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The Democratic Strategist

Political Strategy for a Permanent Democratic Majority

Health Care Public Option: Not Just Whether But How

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.

One comment on “Health Care Public Option: Not Just Whether But How

  1. gdb on

    “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.” Since when is everything that follows the “but” a given fact?Any bill that does not include a public option plan is likely to do more harm than good, in that it would perpetuate a variant of the current failed system. Churchill once noted that ”You can always count on Americans to do the right thing – after they’ve tried everything else”. We have tried everything else on health care. Now it’s time to do the right thing. Over 20 other first-world countries having heath care plans with universal coverage and/or single-payer systems have equal or better overall health care statistics at costs of 8-12% of GNP compared to our 16-17% of GNP. Pick one of the these model systems you like the best (Germany, Japan, Canada, France, Norway, Sweden, Denmark, Netherlands, England, Switzerland, Austria, Australia, New Zealand, whatever) and increase the costs by 20% to cover what you don’t like about that particular system and you’ve still got a much better system than ours at 20-40% less cost. If you don’t like any of them, quite frankly you’re a deluded ideologue that no amount of real-world data will change. What is risky is to re-arrange the deck chairs as the means to re-float our already-sunk non-universal private-plan only system, rather than to change to a variant of one of many demonstrably floating systems that all incorporate universal coverage and public-plan, often single-payer, systems. A public system does not necessarily mean the end of private systems. Many countries with successful, much lower cost public plans cover basic medical needs for everyone. Additional coverage for other, more elective, medical procedures are covered by private plans where the total costs are still less than ours. As one example, Google Germany.

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