There’s been a certain Kabuki Theater quality to arguments over a “public option” in a reformed, competitive system for universal health care, with many progressives insisting on the inherent superiority of public programs not driven by profit-seeking, and many conservatives calling the public option a Trojan Horse for a single-payer system.
Today in The American Prospect, Paul Starr calls attention to key issues about how a public option should be structured that go beyond these reflexive attitudes:
The great danger is that the public plan could end up with a high-cost population in a system that fails to compensate adequately for those risks. Private insurers make money today in large part by avoiding people with high medical costs, and in a reformed system they’d love a public plan where they could dump the sick. Although the proposals before Congress aim to limit insurers’ incentives to skim off the best risks, the measures are unlikely to eliminate those incentives entirely.
The regulatory environment for both public and private options will have an enormous impact on their relative costs, which in turn could determine whether the system as a whole can actually work, explains Starr:
Unconstrained, the public plan could drive private insurers out of business, setting off a political backlash not just from the industry but from much of the public. Over-constrained, the public plan could go into a death spiral itself as it becomes a dumping ground for high-risk enrollees, its rates rise, and it loses its appeal to the public at large. Creating a fair system of public-private competition — giving the public plan just enough power to offset its likely higher risks — wouldn’t be easy even if it were up to neutral experts, which it isn’t.
Those who view a public-private “hybrid” system as a nice compromise between the status quo and a single-payer system need to think more deeply about these questions.