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Getting Specific on the Public Plan

Sen. Olympia Snowe is among the handful of Republicans who agree that private insurers haven't done a good enough job to be trusted with the provision of health insurance. But she doesn't think we should go straight to a public insurer. Rather, she's a fan of the "or else" strategy, as in, "Shape up ... or else." She supports a "trigger" option wherein if the private industry doesn't fulfill certain benchmarks (lowering costs, say), then and only then will a public option be introduced. In a recent interview with the Associated Press, she explained her thinking:

“If you establish a public option at the forefront that goes head-to-head and competes with the private health insurance market … the public option will have significant price advantages,” she said.

That language is, I think, a bit needlessly opaque. When Olympia Snowe says that they public option will have "price advantages," she's saying that it will be able to negotiate lower prices with health-care providers and thus offer consumers lower premium costs. This will make it hard for private insurers to compete because no one will want to pay more for worse service.

I imagine that Snowe's concern extends a bit further than that: If private insurers can't compete, they'll go out of business. If they go out of business, the government will control the market. If the government controls the market, various bad things will happen.

But it would be nice if the debate over the public plan got a bit more specific. It tends to focus on pretty weird questions of "fairness" and "advantages." But markets aren't fair. And public policy is about producing beneficial outcomes, not setting up some sort of arena battle between various forms of insurance companies. It would be useful to know what Snowe fears would happen in a market dominated by the public plan. How much money does Snowe think they would save (as that, of course, is why they're voluntarily choosing the public plan and its "price advantages")? Would this harm innovation? By how much? Would this decrease access? By how much? Why does she think that? Why should consumers prefer her world over Bernie Sanders's world?

Liberals, incidentally, should answer the same questions. The impact of the public plan is a serious policy question. It shouldn't just be gestured toward.

By Ezra Klein  |  June 30, 2009; 6:22 PM ET
Categories:  Health Reform  
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Comments

Obama's position is that private insurers would be able to use rates negotiated by the government as leverage to negotiate better rates for themselves. He might be right, but I'm not so sure. Larger entities are typically able to negotiate better rates than their smaller rivals. However, that doesn't necessarily mean that private insurers can compete for businesses in other ways. As the crowded malls prove, most people don't usually opt for the lowest price option (e.g. most people don't shop at Wal-Mart).

Let's say, for the sake of discussion that insurers can't compete with a public option. The short-run downside would be real in terms of job loss (what the right happily points out as "creative destruction"), but the long-term downside would be nil. For-profit health care is both inefficient (as evidenced by 46 million uninsured and about 254 million underinsured) and unethical.

Posted by: cjo30080 | June 30, 2009 6:38 PM | Report abuse

"For-profit health care is...unethical."

You just said it's unethical for doctors to make a profit. Are you hoping to conscript them???

You know, I wouldn't want to eat government food. I really like for-profit food. Are you so sure we'd like government health care?

Our healthcare system has many attributes. Interesting that you would focus on the for-profit part to describe it, and as the source of the problem.

And it's amazing how healthcare defies the laws of economics. Economics has all sorts of ways of explaining high prices. "For profit" isn't one of them.

You must be the envy of all the other economists.

Posted by: whoisjohngaltcom | June 30, 2009 6:52 PM | Report abuse

More questions: how will the insurers "get their act together" under the threat of the public plan? By collusion? Or by no longer colluding? Either way, it ain't the classical market in action.

Posted by: chrismealy | June 30, 2009 6:56 PM | Report abuse

I agree with Senator Snowe. Except that I think we shoud wait until 100,000 people die unecessarily because they lack insurance before we should pull the trigger.

Posted by: lensch | June 30, 2009 7:05 PM | Report abuse

I can imagine a Terri Schiavo situation after that 99,999 person dies.

Posted by: SteveCA1 | June 30, 2009 7:16 PM | Report abuse

"it's amazing how healthcare defies the laws of economics."

It's amazing how the Galtroid seems ignorant of adverse selection.

Actually, no. Hypergaltroidism is a mental illness.

Posted by: pseudonymousinnc | June 30, 2009 7:54 PM | Report abuse

whoisjohngaltcom: I believe the discussions here is large for-profit insurance companies not doctors specifically. I believe you may be having an Emiliy Littella moment. Or perhaps a Glen Beck seizure.

Posted by: mickster1 | June 30, 2009 8:34 PM | Report abuse

"Galtroid seems ignorant of adverse selection."

Try to keep up, lib. Adverse selection is not a problem of healthcare -- or even profit. It is a problem of insurance.

