Hey Moderates, Public Health Plan Option Will Cut Costs (And Other Fun Facts)

The Senate and the Beltway media got the vapors last week when the Congressional Budget Office estimated the government cost of two draft Senate health care proposals to be above $1 trillion.

With the media presenting the preliminary CBO price tag devoid of any context, Senate Finance Committee chair Max Baucus panicked, delayed introduction of a bill and produced a new draft with no public health plan option. The Senate minority of Republicans and right-leaning Senate Democrats who never wanted a public plan option are now using the CBO estimate as an excuse to drop the idea -- even though the idea was not part of the CBO's cost analysis.

In other words, the conservative Senate minority, with the help of the media, is distorting the public debate.

We need to reframe the debate immediately, and counter misleading information, if we are to press Congress to enact effective health care reform with the choice of a public plan that help covers everyone and reduces costs. Here's how we can:

1. It is not public plan option vs. saving money. The public plan option is the best way to save money. If these alleged deficit hawks actually care about wasteful spending, then they would want a public plan option, and its $1 trillion in health cost savings over 10 years.

Who says? The Lewin Group -- which, by the way, is the same organization conservatives have repeatedly cited when arguing President Obama's plan would spark a migration from private insurance into the public plan option.

They just don't mention such a migration would save us tons of money.

2. It is not a trillion-dollar plan. It is a investment of about $50 billion per year to expand coverage and reduce overall costs. Senators and reporters keep throwing around eye-popping numbers like $1.6 trillion, but such "price tags" are grossly misleading for several reasons. First, it's the amount of money it would take to cover all Americans for 10 years, not one year.

Meanwhile, our federal government already spends $3 trillion a year. As a nation, we all currently spend $2.2 trillion on health care per year, and with costs skyrocketing, we will spend $30 trillion over the next 10 years on health care if we fail to reform the system.

We live in a big country of 300 million people. The number attached to a major initiative over a 10-year window is going to look like a lot of money out of context, but in fact amounts to much more bang for our health care bucks -- achieving universal health coverage while reducing overall health care spending

Furthermore, just because the reform effort may have a cost of more than $1 trillion, that doesn't mean taxpayers will be paying more than $1 trillion in new taxes. Much of that cost will be handled through other savings in the health care system. For example, the Lewin Group analysis of Prof. Jacob Hacker's version of a public plan option found that it would need $53 billion in new revenue annually, not $100 billion.

And again, that annual investment would pay off with a 10-year savings of $1 trillion -- including savings for state and local governments (read: lower state and local taxes), businesses and households.

3. The CBO is not God. The job of the Congressional Budget Office is to make an estimate of the cost to the federal government. But any estimate involves subjective assumptions. And CBO makes cautious assumptions, because it is institutionally skeptical of new ideas. The New Republic's Jonathan Cohn recently explained:

...the agency still seems inclined to produce estimates that strike many outsiders as overly cautious. To take one example, electronic medical records make it a lot easier to compile data on which treatments work, which--in turn--will let you cut down on the use of ineffective ones. In other words, there is reason to believe the two innovations would save more money in combination than they might separately. But, according to people familiar with the CBO's thinking, the agency seems skittish about giving extra credit for the way the two reforms would interact. Harvard economist David Cutler, a key architect of Obama's campaign plan, just published a paper outlining the potential to save the federal government $600 billion over ten years--about half of what it would cost to pay for expanding insurance coverage. Again, the CBO seems skeptical.

Nobody disputes that there is room for honest intellectual agreement; plenty of smart people dispute claims about savings that reform will generate. But it's an open question whether the CBO takes skepticism too far--and whether such a super-strict reading of the evidence really serves the public interest.

Obstructionist insiders looking to derail the public plan option know full well of CBO's reputation, so they have hyped up the CBO as the ultimate scorekeeper, figuring that it won't assume the same kind of savings other independent analysts have. We should not fall into their trap, and should not treat CBO's numbers as gospel.

