US health reformers must show how the public option will help provide better value for money

05/25/2011 02:55 pm ET

Opponents of the public option in the Senate's draft healthcare bill argue variously that it is anti-competitive, will cost too much to implement and that it is the vanguard of a socialist takeover of the US healthcare system.

Let's be blunt; the public option is none of those things. The three to four million people it is expected to cover are likely to come from a pool of people not previously insured and in any case, according to the Congressional Budget Office (CBO), the public option will have to charge higher premiums initially due to the disproportionately high number of unhealthy enrolees. That's hardly anti-competitive.

The draft bill also suggests how the system will be paid for. Taxes will be imposed on high-cost insurance plans and Medicare payroll taxes would be raised from the richest Americans. A 5% tax would also be levied on elective cosmetic surgery. Whether opponents like these proposals is one thing; but again the CBO estimates a net reduction in the Federal Deficit of $130 million.

Which just leaves us with the knee jerk reaction to "socialized" healthcare. Trust me - I've worked in the NHS in the UK for 30 years and had the privilege of writing a 20 year plan for Scotland's NHS which shifted the balance of care to the community, from episodic to continuous, and compartmentalized to integrated care. A government run insurance scheme looks nothing like a state run health system paid for from general taxation.

However, if the public option is to survive, proponents will need to show that that a public option could actually help curb costs in a healthcare sector which has spiralled out of control.

America spends more per person on its healthcare than any country in the world; yet Americans can expect on average to have shorter lives than people in almost every other developed country, including the UK.

And American healthcare is expensive. As one doctor put it:

"I asked my friends, other doctors, why they thought we were so expensive, and they all knew. And I knew too. We all know that, for various reasons, we order too many expensive tests, procedures and medications, without considering the costs and the benefits."

Add on to this the sky high costs of administration and marketing and the relative weakness of the primary care sector and it all soon adds up to the most expensive healthcare system in the world.

One of the main criticisms of the NHS, aired in a series of provocative TV ads supported by the Republican Party, was that rationing dominated all healthcare decision making and raised the laughably absurd concept of the NHS having "death panels", a dystopian echo of second rate science fiction.

At its heart, the root cause of America's wildly expensive healthcare system is the fact that it rations on non medical grounds; treatment is determined by an individual's ability to pay rather than on evidence based medicine.

A robust public option, however, could start to address this incongruity, reduce the
ever widening mortality gap between rich and poor, and in doing so start to bring costs down.

Imagine: a government health insurance provider that based its decisions on affordable treatment on the basis of medical evidence and outcomes, rather than on non medical factors. The NHS established a National Institute of Clinical Excellence to provide a transparent, evidential, rule based system to determine whether new treatments or procedures should be adopted by the NHS. It also has the advantage that it has to consider whether the price being charged by a manufacturer offers value for money.

What's more, the public option could even use its market strength to bolster the flagging primary care system by paying disproportionately higher rates to General Practitioners (GPs) than they get currently. More GPs means fewer needless treatments ordered by specialists who have a vested interest in ordering more and more expensive tests and therefore contributing further to the cost spiral.

The public option therefore, set up properly, could be exactly the transparent tonic that American healthcare needs. The private sector won't do it - they have no incentive to and have shown that they won't. But as their premiums go up to accommodate the latest procedures and medicines (an increasing number of which will deliver marginal benefits) the public option premiums will rise more slowly. Starting from a comparatively high level because of the poor health of enrolees, the public option will become more competitive. Will families really want to spend up to 60% of their income or bankrupt themselves on the off chance that they might need a drug which will prolong their end of life by 3 weeks? Possibly not.

American politicians have a once in a generation chance to reign in US healthcare spending for the greater good; the public option is the way to do it.

David Kerr is Professor of Cancer Therapeutics at Oxford University and Chief Research Advisor to SIDRA Medical and Research Centre.

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