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Steve Pearlstein Responds on the Public Option

Steve's column arguing that Democrats should drop the public option is here. My response is here. This is his response to my response. You got all that?

We agree that if there is to be a public option, it ought to be transformational. I think the cooperatives hold out a promise for that, if structured properly to include participation by hospitals and doctors groups, but there are other ways of doing it as well. We disagree about making the public option Medicare for All. Most of Medicare now is fee for service, and that is not transformational -- in fact, it will bankrupt the country. And piggybacking on Medicare's monopsony power to dictate hospital rates that are below cost doesn't really solve the cost problem as exacerbate the cost-shifting problem. In the column, I give a couple of other suggestions for bringing down prices.

My second point is really a judgment call. You tend to look at the politics of health care in terms of the inside negotiation and vote-getting within Congress. I look at it more broadly. And I make the judgment that the broad middle of the electorate doesn't want a government run health care system and that a public option either is that or can effectively be portrayed as that. If that assessment is correct, it's best to drop it now, since it is the outside game that, in the end, generally determines whether such a landmark piece of legislation will pass or not.

By the way, I do not assume, as you seem to, that all Republicans will vote against final passage and all Dems will vote for. If you lose the debate among the general public, you will get Democratic defections on final passage. And if you win, you will get Republicans who realize they don't want to be on the wrong side of history going into the next election and will vote for it, despite pressure from party leaders -- if for no other reason, they will tell their leaders, than that it was going to pass anyway. These Republicans may vote against it in committee, vote for crippling amendments, but in the end they have to be able to defend a no vote in the next election. If the public rallies around a solid but moderate reform bill, some Republicans may not want to take that risk.


By Ezra Klein  |  August 19, 2009; 3:35 PM ET
 
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Comments

What is this, logic and reasoning? Well stated argument?

I thought we were screaming about health care?!? I thought this was a blog?!?

;=)

Posted by: JkR- | August 19, 2009 4:08 PM | Report abuse

> And I make the judgment that the broad
> middle of the electorate doesn't want a
> government run health care system and that
> a public option either is that or can
> effectively be portrayed as that.

What gives people in Washington DC, particularly but not exclusively the elite media, the right to ignore not only dozens of nationwide opinion polls but the results of the 2006 and 2008 elections and substitute their own judgment for what the "broad middle" of Americans "really want"? Why can't they use, oh, I dunno, the way 56% of Americans voted in 2008 as a guideline to what we out here in flyover country "really want"?

Similarly, why do such people get to simply ignore the existence, form, and great success of the Dutch and German health care systems with their mix of private insurance and care and public stewardship?

sPh

Posted by: sphealey | August 19, 2009 4:41 PM | Report abuse

"And if you win, you will get Republicans who realize they don't want to be on the wrong side of history going into the next election... These Republicans may vote against it in committee, vote for crippling amendments, but in the end they have to be able to defend a no vote in the next election. If the public rallies around a solid but moderate reform bill, some Republicans may not want to take that risk."

I hope you tell him how irrelevant this is. As he says, the only way this happens is if the bill's passage is inevitable. If some Republicans end up in the "yea" column at the end, that doesn't mean any of them played any positive role in passing the bill. I'd love to know his logic on how this matters, or if he was simply trying to find another topic of disagreement and needed to get pedantic about it.

Posted by: spiffymcbang | August 19, 2009 4:46 PM | Report abuse

I guess Research is useless for gut feeling Pearlstein. Maybe he should ask the CBO who beleive a Medicare buy in would reduce the cost of reform by about 200 billion. A Medicare buy in would be 15% cheaper than private insurance. If Pearlstein does not want to save 15% of his health insurance he is a idiot

Posted by: JonWa | August 19, 2009 4:58 PM | Report abuse

Ezra - I think Pearlstein makes an important point. The public doesn't want a government-run insurance plan. It's that simple. A public plan can be very effectively portrayed, by republicans, as goverment taking over health care and, rightly or wrongly, this resonates with the public. The poll reflects this.

Democrats need to give up the public plan, as painful as that may be. And they will not receive any concessions from Republicans for doing so. Republicans have no reason to make concessions on this because the public is behind them.

All the talk of passing a bill with a public plan through reconciliation misses the most important point. It will be political suicide for many Dems if they try this.

Subsidies for the uninsured and protection against losing coverage through job changes are HUGE and viable improvements that can be made now if Dems don't screw this up.

Posted by: mbp3 | August 19, 2009 5:51 PM | Report abuse

> The public doesn't want a government-run
>insurance plan. It's that simple.