4. $1 trillion dollars over 10 years is not a magical threshold of fiscal responsibility. It's a completely arbitrary benchmark. There simply is nothing special about keeping the overall cost of the plan to $100 billion per year, as opposed to $130 billion or $160 billion.

Now, more money doesn't automatically mean better anymore than less money automatically means better. We should strive to be as efficient as possible with our up-front investment, and there are several ideas in addition to adding a public plan option worth considering that would strengthen the system at less cost -- see Jonathan Cohn and Ezra Klein.

Crudely cutting down the size of the bill to meet an arbitrary benchmark, at the expense of reaching the goal of quality, affordable health care for all, is simply unnecessary. But that's what the latest Senate Finance Committee draft would do.

5. Everybody in the nation wants a public plan option. Both the NBC/WSJ poll and the NYT/CBS poll found overwhelming support, about 75%, for a public plan option.

So the people want it, and it saves us money. There simply is no policy or political rationale to justify leaving a public plan option out of reform. Once that is made crystal clear, it will also be crystal clear the only reason to oppose it is sucking up to insurance and drug lobby campaign cash.

Once that is obvious, it becomes much harder to resist the will of the people.

Originally posted at OurFuture.org

 

 

Follow Bill Scher on Twitter: www.twitter.com/billscher

Comments

[CMontalvo]

Perhaps the more informed readers can help to poke some holes in statistics I found quoted in a May 1, 2008 article of "Fortune" magazine. The quote below is from the CEO of Aetna Insurance, clearly someone with a bias toward private insurance. But it takes issue with the oft-quoted "47 million uninsureds" statistic that is used with great frequency to promote the need for major changes to our system.

"I'm always amazed that 20% of the 47 million uninsured are eligible today
for Medicaid or the Children's Health Insurance Program. They could sign up
and have a relationship with a primary-care physician. About 10% of the 47
million are college and university students, very inexpensive to insure [but
they don't buy it because they rather spend their money on the latest
i-Phone). Slightly more than 20% are not citizens but are in the country
legally.

We might find a way to link visa entry or other mechanisms with
comprehensive coverage. And about 20% have household incomes above $75,000.
On this we agree with many of the presidential candidates. Aetna believes
there is a place for an individual coverage requirement for individuals who
can afford insurance. I think reasonable people could agree that at some
point there's enough income that someone should be expected to participate
in the health-care system. That leaves us with about 14 million to 17
million who really need tax credits and subsidies or tax deductions. "

[PhilCary]

It really bothers me that no one seems to be pointing out that we do not currently have a "free market" health care system in this country. Our system is controlled by the insurance companies, Big Pharma, corporate hospitals, and the AMA. They march in lockstep with one goal in mind: increase profitability at whatever cost. There are currently no downward pressures on health care costs, so they continue to rise faster than inflation. We need the added competition of a public option.

No one seems to mention that healthcare is already rationed in this country. How many stories do you need to read about how someone with what they thought was good insurance dies because the insurance company refuses to pay for certain types of treatment? What do you do if a drug you need is not on your insurance provider's preferred list? Have you ever had to wait two months for an appointment with a specialist? I have even with what is considered excellent health insurance. If the healthcare market is free and open, why is there such a shortage of primary care doctors? In a free market, a shortage in the supply of a good results in a rush to fill the void, and make a profit by doing so, until the market reaches equilibrium again. It doesn't happen in healthcare because of artificial constraints on market adjustments in order to squeeze out more profit.

A public option can only make things better.

[JuliaRain]

How come some Americans complain about health care costs and not the cost of fake W_AR? Shouldn't US citizens benefit from the taxes they pay?

[CaptainObvious]

"Shouldn't US citizens benefit from the taxes they pay?"

Only if you're a White Republican Defense Contractor. Otherwise - the "One Drop Rule" applies.

