The hard truth is that a robust public option is already dead. Dedicated activists like Jane Hamsher and conscientious public servants like Rep. Anthony Weiner deserve props for continuing to fight the good fight for a robust public option (particularly since in their heart of hearts they really support Medicare-For-All), but their fight is largely quixotic.
With a robust public option dead, the real question is can a health care reform bill worth passing still be salvaged? As detailed below, if government regulation of insurance rates and a trigger on individual mandates are added, a bill which bans insurance companies from rejecting customers for pre-existing conditions might still be worth passing. Otherwise, it's little more than a massive government subsidy of the insurance and drug industries and it ought to to be defeated.
The New York Times and the Associated Press made clear this weekend that the Obama White House and leading Congressional Democrats are hard at work on a political strategy to kill the public option outright by substituting toothless triggers or coops to satisfy Blue Dogs and one or two Republicans like Olympia Snow and keep the backroom promises the White House made to the insurance, pharmaceutical and health care industries in exchange for campaign contributions.
But even in the unlikely event something called a "public option" somehow makes it into the final legislation, it might as well be dead--the versions of the "public option" that are still on the table in Congress have already been so compromised as to be all but meaningless. They are drastically watered down from the robust version that was presented by the likes of Jacob Hacker, Health Care for America Now and Move On as a "pragmatic" alternative justifying progressives negotiating away Medicare-For-All in advance. Their original public option plans were projected to cover over 125 million Americans, be the default option for all of the uninsured, be available to employers, require doctors who accept Medicare patients to accept patients from the public plan, and use negotiated Medicare rates to keep costs down.
None of these requirements for a robust public option remain on the table in Congress. The public option, as passed by the Committees in the House and the HELP Committee in the Senate, don't require Medicare doctors to accept patients from the public plan, don't use Medicare pricing but require the plan to negotiate rates on a provider-by-provider basis, require consumers to opt in rather than opt out, and bar employers who currently provide health insurance from switching to the public option over private plans. Even before the House dropped Medicare pricing, the Congressional Budget Office projected that this type of public option would have at most 10 million customers 5 years from now under the House bill and 0 (that's right 0) customers under the Senate HELP bill, and wouldn't materially lower insurance costs. (For a brilliant critique of the watering down of the public option, see "Bait and Switch: How the 'Public Option' Was Sold" by Dr. Kip Sullivan.)
With a robust public option dead, what we're left with is a massive Democratic-sponsored taxpayer bailout for the insurance and drug industries and a back-door tax on the uninsured middle class. The plan may ban insurance companies from rejecting people with pre-existing conditions (a good thing), but it places no limits on how much they can charge.
Health insurance premiums have skyrocketed by 87% over the past 6 years and now average $6,000 for individuals and $14,000 for families. 94% of insurance markets are highly concentrated and monopoly/oligopoly pricing have enabled the largest insurance companies to increase their profits by 428% from 2000-2007 while paying their CEOs an average of $11.9 million apiece. If the government mandates that the nearly 50 million uninsured buy private insurance or be fined as much as $3800 a year by the IRS (while providing hundreds of billions of dollars in taxpayer-funded premium subsidies to the less well off), insurance companies are all but certain to jack up their rates even further, keeping health insurance unaffordable to the middle class and breaking the federal budget with ever-increasing subsidies.
With enough arm-twisting from the White House, such a bill may squeak through Congress. But when it's fully implemented and the American people discover the burden it places on them as consumers and taxpayers, it could turn millions of people who elected Obama and a Democratic Congress against Democrats for a generation. Perhaps that's why Obama proposes to delay implementing many of these provisions until 2013, after the 2012 elections.
Many Democrats, including Barack Obama, Rahm Emanuel, and Congressional leaders seem to think passing any bill that's called "health care reform", no matter how flawed, is better than passing nothing. They fear, with some justification, that if, having taken control of the Presidency and both Houses of Congress, Democrats can't pass something called "health care reform", voters will conclude that Democrats are unable to solve serious national problems. On the other hand, passing a bad bill could have an even more negative long-term impact on Democratic prospects.
So the question is, assuming the public option is dead, are there other alternatives--as Obama said in his Congressional speech that he's open to considering--that could make a health reform bill worth passing? As a long-time Medicare-For-All advocate, I'm tempted to say "no". But as a political pragmatist I've got some key suggestions:
1. REGULATE INSURANCE RATES: It's a bit amazing that while liberals have been fighting for the leftover crumbs of a feeble public option as the way to "keep insurance companies honest" and prevent them from overcharging, no one on the left has suggested the more vigorous solution of rate regulation. If the government is going to force citizens to buy a private product like heath insurance and taxpayers are going subsidize the premiums of lower income purchasers to the tune of hundreds of billions of dollars, then the government has to regulate the rates that insurance companies can charge. This is what virtually every state does when it mandates that every driver buy auto liability insurance, which is far less expensive than health insurance.
