06/24/2009 12:32 pm ET | Updated May 25, 2011

Beyond The Public Option

by Faiz Shakir, Amanda Terkel, Matt Corley, Benjamin Armbruster, Ali Frick, Ryan Powers, and Ian Millhiser

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Tonight, ABC News will host "Prescription for America," a discussion with President Obama about his plans to reform the health care system. Critics have charged that Obama's proposal to enact a new public health insurance plan to compete directly with private insurers would lead to a "government takeover" of the health care system. During yesterday's White House news conference, Obama defended the plan, but stopped short of calling it "non-negotiable." "If private insurers say that the marketplace provides the best quality health care, if they tell us that they're offering a good deal, then why is it that the government, which they say can't run anything, suddenly is going to drive them out of business? That's not logical," the President said. Progressives have long argued that a public health insurance option is essential to controlling skyrocketing health care costs and expanding the choice of coverage. Moreover, a recent CBS News/New York Times poll found that "a clear majority of Americans -- 72 percent -- support a government-sponsored health care plan to compete with private insurers." The Tri-Committee health care reform legislation in the House includes a robust public option and the Senate's Health, Education, Labor and Pensions (HELP) Committee bill is expected to include a similar provision. Sens. Chuck Schumer (D-NY), Dick Durbin (D-IL), and Patrick Leahy (D-VT) have started Citizens for a REAL Health Care Reform and a Public Option, a petition in support of a public health insurance plan. But while a public option is certainly an essential element of health care reform, any overhaul of the health care system must also include a host of other progressive reforms, including robust affordability standards, shared responsibility principles, and payment reform.

ENSURING AFFORDABILITY: Health reform that fails to make insurance more affordable is at best an incremental improvement. The problem of affordability is most apparent for the nearly 47 million Americans who lack health insurance. The Agency for Healthcare Research and Quality found that while "15.8 percent of adults spent more than 10 percent of their family income on health care services in 1996, by 2003 the proportion of adults bearing what has historically been considered catastrophic financial burdens had increased to 19.2 percent of the population, or 48.8 million individuals." According to the Center for Studying Health System Change, one in five Americans had trouble paying their health care bills in 2007. In fact, even moderate levels of out-of-pocket spending -- spending that is well below the 5 or 10 percent of family income -- created difficult financial hurdles. Health care reform must expand safety net programs like Medicaid and the State Children's Health Insurance Program (SCHIP) for low-income families and provide help with premiums for middle-class families. While both the House and Senate health care proposals provide subsidies to families on a sliding scale of income up to nearly 400 percent of the federal poverty level (FPL), Karen Pollitz, a professor at the Georgetown University Health Policy Institute, insists that health reform must also include "a maximum out-of-pocket limitation" for both in network and out of network coverage. Moreover, "depending on what premiums are charged for qualified health benefit plans, subsidies capped at 400 percent of FPL may prove to be insufficient to ensure affordable health care for all Americans," Pollitz explained in yesterday's testimony to the House Education and Labor Committee. "The Committee might consider instead a rule that no individual or family will have to pay more than 10 percent of income on health insurance premiums....cutting subsidies off entirely at an arbitrary income level can leave families vulnerable."

SHARED RESPONSIBILITY: Health reform must also build on the principle of "shared responsibility," an approach that envisions "joint contributions by the public sector, individuals and employers." While individuals should be responsible for purchasing health insurance coverage -- with a waiver for those who cannot afford to do so -- "firms that do not directly provide health care to their employees" should be required to pay into a public pool to help finance their employees' coverage. As UC Berkeley Labor Center chair Ken Jacobs and Berkeley professor Jacob Hacker explain, an employer mandate enhances the existing system of employer-based coverage, levels the playing field between employers "that provide insurance and those competing with them that do not," reduces "crowd-out of private coverage by new public programs," and preserves the employer contribution -- an important source of funding for health care reform. And while critics charge that an employer mandate to provide coverage would lead to fewer jobs or mass layoffs, especially for low-wage workers, Hacker contends that "these concerns are overstated when it comes to the play-or-pay proposals currently under consideration, with their relatively modest employer requirements." A study of the impact of the Hawaii health care mandate, for instance, "found no evidence of reduced employment." In Massachusetts, where employers with more than 10 employees are required to provide coverage or pay a fine, "few firms reported making changes as a result of health reform." Moreover, "it is also important to keep in mind that health reforms with employer requirements promise new benefits for firms and workers as well as new costs," Hacker explained in testimony to the House Education and Labor Committee. "All firms would benefit from the reduction in unpaid medical bills incurred by the uninsured. Firms would further benefit from any savings due to a reduced rate of health-care cost growth," Hacker said.

REFORMING THE PAYMENT SYSTEM: As RAND economist Melinda Beeuwkes Buntin and Harvard University professor David Cutler explain in a new paper, to bend the curve on health care spending, we must reform the way we pay for medical services. Currently, "the U.S. health care system, with our 'fee-for-service' payment system, pays for the volume and intensity of services, giving short shrift to primary care, prevention, or wellness." Health care reform should "pay for value, not volume," and "move us toward value-based systems that pay for entire episodes of care, stressing prevention and not just acute treatment." Not only will these reforms improve the quality of care, but they could also lead to federal savings of about $299 billion over the next decade. In fact, payment reform that "is based on the idea that good care should be rewarded more than just more treatment...could save about 8 percent of projected spending over the next decade." To hasten these savings, Center for American Progress experts Ellen-Marie Whelan and Judy Feder are recommending -- in another report out today -- allowing the Centers for Medicare and Medicaid Services (CMS) to "implement these reforms more broadly without additional legislation."