03/18/2010 05:12 am ET Updated May 25, 2011

The Public Option: Why Not Allow 80 Million Americans to Join?

With the introduction of the Senate's health care reform bill, we have two legislative packages, one (from the House) that has a weak version of the public option, and one from the Senate that provides an opt-out option for states. According to the CBO scoring of the House version, 30 million citizens could have access to the insurance exchange, of which only 5-6 million folks would be eligible for the public option. On the Senate side, roughly 31 million would be eligible for the public option with a state opt-out feature. Don't jump for joy.

According to an analysis undertaken by Andrew Kurz, a former CFO at Blue Cross/Blue Shield, the U.S. has about 300 or so million citizens, 220 million of who are either covered by health insurance plans through large employers (100 plus employees) or through government programs, notably Medicare. That leaves roughly 80 million who would most benefit by a public option. To be sure, a public option is intended to compete with the private sector. Participants should have effective choice in benefits and what those benefits will cost on an annual basis. So, all Americans should ultimately be eligible for a public option. In recent days, Senator Wyden (D-OR) has strongly advocated for this. We should ask members of Congress: why should a public option should cover anywhere from 5 to 31 million Americans, rather than 80 million? After all, if a public option pays for itself, and does not cost a nickel to create and operate, why not allow as many as 80 million citizens to become eligible from when any bill becomes law?

Per Mr. Kurz, the following additional points should be kept in mind in any analysis of a public option:

1. Medicare and Medicaid will pay for nearly half, and soon, more than half, of all health care dollars.

2. Costs for health care track age, so that the highest costs come in the last few years of seniors' lives.

3. Seniors are unaffected by the public option, but may benefit indirectly, as providers compete to be more efficient.

4. Actual health care costs are extremely skewed to the very sick or injured.

5. Because relatively few are so adversely affected, many others are unaware of the consequences of getting very sick.

6. Small businesses pay more for health care, both from higher administrative costs and greater risk through price of premiums due to these companies' small sizes.

7. Through the insurance exchange, these small businesses will have a place to purchase affordable insurance coverage.

8. Some method must exist to ensure that health insurance policies offered in the insurance exchange are affordable.

9. One method to ensure affordability is to offer one standard benefits package before others are added.

10. One standard package allows buyers to compare service and cost.

11. Only a robust non-profit public option insurer has the competitive influence to bring down premium costs offered through the exchange.

12. The more eligible for purchasing the public option, the more risk is spread around, the less the premium will be for everyone who purchases such a plan.

Since a public option will pay for itself and provide the necessary competitive effects to keep what the private market sells in check, and that the more Americans who become eligible for it, the lower the cost of a public option, there is no downside to not allowing more than 31 million Americans the opportunity to purchase a public option plan from the get-go. Certainly, any variation to a public option, like opt-out, opt-in, or with a "trigger," does not make sense at all. Of course, the argument can be made to start with something and then let it be changed, modified, etc. over the next several years. Chris Weigant described this legislative phenomenon quite effectively in his piece on the Huffington Post.

For every year that passes without enough folks becoming eligible to participate in a (public) plan, millions more than become uninsured and underinsured, and our health care system falls closer to an economic hell-hole. Why only consider 5-31 million Americans eligible for a public option when the goal for any baseline should be more like 80 million?

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