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The Five Most Important Pieces of Health-Care Reform That Aren't the Public Plan

There is an emergent argument in the liberal grassroots that if health-care reform doesn't have a strong public plan, it's not worth doing. Atrios wrote that without a public plan, “there really isn’t much point to any of this. The public plan is the point.” TPM's Brian Beutler articulated the same sentiment in a different way when he tweeted, "If the public option fails, then I propose anti-individual mandate tea parties."

But we need to distinguish between different types of public plan. There's the public plan which is actually a version of Medicare-for-All. Everyone can buy in, the plan can partner with Medicare to become the largest bargainer in the system, and the expectation is that it will eventually take over the insurance market. I could understand making that the definition of health-care reform, as it is a fundamental transformation of the health-care system. But if you don't think we can pass Medicare-for-All, there's not much reason to think we can pass that.

And then there is the public plan that Sen. Chuck Schumer and others are actually trying to insert into the process. The public plan that the HELP Committee built into their bill. This public plan is simply another insurer run by the government. It would be good for competition and transparency and experimentation. It might have some small price advantage due to lower administrative costs. It might end up a dumping ground for the sick and the ill. I could imagine a world in which this public plan does a lot of good and a world in which it barely causes a ripple. Either way, it is not the point of health-care reform. It's more a perk of health-care reform.

But it has captured the process. Its existence, or lack thereof, is how the left and right are both benchmarking their success. The only problem is that it's not necessarily a very good benchmark. The left may win a political victory by including it in the policy but find that it hasn't won a particularly large substantive victory at all. The right could give up a lot to block the public plan only to find their concessions worth more than their triumph.

So -- and I say this as a strong supporter of a public insurance option -- here are five issues that I think are arguably more important than the public plan and, at the least, deserve a lot more specific attention than they're receiving:

1) The Health Insurance Exchange: I know. I'm a broken record on this point. But if the fundamental fact driving health-care reform is that our system is broken, then the central question is whether we're building something to replace it. If the Health Insurance Exchange is strong enough, it can serve as that something. If it is weak, and it is limited to the unemployed and the self-employed and small businesses, then it isn't likely to emerge as a viable alternative. And if you're still not convinced that you should care about the Exchange, then consider this: The Exchange is the body that offers the public plan. You could have the strongest public plan in the world, but if the Exchange is only open to 20 percent of the country, then only 20 percent of the country will be able to purchase public insurance coverage.

2) Medicaid: I have my doubts about expanding the Medicaid program. I would prefer a universal system in which low-income Americans were given access to the same coverage that the median American enjoys. But insofar as we're keeping Medicaid as the first line of coverage for the poorest of the poor, then the way we expand it matters enormously. In particular, the question of whether eligibility moves to 133 percent or 150 percent of the poverty line is of huge importance.

3) Subsidies: This is pretty intuitive. Are we helping families up to 300 percent of the poverty line? Or 400 percent of the poverty line? How much help are we giving them? What's the out-of-pocket cap? This all becomes particularly important if we have an individual mandate. You can't demand that people purchase something that they can't afford and that you're not willing to help them afford.

4) The Minimum Benefit Package: This isn't getting a lot of attention -- including from me -- but it's actually central to the whole enterprise. The individual mandate is going to demand that people have something called "insurance." The employer mandate is going to push employers to give their workers something called "insurance." The subsidies will exist to help people buy something called "insurance." But "insurance" can mean a lot of different things. Congress is going to set a definition for the lowest level of acceptable coverage. If that level is too low, we may end up in a situation where almost everyone is "insured" but those people aren't really protected.

5) Can You Choose Not To Keep What You Have? In some ways, this relates to the question of the Health Insurance Exchange. But as a principle, it deserves to be broken out on its own. It is core to the current health-care reform discussion that if you like what you have, you can keep it. But what if you don't like what you have? Can you change it? If the Exchange seems like a better deal, is there a way to cash out of your employer's offerings and choose from the Exchange's plans? If you think you'll be changing jobs a lot in the next few years but don't want to be tossed into a new health-care network every time, can you buy into a plan outside the employer-based market?

It wouldn't be terribly hard to pick another three or four policies that should be added to this list. But people like the number five. And, at the least, these are four specific policies that could literally make-or-break health-care reform. If you don't have enough subsidies you can't have an individual mandate. If you don't have a sufficient benefit package then you're losing sight of the reason you want people to have insurance. If you don't do a good enough job expanding Medicaid, you're left with a patchwork system for the neediest Americans. If the Health Insurance Exchange isn't strong enough to grow into a better and more efficient health-care system, we won't have fixed anything at all.

The public plan is important, but it's not the most important piece of health-care reform.

