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

Time to Kill the Pseudo-Public Option -- and Other Things to Tell Your Representative

The other day I wrote that the final Democratic bill was probably going to be worthy of support, however compromised it may be in certain ways. It should be understood that progressives won't get everything they want, or anything close to it, in the first go-round.

But, while it's wise to be realistic, there are two critical tests for reform: Is it an improvement over what we have today? And is it structured so that further improvements can be made as it becomes politically feasible to do so? There are significant problems with both the House and the Senate versions that could cause the final bill to fail one or both of these tests.

The biggest flaw lies in the House's failure to produce a robust public option -- that is, one that fully employs the administrative efficiencies and negotiating power of Medicare/Medicaid. A robust plan demonstrates and delivers the advantages of a public system, while bearing the disadvantages of such a system as well. (And there are disadvantages: For example, doctors could disenroll from the plan in large numbers if pricing is too aggressive.)

A robust public plan that's made available to all Americans on "a level playing field" could allow people to compare and contrast the advantages of public vs. private insurance, then make their own decisions. The House plan doesn't do that. As a result, my long-standing fear seems likely to come true. The plan will have low enrollment and little power to negotiate, causing the CBO to state as fact what I've long considered possible: That the public option could become a dumping ground where private plans jettison sicker people, while lacking the efficiencies of scale or negotiating power to get better rates or administer itself more economically.

As a result, says the CBO, a public plan's premiums might be higher than private insurance. While the CBO's word isn't gospel, it's entirely possible that they're underestimating the cost of any "public option" we're likely to see this year. The likeliest political outcome, once the House and Senate bills are combined, is a non-robust "public option" with a state-by-state opt out. The CBO didn't consider the opt-out when it came up with its shocking (to some) estimate.

So how small would the public option plan be in the end? The CBO projects an eventual 6 million enrollees. Compare that to UnitedHealth, which had 32,702,000 members in 2008. Or Wellpoint, with 30,622,000. Or Aetna, with 16,318,000.(1) The public option would barely make it into the list of top 10 US health insurers. And the opt-out provision could cut enrollment by another 20%(2) or more.

Remember: No other insurance companies will be told where and how they can compete -- only the "public option." How is that a "level playing field"? The end result is likely to be something called a public option, which is used primarily to placate progressives -- and which provides the political cover needed to force people to pay usurious private-insurance premiums. When this pseudo-public plan fails to deliver savings, reform opponents will use its failures as proof that public insurance doesn't work.

That would make the watered-down "public option" worse than no public option at all. One suggestion: Write or call your Representative and ask that they either restore the robust plan or ask the party to publicly admit its failure to deliver while shutting down this option altogether. And while you're on the phone, here are a few other things you might mention:

The Wyden "Free Choice" Amendment: The President and other Democrats told the American people they would provide "all Americans" with the choice of a public option. Instead, they've artificially restricted access to it (while leaving private insurers free to pursue everyone). The Wyden Amendment will deliver what the Democrats promised, and will lower overall health costs.

The Kucinich Amendment: The so-called Kucinich Amendment would have allowed states to opt out of the Federal system to create intrastate single-payer plans. It was approved by the Education and Labor Committee, but was stripped from the final House bill. The end result? The Senate says states can "opt out" of the public option, but the House says they can't opt out of the private system. That doesn't seem right.

Tolerable premiums and out-of-pocket costs: It's hard to ask a family of four living on $88,000 to pay 12% of its income in premiums, yet still face $1,500-per-person copays and total possible costs of $10,000 per year. (That's better than the Senate version, however.) These provisions have to be made less onerous for working families. Health analysts used to employ a guideline that said 12% of family income should be the total expense for healthcare, or the "ceiling" on possible health costs, not - as this bill would have it - the floor or minimum cost.

No dumping or foul play: Many of the insurance industry's bad behaviors are banned by the House bill (which, complaints aside, has many good features.) But there need to be stronger protections against subtle abuses designed to drive sick people out of private plans. These abuses might include planned provider shortages in needed specialties (e.g. oncology, high-risk neonatology), delays in claims payment, and obstructionist use of prior authorization program.

Make drug costs manageable: Jane Hamsher describes the perils faced by breast cancer patients, and those with other conditions that require expensive patented drugs. Many of Jane's concerns will be addressed by the bill's caps on out-of-pocket costs, and by the elimination of lifetime maximums. But more should be done to ensure that drugs are made generic as quickly as possible, and to restrict the insurance industry practice of labeling them "experimental" and refusing to cover them.


(1)The large plans have been losing membership over the last two quarters as employees are laid off during the downturn and become ineligible under group health plans. They would be likely to gain these enrollees back under reform, however, through the insurance exchanges.

(2)Many of my friends and colleagues still say most states wouldn't dare opt-out and face the public's wrath. I still say they're dreaming -- especially after that CBO report. A candidate for Governor in Virginia already said he's leaning toward opting out - and he was the Democrat.


RJ Eskow blogs when he can at:

A Night Light
The Sentinel Effect: Healthcare Blog

Website: Eskow and Associates