Public Option Redux

05/25/2011 02:50 pm ET

This week there is yet another attempt to introduce a "public option" into health care that could pass the Senate. It's not really a public option. It's not really new. But it just might do the job. It's essentially an expansion of an established program, the Federal Employees Health Benefit Program (FEHBP), run by the government's Office of Personnel Management. It would open this program to some part of the population nationally. A government agency (OPM) would administer it but the plans competing for your business would be private nonprofits.

I am the lucky recipient of a number of emails that keep pushing me to explain why Congress won't give everyone access to what they have. The right uses this as an excuse to attack health reform -- if the health reform plan is so great, why won't Congress require their own members and staff to enroll in it? Why not, indeed?

This, however, is no new idea. When I worked in the Clinton White House in 1994, we considered expanding the FEHBP to everyone and the president even mentioned it in his State of the Union speech. Senator John Kerry in 2004 introduced it as the "Congressional Health Plan." The idea has gained support over time on both sides of the aisle, but it has never had enough support for serious consideration until now.

What are the advantages of doing this?
1. It would be a national and more consistent solution to the fragmented state by state opt ins, opt outs, that are currently being discussed.

2. It would build on a reasonably successful program already in place. Not much new "seed money" would be needed to get the expansion in place.

3. it would offer people a true choice of plans, something most of us don't really have. If you have an employer-sponsored plan, you usually get at most two or three choices and often they are all offered by the same insurance company (e.g. HMO, PPO, HDHP). Depending on where you live, a few plans may dominate the marketplace, offering little real choice.

4. It would not be a "public option," which could allow Congressional members to backtrack on their opposition to "government control" while still supporting this idea. (See Mike Lux's blog on the language of this....)

5. It could invigorate the nonprofit insurance industry, because only nonprofit plans could compete. Instead of seeing plans turn for-profit, we might see for-profits establishing new nonprofit entities. Whether that would make a difference is hard to say, but not having to report quarterly earnings to shareholders could be good for all of us. And the current OPM sets a 1.2% maximum profit level on all insurance plans with which it negotiates.

What are the disadvantages of this so-called "not really public option"?

1. Well, it's not really a public option in the sense that the companies offering coverage would be private nonprofit, not publicly governed or administered.

2. Jon Walker at Firedoglake pretty much sums up the objections to this idea:

This is not a public insurance entity competing with the existing private insurance companies. This will do nothing to inject competition into concentrated markets. This will not ensure the government provides people with at least one decent insurance plan structured to promote the public good. In the long run, this will not change how the insurance market operates or help rein in our out-of-control health care costs. (The FEHBP has been a failure on the cost controlling front.)

3. The FEHBP has not been spectacularly successful in controlling costs, but it has not been a complete failure, contrary to Walker's comment here. The graph he refers to in Ezra Klein's column shows the FEHBP, Employer sponsored insurance and CalPERS all running at about the same annual costs. If you're doing an expansion of FEHBP to control costs, you would need more than just multiple plans competing against each other to achieve that. But that's not to say a strong public purchaser could not put pressure on insurance companies to pay providers differently and thus contain costs.

4. It's a "late in the game" idea, and the disadvantage of it might be that it cannot be cobbled together quickly enough to make it to the final bill.

5. The fact that the OPM would run this program would require additional resources and would open the idea to charges of a government take-over, just as if the program really were public. So I'm not sure the opposition would melt away. But it would be fun to watch the same conservatives who are complaining that Congress won't give everyone what they have turn around and oppose this.

6. It would be difficult to include abortion coverage, because the current FEHBP plans offer very limited abortion coverage to federal employees. This could truly complicate the debate by conflating the two most contentious issues -- abortion and public option -- into one big mess of a concept.

But definitely stay tuned. This is truly a public option "redux" if the meaning of the word is "brought back" or "revived" or "restored." The public option has lived and died so many times, it has gone beyond feline life expectancy.

Update: In addition to this OPM/FEHBP approach to a public option, the Gang of 10 are considering opening up Medicare to people 55 and older. Not sure what that would cost the individual, but it's an option many have been suggesting for a long time. Read Jon Cohn at TNR about it.