[martinfrosa]

A public plan will be as efficient as the Post Office, Amtrak, the fraud-riddled Medicare program and will be as well-funded as Social Security. The only way to reduce health care costs it to offer less of it. Is there waste in the system? Sure, there is waste in all health care systems.

My Irish colleague said it best, "we have 'Universal Care' in Ireland, it's universally bad." When George Harrison had cancer a few years ago, he didn't stay in Britain, he came to the U.S. for cutting edge treatment. So do all the Canadians who can afford it. And if you are a Canadian in need a hip replacement, you can join others on a 1 to 2 year waiting list to get one. On the other hand, if you are a dog in Canada, you can get one right away.

[JuliaRain]

Same lies. Wash, rinse, repeat.

David Gratzer's talking points in action.

Maybe you should actually ask real Canadians themselves how they feel about their health care. I can assure you that no Canadian would want a similar plan as the USA unless they are medical profiteers who wish to make money off of the suffering of those who are ill.

Ask them here:

Americans Who've Used Canada's Health-Care System Respond to Current Big-Lie Media Campaign

http://www.huffingtonpost.com/bill-mann/americans-whove-used-cana_b_215256.html

Then read the thread. Many Americans have moved to Canada and they too have things to say about Canada's UHC.

[JuliaRain]

And Farrah Fawcett went to Germany for health care so what's your point?

[Samalabear]

Yes, and a friend of mine, who is a citizen of France and was living over here. She got sick with melanoma in her brain and needed surgery. She also has MS. She had to come up with $83,000 for Sloan Kettering upfront. Luckily someone else in the family had the money to loan. If we had single payer that money wouldn't have been an issue and the US system would have been reimbursed by the French system.

The point is, this family member will be getting this money back. The French Government is paying for all of the surgery and all of the care. France is No. 1 in health care, we are No. 37.

And I've read a lot of Canadian comments on this board and others and they repudiate every argument you make. So, you know, please, these arguments don't wash. They're scare tactics, just like that $1.6 trillion number OVER 10 YEARS, when we just paid trillions over the last six months or so to Wall Street banks, none of which appears to be benefiting Main Street.

[sino53]

I consider MYSELF a moderate, so let me reply to Mr. Scher's challenge:

What bothers me the most about the public plan option, is that liberals are brazenly admitting to each other that the purpose of the public plan is to destroy the private insurers by unfair competition, after which we'll end up with a single-payer system by default.

They're saying that right here on HuffPo, they're saying that on DailyKOS, and on TPMCafe.

So Congressional liberals are creating a health care plan based on lies and deception. Instead of being honest with us and saying that the public plan is a steppingstone to single-payer which is their real goal, they are lying. They are claiming that the single-payer concept is off the table (even though it's their real long-range goal), and that the public option won't get us to single payer (knowing perfectly well that it will).

They're only saying all that amongst themselves, hoping the rest of the American public won't hear about it.

But I did.
You don't have to join those left-wing blogs in order to lurk there.

NOW: There ARE ways to structure a public plan so that it can NEVER take America to single-payer. That's the only type of public plan I would accept.

[CaptainObvious]

I take it you work in the Health Insurance industry, or otherwise profit from it? I just don't understand why anyone would want to defend a system where we pay twice as much per capita as the next most expensive system (Switzerland, who has single-payer with universal coverage).

Having a "government bureaucrat" between you and your doctor isn't all that different than having an insurance adjuster between you and your doctor, except that the latter has a responsibility to his company's shareholders to protect the profits of his company from your illness.

[JuliaRain]

So what? Angry and h8ful Christians consider themselves to be real Christians.

"What bothers me the most about the public plan option, is that liberals are brazenly admitting to each other that the purpose of the public plan is to destroy the private insurers"

Yeah, get rid of the Medical Profiteers. Good idea.

Are you a war profiteer too or do you just consider profiteering off misfortunes of others is acceptable?

