What the Media and Obama Never Understood About the Public Option

03/18/2010 05:12 am ET | Updated May 25, 2011

People who support the latest version of the health care reform bill can't understand why progressives have been flipping out over the public option. By the end, it was so compromised that it covered a minuscule portion of the population, its cost controls were significantly reduced and it was a tiny portion of the bill. All of that is true. So, why all the sound and fury over something so small?

Well, it's the same reason that private insurance companies fought so hard to kill it (how come no one ever asks why they cared so much about it if it was so insignificant?). Because it was the one provision that addressed the cancer of the system: private insurance.

To be more accurate, there are three main cancers that are killing our health care system. 1. Fee-for-service system that encourages providing more services so that providers can charge more fees. 2. No effective competition between insurance providers to drive down costs and improve care. 3. The inalterable incentive of private insurance to lower costs by denying policy holders care and charging them more for the same or less services.

So, the Senate version of health care reform admittedly applies some mighty large band-aids to these problems. It has huge subsidies so that more people can afford the ever-increasing premiums. It has regulations meant to curb some of the worst abuses in how insurance companies deny us care. But it leaves the cancer alone; in fact, it grows it. That's the problem.

Again, to be fair, the first two problems might be addressed by the bill. That's why this is not a black and white issue and why it's so hard to make definitive conclusions about the bill. Efforts at bundling, new experiments in how to pay for care and a Medicare commission to study these issues might really help with the fee-for-service problem. The exchanges that are created by the bill and new program managed by the Office of Personnel Management might create real competition between providers.

But would you trade those two maybes for the definitive lack of action on the last cancer? That's a real tough question and that's why we have smart, thoughtful, caring people on both sides of the issue.

Here's why I ultimately say no to this bill. Because the last cancer is probably the most important one. If the whole system is designed so that private insurance companies can make as much money as possible, the incentives are always going to be wrong. Since they have a permanent incentive to lower costs by denying care and increase profits by charging more, they will always find a way around the regulations and reforms. And they have an army of lawyers and lobbyists to help them do so.

Having private insurance is like having the Sword of Damocles hanging over your head. You never know when they are going to deny you care or for what reason. You never have peace of mind that's supposed to come with insurance. Because their goal is not to treat you, it's to make money off of you.

I don't blame them; that's the way the system is set up. That's why the system is wrong. This bill tries to regulate that system, but it winds up reinforcing it because it strengthens the underlying structure by making private insurance companies even larger.

And as far as the money that's supposed to help us afford insurance, the insurance companies will find easy ways to gobble up all of the subsidies and then come back and ask for more. And those subsidies actually cost the American taxpayer a tremendous amount of money - which you can argue is a good thing because it goes to people who can't afford insurance - but as we have learned many times in the past, if it doesn't help everyone across the board, eventually there will be a limit to the generosity of the American people. And what happens when we run out of those subsidies and the system is still broken?

Worse yet, this version of the bill feeds the cancer. The extra money and customers being funneled to private insurance will only make them stronger, and more resistant to change later.

In situations like this, I'm always reminded of the great scene in Planes, Trains and Automobiles where John Candy and Steve Martin are headed the wrong way on a one-way street. People are screaming, "You're going the wrong way!" And John Candy (played by Rahm Emanuel here) leans into Steve Martin (played by Barack Obama here) and says, "How would they know where we're going?" Of course, they run into two eighteen-wheelers a little later down the road and find out what people were trying to warn them about.

Going along wit this road metaphor, let me do one more analogy here. The Obama team is telling us that they just loaded up the car with gas (subsidies) and did a comprehensive tune up (regulation). So, even if the road is long and there are some twists and turns in it, with the car all loaded, it's better to start down the road now then not to get started at all. Yes, but that depends on which direction you're going. If you start driving the wrong way, it doesn't matter how much gas the car has or how well it's been tuned. You're still going the wrong way and getting further away from your destination.

What I'm afraid of is that this bill makes private insurance larger and stronger - and hence, gets us further away from curing the main problem of our healthcare system. Apparently, Wall Street agrees because the three largest health insurance companies just hit their 52-week highs. The rest of the industry is also soaring and investors are confident that the industry insider who proclaimed this to Politico is exactly right:

"We WIN. Administered by private insurance companies. No government funding. No government insurance competitor."

In the end, of course, I might be wrong (and I would love to be since it looks like this thing is going to pass) and Wall Street might be wrong in how much they think this kicks ass for the insurance companies. And those maybes above might turn into positive change and lead to an overall improvement. But the reason we cared so much about the public option or the Medicare buy-in (or even my version of the Medicare buy-in that got some traction among progressives online) is because it addressed the core of the problem. It might not have gone very far down the road, but at least it wasn't going the wrong way.

So, if it turns out we were right and this version of reform heads in the wrong direction, then you'll know why we cared about something that seemed so insignificant to you. Because we wanted to be good friends and good citizens and yell, "You're going the wrong way!" before you hit the trucks down the road. The reason the public option mattered so much was because it was the one thing we were sure was headed in the right direction.