By Ezra Klein  |  July 6, 2009; 2:15 PM ET
Categories:  Health Reform  
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Comments

Ezra, you will be happy to know the 27 million the CBO projects will be on exchange is pure PR, CBO slight of hand. The HELP bill gives both the states and the HHS the power to change the number of employees a "qualified employer" must have. 10 is only the "default" to make CBO scoring look good.

I suspect if the exchange works will that number will quickly grow closer to 127 million.

http://jwalkerreport.blogspot.com/2009/07/61-most-important-words-in-help-health.html

Posted by: JonWa | July 6, 2009 2:35 PM | Report abuse

Even though I have pretty good coverage from my employer, I would love for my employer's 80% premium coverage go to the public plan (which in theory would be cheaper) saving both my employer and me money. I don't see this in the cards right now, and it may be where most insured people are.

Posted by: srw3 | July 6, 2009 2:43 PM | Report abuse

Excellent point Ezra and one that isn't made nearly often enough.

I tend to think of it is a pie chart of 47 million uninsured, with two big slices being:

1. Medicaid Expansion, i.e., catching all the Alabama’s up to all the Massachusetts’

2. Enrolling those who are Medicaid eligible but are not enrolled (if Massachusetts is a predictor at all that’s a figure anywhere between 13% and 30%, depending on who’s counting, not really something you’ve heard much about). Once you have an individual mandate, expect Medicaid enrollment to go through the roof.

After that you have the employers who buy into an exchange plan as another slice (depending on the feasibility of that), and finally, those who directly use the Insurance Exchange to get coverage. A smaller slice of that Insurance Exchange slice will be those who use the public plan as opposed to the other privately run plans. I agree, it’s an important component, but not the ballgame.

Also, one thing that frustrates me is that people are forgetting that the companies that will competing against the public option will likely win in the short term. These will be large corporations using their economies of scale to throw in things like dental benefits, vision benefits, and other bells and whistles that the public option won’t have. I’m not saying the public option should give up before it starts, but that we should be mindful that the public option’s competitors are, in fact, good competitors. This is another way of saying that it seems sort of silly that a lot of people are fighting so fiercely for something that very few people may ultimately want.

Posted by: ThomasEN | July 6, 2009 3:07 PM | Report abuse

These are all good points. In a recent Health Care Reform evening I hosted, our speaker said the minimum insurance would be what our representatives in Congress get. Is that not the case? I was not aware that there may be limits on the ability of someone to be on an employer or public option plan - what are the options for offering plans if not an exchange? If all insurance companies must accept anyone at the same price, regardless of pre-existing condition, then the public plan won't become a dumping ground for the sick.

Posted by: Pobo | July 6, 2009 3:10 PM | Report abuse

Ezra,
I think the "exchange" concept is potentially a dodge of the fundamental issues which are public finance and/or support for the neediest and what is the minimum required benefits package for all insurance market participants. All countries with universal health care have a mandated minimum benefits package that a large majority of the population finds is acceptable. What varies is the delivery mechanism for that package: public delivery, regulated non-profit delivery or private delivery.

I'm afraid the focus on the exchange is an attempt to kick the can down the road rather than focus on benefits and finance of benefits for all. At some point the government is going to have to regulate rather than dance around regulation.

Posted by: michaelterra | July 6, 2009 3:24 PM | Report abuse

Definitely a good post. I do agree that people are looking to the public plan as a proxy. Talking about these other issues are sort of less simple to characterize as easily.

For example, on point 4, I do know that Elizabeth Warren did a study regarding bankruptcy and health insurance. Typically many middle class families are underinsured. As a result, they end up bankrupt.

Point 5 though also raises the question of the ESI tax benefits. I am sort of interested too as to how the valuation would work should an employee decide to cash out of the ESI and into the exchange. If, on the off-chance, we do tax ESI, it may be worthwhile to link the valuations together (cash out for exchange and income that is taxable).

As they say, the devil is in the details. Thanks for helping bring this to light.

Posted by: blpanda | July 6, 2009 3:26 PM | Report abuse

Yes and I am in agreement that public plan advocates are deluding themselves if they think that the public plan as just another participant on a private insurance dominated insurance market is going to solve anything. What is needed is either Medicare for all OR heavy regulation of the basic insurance package with much cost and risk sharing. Just "slipping in" a public plan into the existing marketplace (reformed into exchanges or not) is a recipe for disaster or an eventual single payer system. I prefer the latter plus some optional private insurances for perks.

Posted by: michaelterra | July 6, 2009 3:30 PM | Report abuse

As you know I hate the public option because it doesn't pick up the $500 Billion of waste every year from the high overhead and compliance costs of private insurers and the high cost of drugs. I guess Ezra is forbidden to mention this.

