwise, there’s “adverse selection,” which causes the cost of insurance to rise because some people buy coverage only when they know they need care. Just as importantly, an individual mandate may be the best way, short of single payer, to minimize the number of uninsured. However, the effectiveness of the mandate depends on the amount of the penalty: The closer it gets to the cost of coverage, the more people will choose to buy insurance rather than pay the penalty. As odd as it may sound, progressives should actually be championing a meaningful penalty.

A mandate’s effectiveness—as well as its fairness—depends on whether coverage is affordable. That’s the second key, and it’s more important to progressive health-reform goals than a public option. We have to provide sufficient subsidies for people who can’t afford coverage—and also can’t afford to pay a penalty for not having it. The current House and Senate proposals all include some level of subsidy for middle- and lower-income individuals and families to purchase coverage. But the levels vary, and the amount of subsidies to provide is proving be a major source of disagreement as Congress hammers out a deal—not only because they are necessary for an individual mandate to be meaningful and fair, but because subsidies account for most of the costs of health reform.

Senate Democrats have already pressured Baucus to lower the penalty amount for not obtaining coverage because of concerns that subsidies won’t be adequate. But instead of reducing the penalty, which we need to enforce an individual mandate, progressives should be clamoring for generous subsidies and a penalty that truly incentivizes compliance with the mandate. This is where the passion we’ve seen for the public option could really make a difference in reducing the number of uninsured and making coverage affordable.

The third key to real reform is guaranteeing what I’ll call reliable coverage. Countries that provide universal coverage through a private system tightly regulate that system. We too need strong regulations to make insurers earn their profits on the basis of quality and added value rather than their ability to avoid covering or paying for sick people. Once again, all the current Congressional proposals impose new requirements on the insurance industry: no exclusions for “pre-existing conditions,” for instance, and no higher premiums for those who are sick than for those who are healthy. And they all create an essential benefits package, which would define such things as the services insurers must cover and the maximum amount of cost-sharing they can require if they want to sell coverage to people without employer-sponsored insurance.

The insurance industry actually offered up such reforms several months ago. But their offer is not a signal of newfound compassion. The industry’s willingness to operate under these new requirements is contingent upon the infusion of millions of new dollars into the marketplace that will result from requiring everyone to have insurance, and imposing the penalties and providing the subsidies that will make the requirement effective. Operating under the new regulations is only financially feasible if we ensure everyone is in the risk pool. A public plan would mean a smaller private sector risk pool over which to spread the costs of care.

Many progressives, thanks in part to their favorite talking heads on MSNBC and in the blogosphere, have come to believe there can be no real reform without a public option. But the public option, as Obama indicated, is merely one approach to achieve universal, affordable, reliable health-care coverage. Even with a public option, we would still need to fight for an individual mandate, generous subsidies and tough regulation. Putting our energy into these battles, rather than continuing our unnecessary game of chicken on the public option, will give us a better chance of winning the three essential ingredients of health reform.

Hope Morrison is a senior consultant for Ireland and Associates, a Texas-based health care consulting firm. Previously, she worked for the Texas Health and Human Services Commission in the state’s Medicaid program, and was an aide to former state Sen. Mike Moncrief on health and human services issues.