An Alternative to the Public Option I Could Live With

09/18/2009 05:12 am ET | Updated May 25, 2011

The folks who read my blog posts might be surprised to learn that there is an alternative to the public option I could live with (besides single-payer, of course, that being my preferred option from the beginning). I have been an advocate for a very hard line on the public option, as I discussed here yesterday. But there is one other alternative I would feel okay about, and Bob Creamer outlines it today in his great post, Three Reasons Why a Strong Public Option is Likely to Be Part of Health Insurance Reform. Here's the part of Bob's post I'm referring to:

Once everyone is required to buy insurance, the companies can have a field day raising prices and profits using the government to guarantee they are paid -- either through subsidies or the imposition of fines. You can see why, from an insurance company perspective, this would be a great deal.

But from the point of view of the taxpayers -- and the insurance ratepayers -- it would be a disaster. It would be like giving the insurance companies a license to take your money -- with no regulation -- all enforced by government edict.

This, of course, is basically what happened with the prescription drug benefit -- Medicare Part D. But there is a big political difference. A huge percentage of the money used to pay the insurance and drug companies in Medicare Part D comes from the taxpayers (or deficits). Most of the money that will go to pay for health insurance in a new system will come from ratepayers -- individuals and companies who will feel the sting of rate increases directly.

What politician in his right mind would pass a law that requires individuals and businesses to buy products from companies who can then charge whatever the traffic will bear -- especially in an industry where premiums have increased three times faster than wages, and profits keep heading skyward even in the worst recession in 60 years? Once government requires you to purchase a product, it has to provide some means to assure that the price is fair.

There are only two real practical solutions to this problem. On the one hand, you could set up a public health insurance option that does not have the same incentives to increase profit or CEO salaries and would compete against the private insurance companies and keep them honest. That is what President Obama has proposed. Or you could regulate health insurance rates.

Now rate regulation is not a crazy idea. It's been done for years in segments of the insurance market at the state level. But if you think the private health insurance industry is fighting tooth and nail to stop a Public option -- wait to see what they would do to stop rate regulation.

So to my esteemed colleagues in the insurance industry, how's this for a compromise: we'll give up the public option but we will regulate health insurance rates instead. We will institute a system of strict price and rate controls, just like utilities have to live with where they weren't deregulated. That would do more to cut health care cost increases than any other thing we could do. So what do you think, guys?

This is the amazing irony of this whole debate, as it was by the way of the last one (1993-94). Insurance companies are happy to support universal coverage, but they are dead set against anything that would either control their prices or provide them any real competition or accountability.

This is why so many of us who know the health care issue are so determined to not give in on demanding a public option. Look, I am a pragmatist and an Obama loyalist. I want this president to be successful, and having fought a searingly painful fight in the Clinton health care war room a generation ago, I want health care form like I would want a drink of cold water in the middle of a hot desert. But without either a public option, or the kind of strong rate regulation Creamer is talking about, health care reform is a nightmare for the public and for the federal budget. It is not "the good" in the sentence "Don't let the perfect be the enemy of the good," it is a plain and simple disaster. That is why I don't agree with another good friend and ally of mine, Paul Begala, in his op-ed comparing health care reform and Social Security. I respect the argument he is making, and if it were another issue less fundamental to whether the whole thing works, I might agree. But keeping the insurance companies honest, as Barack Obama likes to put it, is too central to everything. That's only possible with either tough rate regulation or a public plan, because this co-op thing is a jumbled mess that clearly is a non-starter.

Health care is something everyone has to deal with in their and their families' lives and it is at the heart of our federal deficit problem. If the Democrats don't get it (at least mostly) right, we are done as a governing party in spite of all the other demographic and political advantages we have. It's time to face the music and tame the insurance industry dragon.

On an action note, my good friends Howie Klein, Jane Hamsher, Darcy Burner and the Atkins brothers, along with DFA, have put together an action to thank progressive Democrats for standing firm on the public option. Thank them here, and donate to your favorite one or five here. As you can see below, many of our fellow activists who think this is critical have.