[ProgressiveVoice]

What liberals are "brazenly" admitting that the purpose of the public plan is to destroy private insurers? I happen to believe that will ultimately be the effect, but the purpose? And even if it is the hidden agenda, 75% of Americans polled want a "public option". I'll bet that was what the question was, too. I believe I read of a poll that said 72% of Americans want a single payer plan similar to what every other industrial nation has. We are only being offered a "public option" and without any idea of what that may entail, at that!

Who would you pick for your doctor, the person who goes into medicine "for the money" or the one who enters the field out of a desire to help people?

What opponents of the public option are calling unfair competition are things like the government providing health care with administrative costs of about 6% while insurance companies use about 35% of revenue on "administrative costs and profit". Or they call the government's payment of the premium to cover insurance for the poor a subsidy.

To avoid defaulting to a single payer plan, the insurance companies need only successfully compete. Isn't that what the free market is supposed to be about?

[lj9283]

Health Insurance Companies in the U.S. add 20%-27% administrative overhead to premiums. Health Insurance Companies in Europe (France, Switzerland) add 5%-7% administrative overhead to premiums.

There is no competition in the marketplace today, only industry collusion. The public option will inject competition into the marketplace.

[CMontalvo]

A "Consumer Reports" magazine article last year on health care stated that administrative costs and profit represent 12% of insurance companies' premiums. Anyone care to actually cite SOURCES for the higher percentages?

Call me skeptical but when I see what a mess the government has made of Social Security and Medicare, when I consider the credit crisis (caused NOT by Wall Street greed but by an unholy alliance of regulation-hating Republicans and "let-poor-people-buy-houses" Democrats) and when I'm unable to think of a single governmental initiative that has ever delivered quality service, on-time and on-budget, I can't get excited about the public option. I'm not one to deny the system's problems. But paying money to create a public insurance company scares the heck out of me...especially at a time when the deficit is totally out of control...even in advance of the SS and Medicare time bombs.

And for those relying on the broad public support for a public plan, recognize that the public supported an invasion of Iraq by two to one. How'd that turn out? It's one of the reasons that our founding fathers were prescient enough not to create a democracy but rather a republic.

[TheBurdicks]

What's the deal here? I just want to scream.
We spend TWICE (scream, scream!) what other developed countries do, to get ranked NUMBER 37 (scream, scream!) in health statistics.
More expensive than downtown Paris, lower quality than rural Cuba!
Almost anything we do would make it better. What could possibly make it worse?
Yup, all that money comes right out of our pockets, our collective governmental pockets, our business pockets, or our individual pockets. Wherever it comes from, it's our money, and it's too damn much!
If we reform, the savings may accrue to government, business, or the individual. Is it all that important where the savings go?
So, why is health care in the US so expensive?
INSURANCE (scream, scream!)
What's the business of insurance? Why, it's the reward of failures (fires, wrecks, death, illness, injury). Can we afford to reward any more failures?
How about a little health care Quality instead. Universal nationalized health care eschewing INSURANCE (scream, scream!), and promoting a little simple public health education, a little Preventive Medicine.
Design the Quality back into our health care system.
You know, we could spend less than all of the others, and return to our old ranking, Numero Uno!

[S1m0n]

There's more than enough money already on the table to do the job well rather than badly. Money is not the problem.

[lj9283]

What would be the objection to imposing a 1% VAT Tax on all retail sales to fund the "Obama" Health Care Reforms.

So while the expected savings from the overhaul of the Health Care System is $1Trillion Dollars, lets say for the sake of negative speculation that the Lewis Group is off by 50% in their projected savings.

Retail Sales in 2008 were $4.6Trillion Dollars, so if a 1% VAT Tax were imposed on retail sales with the expectation that retail sales will grow year over year the 10 year gross for a VAT Tax would be about .5 trillion dollars. The rest would be offset by savings.

Or fund the whole thing with a 2% VAT Tax.

