Originally Published: 7/15/2009
HEALTH CARE – THE PUBLIC OPTION
By The Issue Wonk
Now that we’re getting down to the nitty-gritty of health care reform, I thought I’d point out a clear distinction that appears to be missed by most people, probably because politicians and the media are deliberately blurring the lines. The distinction is this: the so-called “public option” is not “single payer” health care. It is not “nationalization” of health care.
Single Payer Health Care
The Institute for Health & Socio-Economic Policy (IHSP) recently published a report on single payer health care.1 It defines single payer as “a truly comprehensive health plan” and sets out the following conditions for a system to be considered “single payer:”
1. Universal eligibility, regardless of age, employment status, income, or existing health conditions.
2. A uniform single standard of care for all enrollees, eliminating the existing disparities in Medicare (such as the low percentage with prescription medical coverage), Medicaid (with disparities in coverage for specific treatments by state, and in access to coverage by residence location). A scenario used in this study simulates the existing Medicare Parts A, B, and D for standard of care.
3. A Single Payer system for both funding and administration, displacing the current ad hoc mixture of federal and state agencies, private insurance sponsorship by employers, and both cost and administrative processes by individual insurance plans. This enables the entire nation to have access to the same health services, costs, eligibility requirements, and administrative cost burden.
IHSP goes on to state that, regardless of all the arguments and rhetoric, there really have been only 2 plans under consideration during this most recent discussion of health care reform. One is the universal single payer plan, as defined above, and, make no mistake, it is truly “off the table.” It’s not even being considered. The other plan, the only plan that is under consideration, is a mixture of all kinds of things with the addition of the “public option.”
The other plan consists of a plethora of proposals with multiple risk pools and payers, – normally inclusive of and reliant on the private insurance industry, and hence market mechanisms – and some combination of employer and/or individual insurance mandates conjoined with health savings accounts, experimental proposals for a ‘public option’ while maintaining the private insurance industry and a smattering of elite ‘boutique proposals’ that cater to the well off. The Massachusetts program and many others stress individual mandates and/or employer mandates and ‘incrementalized’ reform and serve as good examples of the market based plan.1
The biggest benefit to a universal, or single payer, plan is the size of the pool. Former Senator Tom Harkin (D, IO) explained it well: “I used to sell insurance. The basic rule is the larger the pool the less expensive the health care. Today we have 1,300 separate pools – separate health care plans – and that is why health care is so expensive; 700 pools would be more efficient and less expensive and one pool would be the least expensive. That’s why single payer is the answer.”2
IHSP1 makes an exceptionally good argument for implementing a single payer system, but since it is off the table I’m not going to go into it. If you’re interested, and you should be, read the report. It’s remarkably easy reading considering all the detailed data. The point I want to make here is that the “public plan” is not “single payer” and we all need to understand the difference.
The Public Option
The public option is just what it says it is – the option for people to buy into a Medicare-like insurance program. An option. If you want Blue Cross/Blue Shield, or any other private insurance, go for it. The main argument for a public option is that a large pool at a lower cost than is available from private insurers will be able to put pressure on private insurers to reduce their premiums. The public option is being touted as the best way to restore competition into the health care system which, in turn, will lower private insurer premiums, introduce innovations, and improve health quality.3 Please look at this argument carefully. Restore competition. This means repairing your broken leg will be, as it has been, a market commodity, like repairing your car or your television set. I continue to have a moral objection to making health care a market commodity. It wasn’t always this way. Until 1981 only about 12% of the market was served by for-profit organizations. By 1997 for-profit health care represented about 65% of the market. As “for-profit” grew, denial of medical care grew so as to increase profits.4
Critics complain that a public health insurance plan will compete directly with private insurers resulting, eventually, in a government takeover of the health care system. And what is the problem with that? Well, it means that investors could no longer make money by denying people access to health care. Since I find this practice morally objectionable, I find no problem with doing away with it.
Issues Being Debated
Here are some of the details that are currently being debated. Let me point out, again, that neither single payer nor the public option is an issue. It’s settled. Whatever comes out will definitely have a public option and single payer is not being discussed.
Virtually all serious proposals include requiring insurance carriers to cover people with pre-existing conditions and ban them from the practice known as rescission; that is, canceling medical coverage for sick policyholders. However, health insurance officials testifying before Congress adamantly refused to stop rescission.5
A variation of the public option has been put out by Senator Kent Conrad (D, ND). He calls it consumer-owned health cooperatives, claiming that they would be subject to the same standards as private plans.6
Most proposals require that people get health insurance. Employers will be required to help pay for it. What if you’re not employed and cannot pay for it? Well, the government would subsidize insurance premiums for families earning up to 4 times the poverty level and would expand Medicaid coverage and increase payments to health providers. This is being called the “tri-committee” proposal because it was developed by staffers of the House Ways and Means, Energy and Commerce, and Education and Labor committees.6 According to the Department of Health and Human Services, the poverty level for a family of 4 is currently $22,050. So, 4 times that is an income of $88,200. For a single person, the poverty level is currently $10,830. So, a single, self-employed person could make up to $43,320 and still get a subsidy. I have seen no mention of a sliding scale subsidy but you can bet your house (if you still have one) that it’ll be in there.7
Paying for the plan is, of course, a matter of much consternation. A recent Wall Street Journal/NBC Poll found that most people favor requiring all people to get insurance, raising taxes on the rich, and requiring all but the smallest businesses to offer insurance or pay into a fund.8 One idea that is still out there is to include health benefits as taxable income.9 But, according to the aforementioned poll, the majority of people oppose this, even if the taxes only apply to the most generous health plans.8 There appears to be no doubt that the costs will somewhat be borne by a tax increase, or surtax, on the wealthiest people. Indeed, the House of Representatives just released a plan in this regard.10
Watch the details because the overall plan has been decided. The paid-for politicians insist that investors make money off of people’s illnesses, so little will change. Maybe individual/family/employer premiums will be reduced somewhat, but the inefficiencies and inherent problems of a competitive market for health care will still be there. This will be no panacea.
1 The Institute for Health & Socio-Economic Policy. Single Payer/Medicare For All: An Economic Stimulus Plan for the Nation.
2 Zeese, Kevin. Congress to Transfer Hundreds of Billions in Tax Dollars to the Insurance Industry. Truthout, June 16, 2009.
3 Harbage, Peter & Davenport, Karen. Competitive Health Care: A Public Health Insurance Plan that Delivers Market Discipline. Center for American Progress, March 25, 2009.
4 Publishers Weekly Editorial Review of Sick: The Untold Story of America’s Health Care Crisis—And the People Who Pay the Price. Amazon.com.
5 Girion, Lisa. Health Insurers Refuse to Limit Rescission of Coverage. Los Angeles Times, June 17, 2009.
6 Pear, Robert. Democrats Nearing Consensus on Health Plan. The New York Times, June 9, 2009.
7 Wayne, Alex. House Democrats’ Health Care Overhaul Includes Public Plan, Insurance Mandate. Congressional Quarterly, June 9, 2009.
8 Meckler, Laura. Public Wary of Deficit, Economic Intervention. The Wall Street Journal, June 18, 2009.
9 Rubin, Richard. Unions Waver on Taxing Health Benefits. Congressional Quarterly, July 7, 2009.
10 Pear, Robert & Herszenhorn, David M. House Health Plan Outlines Higher Taxes on Rich. The New York Times, July 14, 2009.
© The Issue Wonk, 2009