07/23/2009 05:12 am ET Updated May 25, 2011

Hey Moderates, Public Health Plan Option Will Cut Costs (And Other Fun Facts)

The Senate and the Beltway media got the vapors last week when the Congressional Budget Office estimated the government cost of two draft Senate health care proposals to be above $1 trillion.

With the media presenting the preliminary CBO price tag devoid of any context, Senate Finance Committee chair Max Baucus panicked, delayed introduction of a bill and produced a new draft with no public health plan option. The Senate minority of Republicans and right-leaning Senate Democrats who never wanted a public plan option are now using the CBO estimate as an excuse to drop the idea -- even though the idea was not part of the CBO's cost analysis.

In other words, the conservative Senate minority, with the help of the media, is distorting the public debate.

We need to reframe the debate immediately, and counter misleading information, if we are to press Congress to enact effective health care reform with the choice of a public plan that help covers everyone and reduces costs. Here's how we can:

1. It is not public plan option vs. saving money. The public plan option is the best way to save money.
If these alleged deficit hawks actually care about wasteful spending, then they would want a public plan option, and its $1 trillion in health cost savings over 10 years.

Who says? The Lewin Group -- which, by the way, is the same organization conservatives have repeatedly cited when arguing President Obama's plan would spark a migration from private insurance into the public plan option.

They just don't mention such a migration would save us tons of money.

2. It is not a trillion-dollar plan. It is a investment of about $50 billion per year to expand coverage and reduce overall costs. Senators and reporters keep throwing around eye-popping numbers like $1.6 trillion, but such "price tags" are grossly misleading for several reasons. First, it's the amount of money it would take to cover all Americans for 10 years, not one year.

Meanwhile, our federal government already spends $3 trillion a year. As a nation, we all currently spend $2.2 trillion on health care per year, and with costs skyrocketing, we will spend $30 trillion over the next 10 years on health care if we fail to reform the system.

We live in a big country of 300 million people. The number attached to a major initiative over a 10-year window is going to look like a lot of money out of context, but in fact amounts to much more bang for our health care bucks -- achieving universal health coverage while reducing overall health care spending

Furthermore, just because the reform effort may have a cost of more than $1 trillion, that doesn't mean taxpayers will be paying more than $1 trillion in new taxes. Much of that cost will be handled through other savings in the health care system. For example, the Lewin Group analysis of Prof. Jacob Hacker's version of a public plan option found that it would need $53 billion in new revenue annually, not $100 billion.

And again, that annual investment would pay off with a 10-year savings of $1 trillion -- including savings for state and local governments (read: lower state and local taxes), businesses and households.

3. The CBO is not God.
The job of the Congressional Budget Office is to make an estimate of the cost to the federal government. But any estimate involves subjective assumptions. And CBO makes cautious assumptions, because it is institutionally skeptical of new ideas. The New Republic's Jonathan Cohn recently explained:

...the agency still seems inclined to produce estimates that strike many outsiders as overly cautious. To take one example, electronic medical records make it a lot easier to compile data on which treatments work, which--in turn--will let you cut down on the use of ineffective ones. In other words, there is reason to believe the two innovations would save more money in combination than they might separately. But, according to people familiar with the CBO's thinking, the agency seems skittish about giving extra credit for the way the two reforms would interact. Harvard economist David Cutler, a key architect of Obama's campaign plan, just published a paper outlining the potential to save the federal government $600 billion over ten years--about half of what it would cost to pay for expanding insurance coverage. Again, the CBO seems skeptical.

Nobody disputes that there is room for honest intellectual agreement; plenty of smart people dispute claims about savings that reform will generate. But it's an open question whether the CBO takes skepticism too far--and whether such a super-strict reading of the evidence really serves the public interest.

Obstructionist insiders looking to derail the public plan option know full well of CBO's reputation, so they have hyped up the CBO as the ultimate scorekeeper, figuring that it won't assume the same kind of savings other independent analysts have. We should not fall into their trap, and should not treat CBO's numbers as gospel.

4. $1 trillion dollars over 10 years is not a magical threshold of fiscal responsibility. It's a completely arbitrary benchmark. There simply is nothing special about keeping the overall cost of the plan to $100 billion per year, as opposed to $130 billion or $160 billion.

Now, more money doesn't automatically mean better anymore than less money automatically means better. We should strive to be as efficient as possible with our up-front investment, and there are several ideas in addition to adding a public plan option worth considering that would strengthen the system at less cost -- see Jonathan Cohn and Ezra Klein.

Crudely cutting down the size of the bill to meet an arbitrary benchmark, at the expense of reaching the goal of quality, affordable health care for all, is simply unnecessary. But that"s what the latest Senate Finance Committee draft would do.

5. Everybody in the nation wants a public plan option.
Both the NBC/WSJ poll and the NYT/CBS poll found overwhelming support, about 75%, for a public plan option.

So the people want it, and it saves us money. There simply is no policy or political rationale to justify leaving a public plan option out of reform. Once that is made crystal clear, it will also be crystal clear the only reason to oppose it is sucking up to insurance and drug lobby campaign cash.

Once that is obvious, it becomes much harder to resist the will of the people.

Originally posted at