Furthermore, it is a side effect of people who possess asymmetrical information ripping off other people within the risk pool. Or in other words, the people you worry the most about suffering because of "adverse selection" are the perpetrators -- not the victims. Logic stands on its head.

And finally, a look at auto insurance reveals that insurance is perfectly capable of dealing with adverse selection by grouping insurees of like risk. Which brings us to the real problem.

The truth is that you libs aren't looking for "insurance." You're looking for a way to force the healthy to subsidize the care of the sick. A direct transfer. You don't want insurance -- you want Social Security for the ill. What you call an "adverse selection" problem is simply healthy people deciding insurance isn't worth buying when it means paying for so many sick people. Well, they're right: That's not what insurance is for, and I don't blame them for trying to get away.

Nice liberal priorities you've got there, though. But I'm sure you guys'll eventually find some way of keeping those victims from escaping.

I know about adverse selection, alright. It's not caused by "profit." It's caused by liberals.

Posted by: whoisjohngaltcom | June 30, 2009 9:34 PM | Report abuse

Just to recap for those keeping score at home:
1. government healthcare is like government food;
2. higher prices do not lead to more profit;
3. health insurance is exactly the same as auto insurance;
4. sick people should be denied insurance because they're trying to game the system;
5. healthy people shouldn't buy insurance because it's a scam;

Now I just need to know what to do about my car insurance: should I cancel it because I'm an excellent driver and it's a scam or should I keep it because it's like for-profit food?

Better trolls, please.

Posted by: AndrewNYC | June 30, 2009 10:28 PM | Report abuse

Look at all that straw! Andrew, is somebody here to see the wizard about a brain...?

Since I said it and since, unlike you, I know what it means, perhaps I should do the recap:

1. All the best things you already get come from the private sector.

2. Marx was wrong: Profit is not the cause of high costs. Accordingly, seeking to eliminate profit holds no hope of actually lowering costs.

3. What you call health insurance is not insurance at all. You don't get auto insurance for oil changes, why would you get health insurance for checkups?

4. Sick people's insurance costs more because they file more claims. Why shouldn't it?

5. Healthy people should get lower rates since they consume less care. Incentivizing them to use fewer resources makes the resources more affordable for those who really need them.

Only cowards battle strawmen, Andrew. The real debate's here. Are you in or out?

Posted by: whoisjohngaltcom | June 30, 2009 11:35 PM | Report abuse

"But markets aren't fair."

Ezra you lived all your life's worth to express this! Markets indeed are not fair. Million dollar bonuses on Wall Street literally pulled out public from their homes and placed them on roads. Where is fairness there?

Why should Public need to be fair while buying insurance for their own health? Otherwise, let us bring back the slavery and let we all work for Sen. Snowe and her rich masters only; let everybody live then miserable life of poor as like from Dickens novels. Will you be happy then Senator Snowe? Is that what you want?

Damn it, give my Public Insurance. Whether it works or not we will see. It is not be decided by the Snowes and pompous Bill Nelsons of this world.

Senate can decide how much it wants to spend on that and how fast it wants to grow such public plan subsidy (or decelerate depending upon GDP change and tax revenue collection). But undertaking all sorts of contortions to drop altogether a public plan is betrayal. It just proves one more time the undemocratic credentials of Senate at our cost.

Posted by: umesh409 | July 1, 2009 12:29 AM | Report abuse

After weeks of agonizing over it, my husband and I decided to drop our health insurance. For years, paying the premiums has actually been keeping us from getting medical care as the deductibles are so high and it included no vision, dental, hearing or drug coverage. He needs hearing aids and I need glasses. We are also self-employed, so having a hard time with the mortgage in the downturn. It frustrates me that we cannot simply buy into the state medicaid system. If you have medicaid - it has all those benefits. Plus what the state reimburses the insurance companies for the each person covered is far lower than my premiums. I have emailed the governor and asked why I can't simply buy into that. It seems so simple. If the insurance companies weren't making money off of that, they wouldn't be competing for medicaid clients.

Posted by: melissap1 | July 1, 2009 1:41 AM | Report abuse

John galt,
Are you so stupid that you don't realize that those healthy people and those sick people are, in general, the same people at different stages in the their lives. The POINT of health insurance is that people pay when they're healthy so there is enough money in the kitty when they are sick. So you're again living in your ideological fantasy land.

That being said, I don't think profit should go out of health care...I think device manufacturers and drug companies need profit to undertake risky investments in new treatments. This issue does attract people who are totally anti-capitalist which I think doesn't help in sorting through which aspects of health care should be non-profit and/or highly constrained for-profits and which parts work fine as for-profits.

