Democrats on the left and right are expressing interest in a new compromise that would provide a public option in the health bill but allow individual states to opt out of it. People may well be right when they say this is a deft way to pass a bill with 60 votes, but policymakers and observers should be clear about the potential downsides. It could disable the already-hamstrung public option, create new political liabilities, and be castigated by critics as the "Blue Cross of Alabama Enrichment Act of 2009."
A simple thought experiment might clarify the issues at hand: What if Medicare had been passed with this 'opt-out' provision? To make the thought experiment more appropriate to the situation at hand, we must imagine that the 1965 law creating Medicare had already been subject to the same compromises that the public option has been: that its ability to negotiate with certain suppliers and providers has been negotiated away, and that instead of being available to all older Americans, access has been restricted so that only an estimated 5% of them are expected to join.
A plausible answer is that a number of states, especially in the South, would have chosen not to participate.
What happens next in our thought experiment? Our hypothetical Medicare program, which was already likely to enroll only a few million elderly people, is now likely to enroll even less, reducing it by 20-30% or even more. That means it has even less operational efficiencies, even fewer economies of scale, and less leverage with those suppliers with whom it is permitted to bargain.
The end result would probably have been a pretty weak Medicare - one that's unable to report significant savings when compared to the private sector. Those weak results, the product of political compromise, would probably then have been used by political opponents as evidence that "government-run healthcare" doesn't work.
Now that the thought experiment's out of the way, let's consider the states that are most likely to opt out of a public option if this provision is enacted. Alabama would be high on anyone's list, and Blue Cross has 83% market share in that state. In practice, that would mean that most middle-class Alabama families would be required to purchase Blue Cross insurance or face a tax penalty under the mandate provisions of the Finance Committee bill. The bill would strengthen an already-unacceptable monopoly while increasing the financial burden on working people.
The monopolization problem isn't restricted to one locale, either. An AMA study concluded that one carrier had 70% or more of the market in 37% of areas studied. In 16% of areas one carrier had 90% or more of the market.
And those are precisely the areas where carriers will spend whatever it takes to get an "opt-out" enacted. Add in the ongoing mergers in the health industry and the study which shows that 94% of markets have a near-monopoly situation already, and you have a genuine ethical problem in any state that chooses to opt out of the public option. (Ironically, it was Sen. Schumer who first discussed the monopoly problem - the same Sen. Schumer who is now pushing the opt-out idea.)
One solution to this ethical problem would be to waive the individual mandate for states that don't offer a public option. That would make the compromise more defensible, and would provide more incentive for insurance companies to accept full reform. But is that likely to become part of this package, especially since the CBO already estimates that 6% of Americans will remain uninsured following the enactment of a bill that we were told would achieve "universal coverage"?
Liberal supporters of this compromise are quick to suggest that few states will opt out, and that leaders in those that do will face severe punishment at the polls. They're not considering the massive amounts of money at stake, and what that will mean in terms of insurance industry campaign contributions. There will be even more money spent on advocacy ads that explain why the public option is "bad for America, bad for (your state here), and bad for you."
The usually genteel Nate Silver opts for an uncharacteristically harsh and sarcastic approach in voicing his support for this idea. "Opt me out of public option purism," he says, deriding (but not naming) the "usual suspects" for their rigidity and suggesting that "this compromise is leaps and bounds better than most of the others." But the right question is: Will it work? He says it will, and cites the behavioral economics theory that says change to the status quo is difficult because "default preferences are extremely powerful." Yet this entire debate is about major change. We're only discussing this issue because we've rejected the "default," which seems to render that argument somewhat moot. Sure, it's better to have an "opt-out" than an "opt-in," but a number of states are still likely to leave the system.
Nate then suggests that public sentiment will shift if, as seems likely, a public option is proven to reduce costs. But we're talking about changes here that make it less likely that a public option will significantly reduce cost, so we're skewing the results before we even begin the process.
To paraphrase Mao: Let a hundred flowers bloom, but don't water 99 of them.
Ezra Klein argues for the "opt-out as fair competition" model, too, adding that "It also creates a neat policy experiment." But the experiment's not so "neat," and not much of an experiment, if a series of compromises rigs the outcome. And the experimental subjects in those monopoly markets may not be happy with their test-subject status.
