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The Politics of the Public Option
Originally published in ConsortiumNews.com earlier today, 16 October 2009
From the start, the health-reform debate has been about money – who will get the best break and who may have to pay more. That is why the issue of the public option, a less expensive government-run insurance plan, has been so central to both the policy and political debates.
Indeed, if the Democrats abandon the public option for the sake of passing a bill like the one that came out of the Senate Finance Committee, they may be courting electoral disaster once voters grasp that they will have to wait years for the law to be implemented and then that it could lead to higher costs for much the same unpopular private insurance plans.
The public option offers the only means for a reform to be quickly implemented and to demonstrate a beneficial effect for the people by 2010 and 2012. It has the potential for reducing costs, especially for small businesses and individuals who are now being soaked by private insurers or denied coverage.
After assessing the five pieces of legislation that have cleared different committees of Congress, the non-partisan Congressional Budget Office found that the nation would get the most savings on health-care costs from a public option tied to Medicare rates. Such a version, which is included in two of the House bills, would save an estimated $110 billion over 10 years.
A more modest public option in another House bill, which de-links the rates from Medicare and would require negotiations with health-care providers, would save an estimated $25 billion, the CBO says. By contrast, the co-op idea in Sen. Max Baucus’s Finance Committee bill would cost $6 billion to set up and would garner few if any savings.
Since the co-op would offer minimal competition, the health-insurance industry doesn’t object to it but is dead set against the public option. The reason is obvious: many of those projected savings would come out of the industry’s bottom line.
What the industry does want is a bill that forces nearly 50 million uninsured Americans, including healthy young people, to buy private insurance, many with government subsidies, a potential bonanza. The industry also wants the federal government to act as the enforcer to coerce these people by hitting them with stiff fines if they don’t sign up.
The level of government coercion is important to the industry. This week, America’s Health Insurance Plans, the industry’s lobbying arm, broke with the industry-friendly Baucus bill because of its relatively weak penalties of only a few hundred dollars a year assessed against people who don’t buy insurance.
AHIP feared that the fines wouldn’t be coercive enough to force young people to buy insurance. Therefore, the industry worries that many of the new sign-ups would be customers the industry doesn’t want, people who actually need medical attention.
So, industry lobbyists warned that if Congress didn’t raise the fines on the uninsured, the industry would jack up its premiums across the board. "The consequences of this would be an upward spiral; rate shock to everyone who stays in," AHIP president Karen Ignagni said. [Washington Post, Oct. 9, 2009]
Risking a Backlash
In firing that shot across the bow of Congress, the industry did risk a backlash, the possible revival of the public option, the industry’s biggest worry since the debate began last spring.
Early in the congressional battle, Republicans cited an industry-sponsored study by the Lewin Group, projecting that the inclusion of a public option could lead to the defection of 119 million Americans from private insurance to the government-run plan.
“As many as 119 million Americans would shift from private coverage to the government plan,” Sen. Chuck Grassley, R-Iowa, wrote in a column for Politico.com. That migration, Grassley said, would “put America on the path toward a completely government-run health care system. ... Eventually, the government plan would overtake the entire market.”
So, to protect the interests of the insurance industry, congressional Republicans – and some conservative Democrats – went to work killing the public option. Behind the scenes, the industry even helped organize angry protests at “town hall” meetings to pressure members of Congress to back away from the government-run alternative.
In essence, President Barack Obama and the Democratic-controlled Congress must now decide whether they will take on the industry (and a Republican Senate filibuster) or whether they will take on the role of arm-twisters for the for-profit insurers.
If the Democrats bend to the demands of the industry and the Republicans, Obama and congressional Democrats could find themselves in several years explaining how they enacted “reforms” that bully moderate-income Americans into buying over-priced health insurance, fatten the industry’s profits and fail to achieve any meaningful cost controls.
Such an outcome could be catastrophic to the Democratic Party’s future and to the concept of progressive governance. Yet, some members of the Senate Democratic leadership appear to heading in that direction, wanting to portray pushing through some bill – even one without a public option – as a victory.
As the legislation stands now, many of the key features that hold some promise of helping consumers – such as the “exchange” where individuals and small business would shop for the best product – won’t even take effect until 2013. That means that Americans now facing the crisis of no health insurance won’t get much help for another four years, if then.
After the long political fight over health care, many of these hard-pressed Americans will suddenly realize that they have been left to the tender mercies of the health insurance industry until after the next presidential election when another person, possibly a Republican, could be in the White House.
By contrast to the four-year phase-in for these relatively modest reforms, the Medicare single-payer program for senior citizens was signed into law by President Lyndon Johnson on July 30, 1965, and was up and running less than a year later.
The implementing delays mean that in both 2010 and 2012, Republicans will be free to make the truthful case that the Democrats – despite their promises – had accomplished little to help the American people on health care.
Already, Republican senators are using the talking point that the four-year delay is part of a budgetary trick to make the bill appear cheaper over 10 years than it would be if its key features took effect quickly.
Even when those new features do appear, Americans may find themselves coerced by the government into buying unsatisfactory plans from the same small group of giant insurance companies – essentially a cartel – that have little incentive to undercut one another on prices. It will be the Democrats who will be blamed for the fines on the uninsured.
The Democrats would not be much better off if Sen. Olympia Snowe of Maine, the one Republican who voted for the Baucus bill in the Senate Finance Committee, has her way. She wants the public option included only as a standby provision with a trigger if “affordable” plans do not materialize.
But the insurance exchanges won’t open until 2013, so it may take years before any trigger would be pulled. At minimum, the industry would have earned a lengthy reprieve.
And by the time, the exchanges have a chance to be tested, Congress and the White House could be in Republican hands. If that’s the case, the Republicans might well undo even the triggered public option. Unlike the Democrats, the Republicans would surely not worry about ramming their preferred policy through the Congress.
On the other hand, if Congress enacts a public option now, it presumably could be implemented at least as fast as Medicare, especially if it were piggybacked onto the existing Medicare bureaucracy. That would enable Democrats to show they had accomplished something beneficial for the public before voters go to the polls in November 2010.
By 2012, if the CBO predictions of substantial savings prove true, Obama could campaign for reelection on the basis that he had improved the welfare of the American people -- and the budget outlooks for government and business.
The loser in that scenario would be the insurance companies. Their plight might not be as dire as the Lewin Group predicted, but they probably would not be celebrating the windfall profits from the combination of coerced consumers and government subsidies.
Given those prospects, it’s hard to understand where Democratic leaders see the political or policy upside of selling out the public option.
Robert Parry broke many of the Iran-Contra stories in the 1980s for the Associated Press and Newsweek. His latest book, Neck Deep: The Disastrous Presidency of George W. Bush, was written with two of his sons, Sam and Nat, and can be ordered at neckdeepbook.com. His two previous books, Secrecy & Privilege: The Rise of the Bush Dynasty from Watergate to Iraq and Lost History: Contras, Cocaine, the Press & 'Project Truth' are also available there. Or go to Amazon.com.
This article is republished in the Baltimore Chronicle with permission of the author.
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This story was published on October 16, 2009.