Posted by: michaelterra | July 1, 2009 2:37 AM | Report abuse

"She supports a 'trigger' option wherein if the private industry doesn't fulfill certain benchmarks ..."

Why hasn't 60+ years been enough time for the insurance industry to get us where everyone else is? For-profit insurance has been the centerpiece of our national health policy since World War II. Why should we wait until we fall even further behind the rest of the industrialized world before actually doing something different?

Why should national healthcare policy be an assistance program for the private, for-profit insurance?

Posted by: Athena_news | July 1, 2009 2:39 AM | Report abuse

Private insurers had their chance. But the situation has become too urgent now for giving them more time. The recession, and the horrible unemployment (where is the outrage about 9.2%?) mean that more and more people lose their employer based insurance. Only forcing private insurers to sign up everyone isn't good enough, they have shown time and again that they will find ways to get around insuring bad risks and offering affordable prices. People need a real, reliable alternative now, and this can only be a state run plan.

Posted by: Gray62 | July 1, 2009 6:31 AM | Report abuse

Folks, anyone who has "johngalt" in his username is just another one of those fanatic Ayn Rand followers. No use in discussing with the brainwashed members of this cult, they are incapable of understanding anything that is cntrary to their religion. Simply ignore those trolls!

Posted by: Gray62 | July 1, 2009 6:37 AM | Report abuse

michaelterra:
"you don't realize that those healthy people and those sick people are, in general, the same people at different stages in the their lives. The POINT of health insurance is that people pay when they're healthy so there is enough money in the kitty when they are sick."

LOL. Actually, *I* am the only person here who's actually said "you want Social Security for the ill." Look at my comments -- it's really there. Of course *I* know what's going on. Do you?

Insurance is not about preparing for old age; it's about preparing for the *unexpected*. And getting sick as you get older, like getting old itself, is hardly unexpected.

In fact, you get your whole life to prepare for old age, retirement, or the day when you stop being so healthy. That said, much of our "health insurance" is not an insurance problem at all, but a simple investment problem. Just like Social Security, which is not a substitute for "old age insurance" -- it's a substitute for responsible saving, for responsible retirement planning.

So, now that we both understand the problem, Michael, tell me: which party advocates something called "Health Savings Accounts," to allow healthy people to prepare for the day when they become sickly, and which party seeks to limit them? Whoa -- the most accurate solution to the problem as you've described it, and all the geniuses here are on the other side! And here you are, calling me stupid. It would actually be *funny* if it wasn't so sad.

Now, there is a real insurance problem tied in this web someplace, and it goes like this: Most people are healthy, but some of them will get sick. So they can pool their risk against getting sick, and that's a responsible thing to do. And not inherently expensive, for otherwise healthy people. But even that solution is strained by Medicare (a retirement problem) and even more so, Medicaid (a welfare problem), both of which are heavily subsidized by higher private sector prices. We already have heavily socialized medicine.

What's not an insurance problem -- and what is a lot more expensive -- is the problem of the few people who are chronically sick, even during the years when everyone else is healthy. Such people are not a "risk" -- they are certain liability. Of course, we have Medicaid, and that's appropriate since these people are, well, a welfare problem. They need other people's money to survive.

"That being said, I don't think profit should go out of health care...I think device manufacturers and drug companies need profit to undertake risky investments in new treatments. This issue does attract people who are totally anti-capitalist which I think doesn't help in sorting through which aspects of health care should be non-profit and/or highly constrained for-profits and which parts work fine as for-profits."

Now *that* part was very refreshing. It would be nice to see more actual thought like that around here.

Posted by: whoisjohngaltcom | July 1, 2009 8:27 AM | Report abuse

Gray62:
"Ayn Rand followers... cult"

Right. The cult of reason. Not as good as the cult of Marx, huh?

Posted by: whoisjohngaltcom | July 1, 2009 8:29 AM | Report abuse

Gray62:
"Private insurers had their chance."

From wikipedia: "The Health Maintenance Organization Act of 1973 required employers with 25 or more employees to offer federally certified HMO options."

By my math, that means nobody's actually *seen" a truly "private insurer" in over 35 years. So you must have a really good memory. By the way, was healthcare less accessible then, or more accessible?

"But the situation has become too urgent now for giving them more time. The recession, and the horrible unemployment (where is the outrage about 9.2%?) mean that more and more people lose their employer based insurance."