Will a major compromise be necessary? It's possible, and if that happens realists may decide that this idea warrants consideration. Fair enough. Nobody who follows practical politics can afford to be a "purist," to use Nate Silver's language. But let's be realistic about our compromises before we make them, and let's not leap to embrace major compromises by pretending they are less significant than they are. It's misleading to imply that a "robust public option" can co-exist with an opt-out. Should the day come when all other options fail, Democrats should make an informed decision: The opt-out is a hard blow to the public option, and potentially a crippling one. Medicare as we know it might not have survived such a compromise. When a solution sounds too good to be true - we can compromise and still get everything we want! - it probably is.
For those who agree with Sen. Sherrod Brown that "the public option is the moral compass of health reform," the stakes are even higher. If it's really a moral issue, how can states be allowed to opt out? If this is your position, the opt-out is the moral equivalent of the Missouri Compromise.
Is a 60-vote, non-reconciliation outcome in the Senate worth the loss, the cost, and the risk that an opt-out provision brings? Maybe in the end the answer will be 'yes,' but that question should only be posed after all other options have failed. In the meantime, Democrats who remember the successful fight for Medicare might best be served by the acronym WWLBJD:
What would LBJ do?
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RJ Eskow blogs when he can at:
A Night Light
The Sentinel Effect: Healthcare Blog
(From time to time I put my comments in context with a disclaimer statement like this: I have done consulting work for large health insurance companies in the past. While I'm not doing any such work at the moment, I might do so in the future - although that becomes less likely every time I write a piece like this one.)
Follow Richard (RJ) Eskow on Twitter: www.twitter.com/rjeskow
Tom Matzzie: Take the "Opt Out" Public Option--Good Policy, Politics
All states will eventually have a public option. The states that are the most hungry for it will get it first, while the states most reluctant will get it last.
The question is, could this pass?
Democrats need to start using Rethug keep-the-angry-mad-as-hell tactics. The Republicans know that anger is what motivates their teabagger and birther imbeciles to vote. Good examples of the use of anger by the Democrats might be to let the Rethugs filibuster, haul out the cots into the Senate hallways, then let the obstructionists make the evening news every evening. Watch the Rethugs plummet in the polls, month after month. A public option opt out could accomplish similar results. The Democrats moral option would be to support those complaining of being opted out. Anger gets out the vote. Snuff 'em with anger and Alan Grayson bluntness. Then give us Medicare For All.
Opt out is a Trojan Horse specifically designed to kill health reform and its victims in red states will be minorities, the sick, and the poor, many of whom will die before their time because they cannot afford to buy insurance and make too much money to qualify for the federal subsidy (over $42,000 per year).
Opt out is vicious and cruel.
http://www.newspress.com/Top/Article/article.jsp?Section=NATIONAL&ID=565665408109379708
And if my state opts out of the public option, I may well opt out of being a resident of such a backward state. Fortunately, I'm in the position of being able and willing to move.
The "public" option must be available to all comers regardless of whether or not they are currently insured. Nothing else should be considered "robust". If that's what is meant by a "robust public option," I don't see how allowing states to opt out would be a problem. But if a "robust public option" has anything other than universal eligibility within any political jurisdiction where it's allowed to exist, it will be doomed to failure with or without "opt out".
The Devil is in the details.
Telling your citizens that they must buy private insurance, when your citizens have been hearing the accolades that public option insurance is receiving from the rest of the country would be foolish.
If, as the above argument goes, the insurance company would spend a gazilion dollars on a marketing blitz to kill the public option in your state, that insurance company will have to raise their premiums even more to cover that gazilion dollars spent. Seems like the citizens would realize they are getting hosed by the insurance company and also realize they have NO OPTION.
And when they hear about others accross the state line who are saving a ton of money on insurance...I suspect the citizens will be pissed at their own politicians.
And I suspect their own politicians that prevented them from obtaining low cost health insurance will also be republicans.
Bottomline: yet another death blow to the republican party.
Bad health care policy...but potential fatal damage to the republicans who continue to support the insurance companies over their citizen voters.
Remember - you can't turn this battleship around on a dime...if will have to be done is smaller degrees.
