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Latest Public Option Concession Comes Into Focus

First Posted: 03/18/10 06:12 AM ET Updated: 05/25/11 04:05 PM ET

Delauro

With several prominent House Democrats acknowledging that they will likely have to give up a public option for insurance coverage in health care reform negotiations with the Senate, the focus has shifted to what concessions they can extract in return.

The main issue on the radar is to try and ensure that newly created health insurance exchanges are national (the House version) and not state-based (the Senate version), say sources on and off the Hill.

"That's where people are going to be looking," said Rep. Rosa DeLauro (D-Conn.) when asked if this would be the key compromise if the public option is dropped. "I'm going to give you my own view, which is the House view, which is that I think we need a federal insurance exchange.... I think we've got to look closely at this. I think that it's much easier... to keep insurance companies in check -- it is simpler to administer. We're going to have a checkerboard here [with the Senate bill]. And also I think you have to take a look at the political reality. Implementing reform is going to be much more difficult in some states than in others."

Progressive activists, in addition to well-respected health care reform advocates, feel the same way. A national health insurance exchange, they argue, has the potential to fundamentally change the accessibility and affordability of insurance. Set up as a virtual market in which consumers have a list of policies from which to pick and choose (think Expedia.com but for health insurance), it would be limited to small businesses and individual buyers. Moreover, state governments, if they meet certain standards of accessibility and regulatory oversight, will have the option to opt out. But the prospect of having providers compete side-by-side -- unlike some of the monopolized markets that exist today -- with the federal government in a regulatory role, is an obvious and alluring way to reduce costs.

The Senate, by contrast, has structured its legislation differently -- choosing to set up exchanges in individual states that in turn would be regulated by state governments. Such a structure may prove effective in lowering costs but likely on a lesser scale. It also will cater better to local health care needs and markets. But the concern is that it won't foster the type of institutionalized competition, risk-spreading and purchasing power that one national exchange presents.

"The Senate is a weaker version, a more insurance-friendly version," said one progressive health care activist. "The state-based exchanges are weaker on the structural level because you have less number of people in these exchanges. There would be more competition and lower prices in the national variety. But also, state-based exchanges would be a lot more subject to the insurance industry lobby."

Diane Archer, the director of the Health Care Project at the Institute for America's Future, also commented on the preference for a national exchange over the state variety in a small entry at the Washington Post's Website.

"The single biggest weakness in the Senate bill is its reliance on states to implement the exchanges," she writes. "The federal government should implement the law in a uniform way and relieve the states of the burden of setting up whole new insurance markets and regulatory structures -- unless they choose to and demonstrate their ability to -- as the House bill provides. And, we need the will, skill, resources and power of the federal government to ensure that the insurers behave. History and experience suggest the states will almost always be outgunned by the insurers. The states should hold complementary regulatory authority over the insurers and also have the right to innovate and improve the insurance market."

Faced with the likelihood that a government-run insurance option will be scrapped when the Senate and House hold their conference committee to mesh their respective pieces of legislation, Democratic lawmakers are now going more public with these arguments. DeLauro, for one, stressed that the debate over the public option "was never just about the public option for the public option."

"It was about: where's the competition?" she added. "People can choose something and still not have any choices in the selection."

But, as has been the case with the entire reform process, there are impediments. Conservative Democrats in the Senate are wary of creating a new bureaucratic regulatory structure to oversee a newly-created national exchange -- preferring instead to rely on already existing state regulatory bodies. And the argument for a more federalist approach also holds deep sway inside the corridors of that chamber.

"It's hard to imagine how Ben Nelson would get on board with national exchanges," said one health care reform activist. "The states rights/every state is different argument" is an impediment.

Not everyone thinks Nelson will draw a line in the sand when it comes to the structure of the exchange. But one senator is all it takes to derail the entire reform process. And if the conference committee chooses not to make too much hay over this aspect of reform, there are other policy battles that the progressive community will wage. Jon Walker, over at FireDogLake for instance, has penned an essay making the case that Democrats should demand that some of the benefits of reform (including the exchanges themselves) kick in well before their slated date of 2014 -- citing the policy and political sense of accelerated action.

"If there was any one single completely terrible political decision made by Democrats during this health care debate, it was to 'save money' by delaying the start of reform," he writes. "This is an act of political foolishness so profound, I'm, to this day, at a loss for words. Making the bill appear $100-300 billion cheaper simply is not worth the medium term political damage that delaying reform will do to the Democrats."


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