Yes, what's needed is another couple trillion dollars of unfunded liability. That should fix our economy right up.

"private insurers...have shown time and again that they will find ways to get around insuring bad risks and offering affordable prices."

Now, Gray, is it really true that in your mind "insuring bad risks" and "offering affordable prices" aren't even just a little bit contradictory??? You're disappointed that the private sector can't do the impossible, so you'll simply toss it to government? Or perhaps you'd like to rephrase that? Because I know I'd be embarrassed if I said it. Is that really your final answer?

Posted by: whoisjohngaltcom | July 1, 2009 8:41 AM | Report abuse

1) many 'uninsured' people are people who COULD afford insurance, but CHOOSE not to get it. Should I subsidize them? I pay my premiums, get my health insurance. If I chose to not use my employer's health insurance, I would be included in that number, but, well I don't choose that.
2) why do we care who is insured or not insured? Shouldn't we be worried about HEALTH CARE? Who cares about insurance? If the government was so worried about people's health, they would open up clinics, have a sliding scale for payment, and that would be that (check out hellohealth.com - they aren't the only ones trying to do something like that...).
3) Health insurance IS NOT like car insurance. An auto insurer WILL NOT PAY for your car if there is a problem related to you not getting an oil change. However, if you choose not to go to the doctor for checkups (and many do choose this) and you only find out you have a serious illness when it's more untreatable, the insurance company will pay. They'll have to. I am definitely not happy to have to pay for people who don't take care of themselves, etc, and yet then want someone else to pay for their medical care. But what are we going to do? Force people to eat right? Exercise regularly? Go to the doctor? This is why I don't want the government in charge of my health care.

Posted by: atlmom1234 | July 1, 2009 9:30 AM | Report abuse

It's true. Somebody who subscribes to the philosophy of "The Virtue of Selfishness" is unlikely to understand the notion of doing unto others unless and until he falls into the hole that others find themselves in today.

In a pure free market, shopping for the best price for a product or service is a reasonable task. In health care, it's not (and even if it were, the for-profit health care system has made it nearly impossible since doing so is to their advantage). In a pure free market, sacrificing quality for price is a reasonable option. In health care, it's not. In a pure free market, choosing not to purchase a product or service is a reasonable option. In most health care cases, it's not.

With regard to health care, the free market failure that we're currently experiencing should be a surprise to no one.

Posted by: cjo30080 | July 1, 2009 9:54 AM | Report abuse

cjo30080:
"It's true. Somebody who subscribes to the philosophy of "The Virtue of Selfishness"..."

"Selfishness" refers to our universal sense of self-interest. The "Virtue" part explains the evolutionary significance of that selfishness as man's survival mechanism -- his very motive for living -- and something that liberalism in general suppresses to man's detriment. I can't help it if you prefer to paraphrase it with comical terms, like "Greed is good" -- that is a sign of your ignorance, and not of any defect in the philosophy.

"the notion of doing unto others"

My "separation of church and state" detector has a problem with the intrusion of your morality on my freedom. What does your "separation of church and state" detector say?

"In a pure free market..."

Since this is not a pure free market (or even close to one) everything after that is ignored without even reading.

"With regard to health care, the free market failure that we're currently experiencing should be a surprise to no one."

What would surprise me would be to find a free market in all this over-regulated nonsense.

What on earth leads you to think this is a free market? I'm reminded of a Twilight Zone episode where someone wants to leave the boredom of Heaven for "the other place." "Heaven?", comes the answer, "What makes you think this is Heaven? This IS the other place." So it is with anyone who pretends America's healthcare system is a free market.

Posted by: whoisjohngaltcom | July 1, 2009 11:31 AM | Report abuse

Galt,
Your faith that individual initiative alone will do it is touching but is again a testament of faith in the writings of a second-rate novelist not in reality. Some people will get sicker than others...and there is no way of knowing who those people will be....it could be you. A very serious illness can bust even the most prudent investor. You are saying that's OK. We're saying it isn't.

Posted by: michaelterra | July 1, 2009 11:42 AM | Report abuse

michaelterra
"Your faith that individual initiative alone"

I don't care about "individual initiative" I care about fixing the problem with reason -- man's unique tool for solving problems.

This particular problem is completely mischaracterized, and so the solution is irrational.

"A very serious illness can bust even the most prudent investor. You are saying that's OK. We're saying it isn't."

Ah, but you can't say that at the same time you say that I'm free, can you? I give libs a lot more credit when they can at least admit that freedom's pretty low on their priority list.

So what should happen when a wealthy person spends a fortune on an illness? Whose fortune, exactly, do you think he should be spending to fight it???

