The horizon is not so far as we can see, but as far as we can imagine

What the Public Option MUST Have To Work

On Saturday I wrote about a piece by Kip Sullivan which attacked the Public Option on its own merits.  Kip’s most devastating, and I think, accurate, criticism was that the public option as envisioned by the current House proposal (let alone likely Senate modifications) is so weak it might not even survive.


  • Because it has no built in customer base, which increases its upfront expenses for advertising and a sales-force significantly.  People who have company healthcare plans can’t join.
  • Doctors, hospitals and so on are not required to accept it, and providers will not accept it if it provides below market rates unless it also provides large numbers of patients, which it can do because it isn’t pre-populated and isn’t a good buy for insureds unless it can provide a low premium, which requires it to pay low rates.
  • It must make a profit in order to return the money up-fronted to it, and it has only 10 years to do that, but it has to start from scratch, as noted above.

Looked at through this lens, the idea that the Public Option will survive 10 years is ridiculous.  With these burdens, it can’t obtain the necessary number of insureds to allow it to negotiate provider agreements that are low enough to make it attractive enough to enough people to have enough people to negotiatite provider agreements which are low enough to… (well, I’m sure you see where this is going.)

This is a public option designed not just to never turn into either single payer (what Canada has) or comprehensive health care (what France has), it is a public option so crippled it may not even be able to get off the ground.  New companies have significant startup costs, there are massive barriers to entry in the health insurance field, and the term over which the public plan has to return its costs is too short.

So what does the Public Option need to work?

First: it needs to be populated with enough people to be viable. Here are some possibilities of how to do that without a lot of auto-enrollment.  You don’t need to do all of these, you do need to do some of them or something similar.

  • On the income tax form, have an opt in box for anyone who wants to enroll, so that every American sees the option, without needing to see advertising
  • If there is an individual mandate requiring people to buy insurance, if they don’t have it after the first year—if they haven’t bought, auto-enroll them at tax time into the public option.
  • auto enroll everyone on disability into the plan, as top-off insurance.  Whatever the gap between what they get from their disability and public option is covered by the public option
  • Veterans auto-enroll into the public option as well, in exactly the same way, as top-off insurance.  They still get all their veterans care, but anything that isn’t covered by Veterans, that is covered by the public option, they now also get
  • everyone must be free to choose the public option, including people who are enrolled in corporate healthcare plans (this is baseline, this must be in the plan to give it the ability to drive down costs.)
  • State rollovers.  If a state has a plan that doesn’t cover everything the public option does, then everyone on the State plan is automatically enrolled, and the cost of those health care services is taken out of Federal Medicare funds.

Institute enough of these policies, and the public plan can have a large enough enrollment base to matter, and because it is easy to enroll in can put price pressure on private firms.  But even with all of these, the public option will still start out not all that large and have trouble negotiating contracts.  So, what else do you need?

Second: it needs to work with Medicare and Medicaid.

  • Negotiation must take place between the all three plans as one, and providers.  This will drive down prices the fastest.  It will not just help the public option, it will also drive down Medicaid and Medicare rates.
  • If a provider accepts Medicaid or Medicare they must also be required to accept the public option.  No picking and choosing.
  • The rate does not have to be the same as the Medicare rate, but it must be based off the Medicare rate.  The House plan is Medicare + 5%.  That’s fine.
  • All limits on the ability of Medicare/Medicaid and the public option to negotiate prices with providers (for example, not allowing negotiations with pharmaceutical companies) must be removed.  Failure to do so will mean not only that costs won’t be contained, but that the government plans will be at a disadvantage compared to private plans which an do this.

The above are the minimum requirements to create a viable public option.  Public option advocates who are not willing to draw a line on the above are advocating for a plan which will, most likely, not survive—a plan that is not viable.  The cry of public option advocates has been “saving even a few lives is worth compromising!”  But if you compromise to the point where the plan is not viable, you’ve compromised to the point where there’s no point.

There are other requirements for a good public option, such as guaranteed issue, the whole population being enrolled in some insurance (mandates in the current debate), the plan being national in scope so it has scale, private plans being required to cover the same things as the public plan, and high enough subsidies so that everyone can actually be enrolled (if you insist on mandates).  Those requirements, however, seem to be better understood by public option proponents.  What is required for viability, however, does not seem to be.

The current House Plan is not viable as written and other options are worse.  There is no practical difference between no public option, and a non-viable public option and at that point the argument of “don’t let the perfect (single payer) be the enemy of the good (a public option which will save some lives)” becomes non operational.

I will be happy to support a viable public option.  So far we don’t have one.  I urge public option advocates, and even single payer advocates, to push for one.


Bait and Switch on Public Option?


Finding Common Ground Between Public Option Advocates and Single Payer Advocates


  1. jacksmith


    We have the 37th worst quality of healthcare in the developed world. Conservative estimates are that over 120,000 of you dies each year in America from treatable illness that people in other developed countries don’t die from. Rich, middle class, and poor a like. Insured and uninsured. Men, women, children, and babies. This is what being 37th in quality of healthcare means.