[jmpurser]

The public option is far from being the "best way" to save money. In fact, we don't know if it will save a dime. The "public option" saves all the problems with the current system, tries to cover up to 50 million more people, and throws tax dollars at the resulting mess to make up the difference.

And "the whole nation" doesn't want a public option. About 25% of the nation don't want a public option and a lot of us who DO want change want Single Payer instead of this watered down big wet kiss for the health insurance industry.

[drricklippin]

The power of personality of our popular new President and an increasingly restless public will make US health care reform happen by the end of this year.

And the historic reform WILL include a public health option.

Moderates in our weak and cowardly Congress will have to be dragged kicking and screaming.

Dr. Rick Lippin
Southampton,Pa
http://medicalcrises.blogspot.com

[ProgressiveVoice]

I'd like to believe you Dr. Lippin, but the AMA opposes a public option. For some reason, most people think doctors know best, so if they are opposed . . .

Here's hoping I'm wrong and you are right.

[chocolatecity]

The CBO is the same group who said that Bill Clinton's budget would leave the country with a massive deficit. They were so wrong I don't know why we continue to put so much faith in what they have to say.

[Manx]

Inasmuch as there is a symbiotic relationship between Congress and the insurance/health-care industry, it boils down to a symbioses vs. the American people. I have a feeling the American people will lose.

[Proletarian101]

You said it saves us money but you have not put forth any evidence of this savings. The people that say it will cost a trillion+ have provide numbers that make sense. You have provide a culmination of articles and studies that, in many cases, have contradicted each other if you were to look at them in their entirety. Please provide consistent numbers and then it will be easier to consider your argument.

[Bill Scher - Huffpost Blogger]

This is the report I cited that concludes public plan option would save $1 trillion in health care spending over 10 years: http://www.ourfuture.org/healthcare/Lewin-Group-report . You assert there is some contradiction, but don't cite anything. What are you referring to?

[Proletarian101]

Lets use what you have cited as an example. The net savings (which if you read the actual proposal turns out to be a wash between expense and savings, not a $1 trillion in savings) is entirely based upon employers increasing the pay of their employees by the amount that they save by not paying for health insurance and the income tax that is obtained from the savings. The numbers may work out but that concept is unrealistic, as any actuary would tell you.

Also that savings comparison, which is incorrect for the reason noted above, is against a single plan which is on the other end of the spectrum.

[Proletarian101]

The plan you cited also is basing all costs frozen at current Medicare levels. Do you know how much debt Medicare currently produces? (look it up) Now multiply that by a factor of 5. All of those unrealistic savings are long gone and we have just driven the debt into overdrive.

[Connolly1916]

You ought to reread the article proletarian 101. I saw no contradictions.

Proletarian indeed. Bourgeoisplant more likely.

[boitexas]

from renaissance:

Private capital and enterprise have created the best health care system ever, with breakthroughs in medicines and treatments every year. Poor people have access to the greatest care in the world. Nobody is turned away if they are suffering.
=====================================================================

Breakthroughs in medical research and treatments happen mostly at the university hospital research level. Public Option is not talking about doing anything to get in the way of that mostly government funded research.

Poor people have access to the greatest care -- THRU THE EMERGENCY ROOM! That is the most inefficient method to provide care for things that could have been prevented if those poor people could afford health insurance.

Private health insurance puts profits above people. Profits above health and well being. Profits for a few over the health of millions. It is immoral.

And its not just private health insurance that's such a scam. Look at what happened after hurricanes Katrina and now Ike. Do you know how many thousands of people got screwed by private insurance like Allstate, State Farm, all the biggies, that after paying years of premiums and then being denied payment for losses. The same happens with private health insurance.

Wake up man. The people want Universal Coverage NOW.

[drjay79]

The public option is not going lobby lawmakers or contibute to their campaigns, insurance companies will, so they drop the public option. Nothing in it for them.