But I still don't understand how you are going to handle pre-existing conditions. What's to stop people getting low cost minimal coverage insurance (or none at all if that is allowed) until they get sick, and then signing up for a better plan?

Look, all this complication, all this mess is because all these plans are based on an fundamental idea, competitive profit making health insurance, that simply does not work. We have ample proof. It's like insisting that the earth is the center of the solar system.

Posted by: lensch | July 6, 2009 3:31 PM | Report abuse

But we need to distinguish between different types of public plan.

We also need to distinguish why it's being supported. I agree those things you outlined are important -- if not more important -- than the public plan. But the public plan is what hopefully will make the beginnings of real health care reform politically viable going forward. The public plan gets the public more personally invested in this process by making them directly a part of it. That's why political folks, rather than policy wonks, seem more invested in making it a part of the overall package.

Posted by: Chris_ | July 6, 2009 3:39 PM | Report abuse

no html tags on the new blog, huh? that first line is supposed to be italicized.

Posted by: Chris_ | July 6, 2009 3:41 PM | Report abuse

If I had to design health care reform that I think is politically acceptable to both parties, here's what I'd do.

1. Have the federal government purchase the for-profit insurance companies and convert them to non-profit. Ideologically, the Republicans should be okay with this because the existing shareholders would be getting market rates for their equity. The companies would remain private, but would be non-profit and not government run.

2. Make sure everyone has insurance, but don't require people to "purchase" it. Use a progressive tax structure to pay for it. Maybe a VAT. Everyone receives a plan that meets certain requirements set by HHS. Anyone that wants to purchase additional insurance is welcome to, but they pay for that out of pocket. This could even be sold by for-profit companies.

3. Ditch Medicaid. Poor people get the minimum package like everyone else.

4. Break the employer/health insurance link. There's no need for it.

There. Problem solved.

Posted by: SteveCA1 | July 6, 2009 3:49 PM | Report abuse

I would only add that the question of the financing question is just as important or more so as any of those five points as well.

Posted by: lancediverson | July 6, 2009 4:21 PM | Report abuse

Steve from CA - Congratulations! You have invented the Swiss health care system.

Posted by: lensch | July 6, 2009 4:26 PM | Report abuse

lensch,

I really don't know why we're not trying something like that. It seems like it would be better than what we're looking at now and could actually have bi-partisan support.

Posted by: SteveCA1 | July 6, 2009 4:31 PM | Report abuse

Lensch, the swiss model is a poor reform model to copy. It being the second most expensive health care system on earth, although still a far amount cheaper then ours.

Posted by: JonWa | July 6, 2009 4:42 PM | Report abuse

Jon from WA - I completely agree. I was just surprised Steve thought up the Swiss system on his own.

I support HR676 - Super Medicare for All because we already have the most difficult part in place.

I would be happy with the French system, the German system, the Spanish system, etc or even the much maligned English system.

Posted by: lensch | July 6, 2009 6:54 PM | Report abuse

I wasn't trying to think of the best health care system. I was trying to think of the best health care system that could pass.

Posted by: SteveCA1 | July 6, 2009 7:27 PM | Report abuse

> I wasn't trying to think of the best
> health care system. I was trying to think
> of the best health care system that could
> pass.

And now the value of the Washington Post's message parlors (and similar behind-closed-doors activities by other entities) becomes clear.

sPh

Posted by: sphealey | July 6, 2009 8:30 PM | Report abuse

Medicaid is a terrible program and should be ended by creating a uniform federal alternative.

Medicaid varies wildly from state to state. In many states it pays so poorly that enrollees have great difficulty getting providers to accept them and are forced to substitute ER's for more routine care. In many states the process of enrolling in Medicaid is deliberately structured to make it very hard to get into the program, and then the problem is compounded by equally complicated re-enrollment procedures required every 3 to 6 months. People with poor English and reading skills often are severely handicapped in dealing with the process. The programs vary from year to year depending on the whims of state governments and available cash.

I could go on, but the main point is that trying to solve health care problems of low income and lower middle income people by expanding Medicaid is a bad idea. What should happen is that it should be replaced with a uniform national program at the federal level as part of the competing federal option. The current enrollees and potential new enrollees would be much better off. The relief to state budgets would be a huge benefit in current crises.

Posted by: PatS2 | July 6, 2009 8:42 PM | Report abuse

These are certainly important policies. Others that should be considered would be an effective method of risk adjustment, increased funding of Medicaid, an improvement in Medicare benefits (drug benefit, long term care, stop loss, etc.), and other measures that would ensure affordable access to all essential services for everyone.