Congress should require that health insurance premiums, and all increases thereto, be regulated by state insurance regulators. But since many state regulators have proven to be overly sympathetic to the insurance companies they regulate (a phenomenon social scientists call "regulatory capture") the federal government should place strict criteria on such state regulation. Among other things, at least 85%-90% of every premium dollar and income from investing premiums must go towards paying for health care with no more than 10-15% allowed for insurance company overhead, marketing, executive salaries, and profits. (Ideally, it would be even better to adopt the Swiss system where private insurance companies are banned from making a profit on a basic health insurance package and can only make a profit on supplementary policies for things like private rooms and cosmetic surgery, but that's not likely to happen.) In addition, if insurance companies are going to benefit from government subsidies, then insurance company executive should receive compensation of not more than $1 million a year. If the government is going to mandate that people buy private insurance and subsidize premiums with taxpayer money, then average CEO salaries of $11.9 million are unconscionable.
2. PUT A TRIGGER ON IMPLEMENTING INDIVIDUAL MANDATES UNTIL INSURANCE PREMIUMS ARE AFFORDABLE: If we're going to discuss triggers for the public option, we should be discussing triggers for individual mandates, postponing their implementation until insurance is affordable to average Americans. Without a strong public option that can reduce insurance premiums on day one, mandates are nothing but a giant government subsidy for the insurance industry and a back-door tax on middle class consumers. Economist Dean Baker forcefully made this case in his Huffington Post article, "Are Mandates Mandatory?" "If we can't get a public plan in this round, why should progressives be pushing for a regressive tax that will go into the pockets of the insurance companies and the overpaid CEOs?"
Postponing implementation of individual mandates is consistent with Obama's Presidential campaign where he campaigned against Hillary Clinton's support of individual mandates, arguing that there should be no mandates unless health insurance costs are first brought down to affordable levels. To quote directly from the health care plan Obama proposed during the Democratic Primaries: "Key differences between Obama's and Clinton's proposals: no individual mandate." Obama circulated a mailer which criticized Hillary for supporting individual mandates, showing a photo of a couple sitting at a kitchen table, stating "Hillary's health care plan forces everyone to buy insurance, even if you can't afford it". The Obama campaign stated, "Barack Obama believes the reason people don't have health care is that they can't afford it, not that they need to be forced to buy it...Obama strongly believe that meaningful cost reduction measures must take effect before a federal individual health insurance mandate can be considered." This is one of the elements of Obama's campaign that helped him defeat Hillary with the support of liberals and progressives. He's now flip flopped.
Since Obama made his campaign promises, insurance premiums have become less affordable, not more affordable, Without a robust public option and without vigorous government regulation of rates, an individual mandate requiring 50 million more Americans to buy private health insurance is all but certain to motivate insurance companies to raise rates even more. Supporting such a mandate is political suicide for Democrats. When the government gives a family making about $65,000 a year the choice of spending over $15,000 a year for a private health insurance policy or paying a fine of $3800, they're going to blame the Democrats.
To prevent political disaster and implement simple fairness, Obama should keep his campaign promise that there will be no individual mandates unless and until health insurance is affordable. No American should be forced to buy insurance or pay a fine to the government unless good insurance policies with reasonable co-pays and deductibles are available for no more than 10% of their after tax income.
3. GIVE MEDICARE THE POWER TO NEGOTIATE FOR LOWER DRUG PRICES: Congress must reject the backroom deal that the White House made with big Pharma to continue to ban Medicare from negotiating lower drug prices. This deal will cost taxpayers hundreds of billions of dollars and directly contradicts numerous Obama campaign promises. As Obama told cheering supporters during the campaign, "We'll tell the pharmaceutical companies, 'Thanks, but no thanks for overpriced drugs'. Drugs that cost twice as much here as they do in Europe and Canada and Mexico. We'll let Medicare negotiate for lower drug prices." The Obama campaign's health care plan promised that it would "Allow Medicare to negotiate cheaper drug prices...Barack Obama and Joe Biden will...use the resulting savings, which could be as high as $310 billion, to further invest in improving health care coverage and quality."
The Obama's administration's flip flop on this campaign promise is perhaps the most egregious of all and will cost taxpayers hundreds of billions of dollars in exchange for a promise by big Pharma to make campaign contributions to Democrats. It flies in the face of everything Obama campaigned on. Any reasonable health reform bill must allow Medicare to negotiate for lower drug prices. If Congress stands firm, Obama will just have to tell Bill Tauzin and big Pharma, "Nancy Pelosi made me do it".
4. ENSURE THAT DENNIS KUCINICH'S AMENDMENT ALLOWING INDIVIDUAL STATES TO EXPERIMENT WITH A SINGLE PAYER SYSTEM STAYS IN THE FINAL LEGISLATION: Canada's single payer system started in one province--Saskatchewan--and was so popular and successful that it spread to the entire country. If national single payer has been taken off the table, States should at least have the right to try it out, if they choose, and demonstrate whether or not it's better than reforming private insurance.
On balance, if the final health reform legislation effectively regulates insurance premiums, puts a trigger on individual mandates until insurance is affordable, lets Medicare negotiate lower drug prices, and allows states to experiment with single payer system, then despite it's serious flaws, it's probably better for Democrats to pass it than do nothing. Without these changes, health care "reform" is little more than a huge government subsidy for the private insurance and drug companies and a back door tax on the middle class and should be defeated. If so, without a robust public option and without these changes, let's hope at least 39 members of the House Progressive caucus have the courage to stand up to pressure from the Obama White House and keep their promise to block passage of this massive piece of corporate welfare masquerading under the name of "health care reform".