Posted by: whoisjohngaltcom | July 1, 2009 12:41 PM | Report abuse

Galt,
What exactly are you advocating?

It *appears* you're suggesting that health insurance *should* be like auto insurance? i.e. You want true private insurance as opposed to social insurance. If that's the case (and I may have misunderstood!), I would suggest that your plan might work so long as you're healthy but wouldn't work once you actually become sick.

Am I simplifying your argument too much: are you suggesting something more nuanced than that?

Posted by: AndrewNYC | July 1, 2009 1:35 PM | Report abuse

AndrewNYC
"What exactly are you advocating?"

Andrew, somebody with an x-ray machine makes money, hand over fist, and all day long, at $50 a pop. I've seen this machine down at my vet's office. For-profit. No insurance. No waiting.

Now, we live in a world where a human x-ray is so expensive that you need an insurance plan to pay for it.

So, what I'm advocating is a little more curiosity about what legal requirements are imposed, on taking x-rays of people, that make it impossible to take an x-ray of a person for $50. And I'm advocating a solution that eases those requirements instead of some big ridiculous accounting trick to convince everybody that $500 x-rays are "free" -- which, by the way, is what everybody around here seems to be advocating.

It seems to me that if everyone could afford x-rays -- and a whole bunch of other things that should be affordable but aren't -- then there wouldn't be such a stampede to figure out how to get everyone else to pay for them, would there?

Why do you accept the premise that insurance is necessary to pay for an x-ray? A checkup? Routine blood work?

I'm advocating a little goddam common sense. Not the most egalitarian way to hide the insanity.

Posted by: whoisjohngaltcom | July 1, 2009 2:05 PM | Report abuse

Did anyone did try to 'test ' the effectivity of a public heatlh care unit (any of them) around the country? Well, do that as an experimet, and you will find out that number of cases -( not wanted to day the majority of them) - ...number of cases, that need real good and serious attention, are for refferals to medical care OUT OF THE GOVERNMENTAL SPECTRUM FOR THE COST IS NOT "acceptable" under the 'guidelines' of public heath care . I other words, people have to go to 'paid-by-their-money' medical care / private pysiscians - MONEY THAT THEY DON'T HAVE FOR THAT IS THE REASON THEY GO TO PUBLIC HEALTH UNITS.

Picture this, and multiply the event thousand and tenth of thousand times all over the country, RATION-LIKE HEALTH CARE ,- like in others countries with this type of system of 'SOCIO- MEDICINE' and that boys and girl is what you get on this OBAMA GANG HEALTH PLAN. I offer no details now about extra taxes and the elimination of the existing health plan all over our country for that are topics for another time ,
Sufice to say this in a nut shell;

So how about a ‘new word’ for HEALTH CARE ? ....hummmm the 'new reform',..Alright here is a though;

“health care: = GOVERNMENTAL SOCIALIST AGENCY THAT WILL SAY ‘NO’ TO ANYONE WHO HAS A DISEASE THAT IS TOO EXPENSIVE FOR TREATMENT AND SO YOU WILL DIE WITH YOUR TUMOR OR WHATEVER AND YOU HAVE TO BUY YOUR OWN HOLE IN THE GROUND SHOULD YOU DECIDE TO BE SIX FEET BELOW, OR PLANT YOURSELF IN YOUR HOUSE BACK-YARD, AFTER DEATH ( well, somebody has to put you there for you cannot move at that time, right? )

Perhaps THE OBAMA GANG CORRUPTED ANTI-AMERICAN ADMINISTRATION will think of another term, for this one I just offered is too long ,…however this one still ok, for the government is growing so big that seems to go even beyond the outer-rim of our solar system,…so this aparently “long name ” for HEALTH CARE should fit just right !

DO WE NEED MORE DECEPTION FROM THE OBAMA GANG CORRUPTED ADMINISTRATION VIA BEAUTIFUL CONVINCING WORDS FROM THE PROPAGANDIST PREACHER-IN-CHIEF ?
Open to suggestions.

And how your day is going so far?

Good day everyone,
Daniel Cabrera
Merrillville, indiana

PS - The tv tabloids (NBC, CNN, MSNBC) , and tabloid publications such as , THE NEW YORK TIMES, THE HUFFINGTON POST, LA TIMES , etc,... along with what is left of the quasi-hypoitized brainless "utra-obamanized " cool aid drinkers people, will not take this one lightly.

Posted by: morcab | July 1, 2009 4:32 PM | Report abuse

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