Our Constitution states pretty plainly that the powers not enumerated to the federal government belongs to the states and the people respectively. My health care is not the concern of the federal government. No one in Washington knows what's best for me, know matter how many policy wonks and think tanks say they do. Limited government is the true greatness of American ideal. The people are supreme. Medicaid, Medicare and Social Security are all careening towards insolvency leaving trillions in unfunded IOU's for future generations.Nationalized healthcare will yield the same result only much faster. A public option won't compete with private insurance. It will crush and devour them as it eliminates competition and innovation. Check out the latest list of Nobel Prize winners. 8 of 9 in medicine and science were Americans. The proud result of the ingenuity of the American people and personal liberty.
Nice theory, but it will become the concern of the government once you can't afford health insurance but end up going to the hospital due to illness or injury - injury that you may not be responsible for, but are bleeding anyway.
So when you show up at the ER with no insurance and your guts are hanging out and your blood dripping on the floor.....then what?
Will you tell the hospital to refuse to treat you because you can't afford it?
Or will you accept all of the hospital medical aid and then let them collect from the government cause you can't afford to pay that whopping hospital bill???
Do explain to us what you would do in this situation and what you think everybody else in this situation should do.
How much should they pay? Last figure I heard for this latest health plan is that it would cost $850 billion over ten years. So take that figure, divide by 50 states and ten years, and you would come to an average yearly penalty of $1.7 billion per year for any state that wants to opt out (more for higher than average population states, less for less populated, on a pro-rata basis).
The mandate requires every individual or family to purchase insurance, unless they already are insured under an employer paid plan. The mandate only applies to people.
People who do not buy insurance will be fined $1,500 (insurance companies are pushing for $3,800), even if their reason for not buying it is they can't afford it. The federal government will subsidize the cost of insurance for people who make less than 300% of the poverty level (less than $42,000 per year).
People who are uninsured when the law goes into effect will be able to choose between buying a policy from a private insurance company or the public option, except in states that vote to opt out of the public option. Opting out means people will have no choice and must buy their policy from a private insurance company, no matter the cost or coverage. In most states one company dominates the market so, if a state opts out, people have no choice and have to buy from that company.
People who fail to buy insurance will be required to pay the penalty whether the state in which they live opts out or not.
As long as we have a system of legalized bribery, nothing is gonna get better...
The Insurance Industry wrote this bill...for themselves...
Note that it's an opt OUT program. All states would be included unless they subseuently opt OUT.
And which state is going to do that? It would be like, well, killing grandma. Get it?
What would kill reform is an opt in policy. Thank your lucky stars that no such proposal is yet getting attention.
Remain vigilant.
Please explain your brilliant theory that states "will have to opt out because they don't have money". It makes absolutely no sense whatsoever.
The "public" option in all its forms is to be self-funded through premiums (and only indirectly by the Federal tax credits or subsidies paid to low income individuals who otherwise would be unable to afford either the "public" option or one of the private options).
What then remains from the "reform": no pubblic option for the midddle class, no public option for the poor - NO PUBLIC OPTION AT ALL except the already existing Medicare for the elderly. The healthier and better earning younger patients are given to the insurance industry to profit from, WITHOUT COST CONTROLS. Result: A system even worse than what we have today.
The Democratic party have already failed by not offering single payer or expanded Medicare for all. From this point on, it can go only down. The gates have been opened for a third party, may be for the first time in American history. This is the only good thing to come out of this mess of corruption and deceit.
Go to most hospital and watch what happens during the night shift. You have cases of one nurse assigned to a hundred patients. How can you make sure everybody's needs are met? How can we ensure that a patient who needs a pain killer is attended to in a timely manner or attended to at all given the ratio of nurses to patients? The hospitals understand that by understaffing, they can reap a huge profit, and so they do it. It's a business. Charge what the market can bear and minimize expenses means huge profit.
You cannot shove this lousy product down the throats of Americans.
Think again.
"You cannot mandate a health insurance, a product, design to make money for insurers without mandating the quality of care that the buyer out to get."
Tunde15 is absolutely right. Social Security is a government tax, it's not payed to private institutions. Tax to a private institution is called "taxation without representation" and it is tightly related to revolutions. I think what people want is tax funded medical care - it achieves the best risk spreading and cost control. It's not about "who pays" it's about "to whom". Taxes are payed by everyone, naturally. Tunde15 did not object that.
This post is looking at a worst possible scenario.
How many states opted out of the stimulus? Zero.