The problem is that numerous studies have demonstrated that building on our multi-payer system of private and public plans is by far the most expensive model of reform. Beginning with a base of per capita costs that are much higher than other nations, the increased spending would push us into a budget that would require far more public financing than the levels being considered. The only way that public costs can be kept below $1.6 trillion or so would be to shift excessive costs to individuals through high premiums, high cost sharing, and inadequate subsidies.

Costs are too high for the proposed model to work. Consider the Milliman Medical Index at $16,771, along with the taxes that we are already paying for the government portion of our NHE, then how can a family with perhaps $60,000 in income foot that bill?

We really do need the $400 billion or so that a single payer system would free up (not to mention automatic coverage for everyone, with a financing system that is equitable by design).

Posted by: dmccanne | July 6, 2009 9:33 PM | Report abuse

Points 1, 4 and 5 all seem to me to be part of the public health insurance plan option discussion. I get confused when you scold us about not prioritizing the public plan. Most people I know who think about it include points 1, 4 and 5 in the conversations about it. It's all of a piece.

Medicaid: is a disaster - underfunded and state-based. That's why I'm not crazy about what I see coming out of the HELP committee re: public plan.

Subsidies: agreed - but in my experience, this question also comes up during any discussion of the public health insurance plan/exchange.

Posted by: eRobin1 | July 6, 2009 10:27 PM | Report abuse

If I am going to start paying for more people's healthcare, I want them to have some serious co-pays. There has be to be a disincentive for people to avoid over-treatment. I want to be able to get penicillin without a $100 doctor visit. I want to be able to go to a hospital without increasing my chances of getting MRSA, getting the wrong medication, or getting the wrong surgery. See Paul O'Neill's piece today for more sensible reforms, less of this increasing coverage before we decrease costs nonsense.

Ezra's #4 is one of the current leading problems already, let's not make it worse. If I want insurance that is catastrophic only, I generally can't buy it in the US. However, I can by stupid policies that have low maximum reimbursements. We already sell too much "pre-paid" care, which encourages over use, and not enough real insurance that covers the incredibly high cost treatments you need for a transplant or the like.

Posted by: staticvars | July 6, 2009 11:46 PM | Report abuse

What, no mention of reimbursement reform to remove FFS? That certainly deserves a top spot. Ideally, we'd go to an all-salary system, but then that might require integrated delivery systems and that would be a huge undertaking, fiercely resisted by physicians who cherish their independence more than the quality of their care.

Second choice would be some quality-adjusted payment system, the only downside of which is that it is very complex to administer and creates unending complaints of unfairness in how quality is measured.

Posted by: jdhalv | July 7, 2009 12:37 AM | Report abuse

For me, the question is: what changes are politically now-or-never, and what changes can plausibly be made as tweaks in the presumably even more favorable legislative environment of 2011?

It seems to me that a robust public plan is the closest thing to now-or-never of these reforms. If we don't get it this time, then we've got to gear up all over again to take on the insurance companies, etc. head-on sometime down the road.

Beyond that, though, the only thing I see here is that there only has to BE a health insurance exchange and a minimum benefit package - but if you've got the public plan, you'll also have these things, so they can be tweaked in 2011 to be more pro-consumer. Ditto the level of subsidy and whatnot.

So I've come to pretty much the same conclusion as Atrios, just by a different route: a robust public plan is the essential thing we need to fight for, this year.

Posted by: rt42 | July 7, 2009 5:20 AM | Report abuse

Sorry. I do not want a consolation prize.

Ezra is wrong on this one. Reform with no public option, available to everyone, at the very least, is no reform at all.

"Reform" with mandated coverages, by private insurers, with no public option, and government subsidies is the worst of all possible worlds. You can write all the rules for private insurers you want, but you can count on that they will be full of loopholes and honored mainly in the breach. The subsidies will be enormously costly as we will be subsidizing private profits and we will still be in the thrall of companies whose main objective is to deny health care.

This won't be the consolation prize, it will be the booby prize. No thanks.

I, for one, prefer nothing. Let the Senate take the heat, or let Obama get off his perch and twist some arms.

Posted by: mjshep | July 7, 2009 6:27 PM | Report abuse

I could be wrong on this, but aren't health exchanges without the public health insurance option just the same thing as "reform" in Massachusetts?

That worked to expand coverage, but it hasn't been able to control increasing costs, really achieve affordability, and hasn't reduced reliance on the emergency departments for care.

I do think the public plan is essential to guarantee affordability, quality, and control costs.

Posted by: DrFox | July 7, 2009 6:28 PM | Report abuse

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