    I know that many of you are angry and frustrated that REPUBLICANS! In congress are dragging their feet and trying to block TRUE healthcare reform. What republicans want is just a taxpayer bailout of the DISGRACEFUL GREED DRIVEN PRIVATE FOR PROFIT health insurance industry, and the DISGRACEFUL GREED DRIVEN PRIVATE FOR PROFIT healthcare industry. A trillion dollar taxpayer funded private health insurance bailout is all you really get without a robust government-run public option available on day one.


    These industries have been slaughtering you and your loved ones like cattle for decades for profit. Including members of congress and their families. These REPUBLICANS are FOOLS!

    Republicans and their traitorous allies have been trying to make it look like it’s President Obama’s fault for the delays, and foot dragging. But I think you all know better than that. President Obama inherited one of the worst government catastrophes in American history from these REPUBLICANS! And President Obama has done a brilliant job of turning things around, and working his heart out for all of us.

    But Republicans think you are just a bunch of stupid, idiot, cash cows with short memories. Just like they did under the Bush administration when they helped Bush and Cheney rape America and the rest of the World.

    But you don’t have to put up with that. And this is what you can do. The Republicans below will be up for reelection on November 2, 2010. Just a little over 13 months from now. And many of you will be able to vote early. So pick some names and tell their voters that their representatives (by name) are obstructing TRUE healthcare reform. And are sellouts to the insurance and medical lobbyist.

    Ask them to contact their representatives and tell them that they are going to work to throw them out of office on November 2, 2010, if not before by impeachment, or recall elections. Doing this will give you something more to do to make things better in America. And it will help you feel better too.

    There are many resources on the internet that can help you find people to call and contact. For example, many social networking sites can be searched by state, city, or University. Be inventive and creative. I can think of many ways to do this. But be nice. These are your neighbors. And most will want to help.

    I know there are a few democrats that have been trying to obstruct TRUE healthcare reform too. But the main problem is the Bush Republicans. Removing them is the best thing tactically to do. On the other hand. If you can easily replace a democrat obstructionist with a supportive democrat, DO IT!

    You have been AMAZING!!! my people. Don’t loose heart. You knew it wasn’t going to be easy saving the World. 🙂

    God Bless You

    jacksmith — Working Class


    Republican Senators up for re-election in 2010.

    * Richard Shelby of Alabama
    * Lisa Murkowski of Alaska
    * John McCain of Arizona
    * Mel Martinez of Florida
    * Johnny Isakson of Georgia
    * Mike Crapo of Idaho
    * Chuck Grassley of Iowa
    * Sam Brownback of Kansas
    * Jim Bunning of Kentucky
    * David Vitter of Louisiana
    * Kit Bond of Missouri
    * Judd Gregg of New Hampshire
    * Richard Burr of North Carolina
    * George Voinovich of Ohio
    * Tom Coburn of Oklahoma
    * Jim DeMint of South Carolina
    * John Thune of South Dakota
    * Kay Bailey Hutchison of Texas
    * Bob Bennett of Utah

  2. jbaspen

    Ian, in fairness to Obama, (who worries us both) could we draw parallels to the 1957 Civil Rights Act – admittedly a feckless peice of Legislation; but a Bill which Lyndon Johnson later claimed established a dynamic (his language was far cruder, of course) on which the Country built far more effective legislation (e.g., the 1964 Civil Right Act)?

  3. Ian Welsh

    It’s possible it could be improved later, yes. I’m not sure I would bet on it. A bad public option is one thing, a non-viable one is another.

  4. One thing minimum needs to be done to make sure the public option will work: Eliminate all current Federal employee health insurance programs (including those for Congress and Congressional employees and TriCare) and force them all into the public option’s three plans. You better believe that Congress will make sure that the public option works if they themselves are forced into it, and having all federal employees as part of the plan immediately provides enough customer base that providers will be forced to accept it or lose significant patient base.

    But I do agree that, as currently set up by HR3200, the “public option” is pretty much crippled. If Congress had really cared to have a viable “public option” they could have simply extended the ability to buy into Medicare to non-prunes, or could have moved all Medicaid patients into the “public option” with subsidized market rate premiums (probably get them better care than the “ghetto care” that they currently get). But of course Congress was trying to get healthcare reform through without pissing off anybody who might possibly give them campaign contributions. Yeah, like that really worked LOL!

  5. Ian Welsh

    Good idea Badtux.

  6. It ain’t Republicans who are the problem (I mean, it is, but it’s not the real problem now), it’s Democrats. The big question is necessarily: what’s in a viable public option for the politician?

  7. jawbone

    Obama is fighting any consideration of putting the FEHBP into the public option. When asked why Congress won’t be required to take the public plan “if it’s so good” (the way it was put today at the AARP town hall/PR event), Obama dances around the answer. Then says the exchanges will be just like the Federal employees’ list of possible choices. And won’t really answer why the Feds won’t join the public plan.

    Couldn’t be because he realizes it’s not going to be very good and might not survive….

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