THE BLOG

Counterfeit 'Public Option' Holds Americans Hostage to Inflationary Private Insurance Costs

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

Born-again Republican and Blue Dog Democratic deficit hawks are disingenuous, crying fowl about proposed deficit-neutral health care spending of $1 trillion spread over a decade, while ignoring trillions in deficit-ballooning war expenditures, tax breaks and corporate largesse. Democratic reformers have led an equally dishonest discussion around health care reform, failing to make the case for a plan that could achieve true health cost savings and comprehensive universal coverage while saving $400 billion annually by eliminating fragmentation, administrative waste and profiteering private insurances through improved Medicare-for-all.

Democratic leaders have short-circuited the reform "debate" and permitted the process to be hijacked by health insurance and pharmaceutical industries that have been gifted with a mandate for millions more insured and billions more in taxpayer subsidies. Eliminating rejection based on pre-existing conditions is good, but that concession pales in significance next to the failure to control continued inflationary increases in insurance premiums, deductibles and copays.

Incestuous congressional-corporate bonds guaranteed that the health reform fix was in early on. Five former aides of Senate Finance Chair Max Baucus are now lobbyists. Previously Wellpoint's VP for public policy, Liz Fowler is listed as chief author of the Baucus bill.

Perhaps the greatest sleight-of-hand has been the Obama administration's pledge that a 'Public Option' will provide competition for private health insurers in order to keep them honest, and reduce health costs. Many groups have lined up behind the vaguely-defined concept of a 'public option,' which has morphed over time from the original substantial model set forth by Prof. Jacob Hacker that was predicted to initially enroll 130 million non-elderly Americans, and utilize economy of scale to lower overhead and provider costs, and ultimately, premiums.

Kip Sullivan of Physicians for a National Health Program details the genesis of the 'public option' from a Medicare-like program to a feeble option that "would effectively be just another insurance plan offered on the open market." Sullivan notes the language in the Democrats' bills authorizes the federal government to outsource 'administrative functions' necessary to run the 'option' -- likely, as reported in the Oct. 24 Washington Post, to be run by private insurance companies:

"The public option would effectively be just another insurance plan offered on the open market. It would likely be administered by a private insurance provider, charging premiums and copayments like any other policy." In fact, public option premiums are likely to be more expensive than private plans, forecasts the Congressional Budget Office.

Sullivan notes that the Democrats' House and Senate bills have effectively gutted the public option, eliminating all but one of the features of Hacker's original version of the "option" (maintaining the same minimum level of benefits by private and public insurances). Gone is the 'robust' public plan that would compete with private insurers. Some features struck from Hacker's original 'public option' model include requirements that:
• the 'option' be open to all non-elderly Americans
• that such a plan would automatically enroll all uninsured people and all Medicaid recipients prior to the commencement of operations
• that only public option enrollees get subsidies to offset the cost of premiums

According to Sullivan, evidence of Democrats' incredible shrinking 'public option' is confirmed by Congressional Budget Office estimates in July that the Senate HELP Committee's 'option' would enroll zero people; and the latest House bill (HR 3962) would enroll just 6 million people.

Sullivan contrasts the implementation of a Medicare-type program that almost immediately enrolls a large number of people, with the inefficient, tiny 'public option' that will of necessity be a "balkanized program" consisting of multiple local programs -- "Small size dictates market-by-market implementation of the 'option' program," with different market-entry barriers to be overcome in each market.

Initial assertions that the public option would be an affordable alternative to high-cost private insurances are belied by CBO forecasts of higher premium rates for the deflated 'public option.' Rather than a true choice of coverage for all, the PO has been reduced to limited coverage, most likely for the sick. Despite the early hype to "keep your insurance if you are satisfied," the public option was never intended for those dissatisfied with their employer coverage.

Most significantly, Sullivan writes that the two primary professed goals of health care reform -- to cover everybody and control health care costs -- have essentially been abandoned by reformers. Jonathan Gruber, a favored economist of the White House, said the bill "really doesn't bend the cost curve." If premiums are the benchmark by which reform is judged, "we are setting ourselves up to fail," Gruber stated.

Co-founder of Physicians for a National Health ProgramDr. Stephie Woolhandler draws a parallel between current U.S. reform and the failed Massachusetts reform model, whose escalating health care costs are now "the most expensive in the world" ($1.3 billion this year), prompting the shift of funding away from state safety net programs toward subsidizing private insurances.

Characterizing current reform as a "private health insurance bailout" of $500 billion in new taxpayer subsidies, she cites PhRMA as another multi-billion dollar winner. Even as pharmaceutical companies fill the 'donut hole' with low price generics for seniors, everyone else remains captive to high medicine costs. Reform proposals continue the great upward shit of U.S. wealth represented by the privatization of everything from war to education.

Woolhandler likens U.S. reform to a discussion about "whether to give Tylenol or Aspirin to a cancer patient."

Expectations around reform have been substantially lowered, as Bill Clinton and others urge the need to pass "something -- better than nothing." The distorted, debased reform discussion has primarily become a political calculation, rather than a crucial step toward economic recovery and the health of the population. Failure to make the best case for reform will exact a cost in lives and health, as well as losses for Democrats in future elections.

Dr. Don McCanne advises "stripping down the current legislation to the important beneficial features, including ending private insurer abuses, and pass it as a temporary emergency measure," while adding language that moves immediately toward universal, accessible, comprehensive, portable, publicly-administered reform.

Reform does not have to be this complicated or this costly. The best bill would be simplified with cost savings, expressed in a single sentence, says Sen. George McGovern: "Improve and extend Medicare to all ages."