Justification for that "simple" statement please?

sPh

Posted by: sphealey | August 19, 2009 5:54 PM | Report abuse

Posted by: sphealey
> The public doesn't want a government-run insurance plan. It's that simple.
Justification for that "simple" statement please?
sPh

RESPOND:
Obama clearly explained why he wants government run type of healthcare. Why public doesn't want it?
Public likes every single part of it besides the price tag. Yet, we have about 50 Milion people without any health insurance and I guess that number is too low to outspeak the "public"! But that means, Obama probably just needs another 50 Milion people without health insurance and his plan will be heard and seen. So, far ellected officials complained only how they didn't have a time read it yet. Its that simple truth.

Posted by: BOBSTERII | August 19, 2009 6:36 PM | Report abuse

I agree with Pearlstein here on the big points.

On the first point, Medicare IS no better in cost control. Health policy experts don't think a Medicare-for-all solution will reduce costs. More importantly, the cost-saving measure of Medicare-- monoposony purchasing-- doesn't address the drivers of cost growth, which is heavily due to increased utilization, not price growth. Wrong solution for the problem. Medicare could change-- and replicate the managed care movement of the 90's-- but the success and failure of that was/is based on whether society wants real restrictions on health care, not whether its government or private sector based.

On the second point, I think both have good points here, but Pearlstein wins on points. I think you really underestimate how much the public option has undermined the Democrats in this debate. The public option exists BECAUSE Democrats believe that government SHOULD control more health care. As you said, it was designed as a novel path to single-payer. Hoping that the rest of America somehow misses that was foolish. Its transparently clear and people don't want it. Once the overall message is undermined, the grandma comments are that much more receptive to a distrusting public.

Posted by: wisewon | August 19, 2009 6:47 PM | Report abuse

"On the first point, Medicare IS no better in cost control."

Really? So why have Medicare's costs risen at a lower rate than Private? Even with the clusterF* of the prescription drug bill that costs hundreds of billions.

John

Posted by: toshiaki | August 19, 2009 6:50 PM | Report abuse

1. Would someone please explain to me how there could be cost shifting under Medicare for All as Steve says. If everyone has Medicare, what would you shift it onto?

2. I have seen a number of polls since 2003 that ask if you prefer a system of prvate insurance through enployers or have the government give something like Medicare to everyone. Except for Rassmusen, they all are 2 to 1 in favor of Medicare for All. Why does Steve say Americans are against a government run syste.

Seniors sure love Medicare.

Posted by: lensch | August 19, 2009 7:17 PM | Report abuse

Let the blue dogs and Republicans get credit for a worthless health care bill. They can pass it on their own during the Palin presidency.

Democrats should stand firm for a national public option.

Ezra allows himself to be misconstrued (as he was in the NYT today) when he talks about "getting something significant for the concession, like passage of everything else, or much more money in subsidies and much stronger exchanges."

What does significant mean? I don't know, and the public won't care, but you can bet the lobbyists are already working to define it downward.

Posted by: bmull | August 19, 2009 7:21 PM | Report abuse

wisewon - "Health policy experts don't think a Medicare-for-all solution will reduce costs."

How about a non Cato Institute reference for this. Here's a refernce that says we would save about $400 Billion each and every year from NEJM:

http://www.pnhp.org/publications/nejmadmin.pdf

Posted by: lensch | August 19, 2009 7:22 PM | Report abuse

" So why have Medicare's costs risen at a lower rate than Private?"

1. The growth rates track very closely, albeit Medicare's is slightly lower.

2. However, Medicare's growth rate is based on a significantly higher per patient cost base, so while the % rate is slightly lower, than absolute dollar rate is higher.

In other words, when MRIs are being overutilized across the board, the % increase for Medicare patients looks lower because the patient is frequently in the hospital getting a lot of other care at the same time. That same MRI for an outpatient 40 year old has a much higher growth rate because of their overall lower utilization of health care.

Overall, a fair interpretation would conclude that both Medicare and private sector cost controls are similarly poor.

Posted by: wisewon | August 19, 2009 7:39 PM | Report abuse

Lensch--

I'm very familiar with Woolhandler et al. (I'm assuming that's your link).

The numbers, even if true, are one-time savings to the system. Unfortunately, $400 billion represents 2 to 3 years of cost growth. Meaning while a government system could save on administrative costs, we'd be back in the same budget situation before we blinked.

Posted by: wisewon | August 19, 2009 7:45 PM | Report abuse

Pearlstein articulates three clear Republican positions, all of which are contrary to fact:

1. The public does not want government run health care. Fact: Public option, accurately described, has over 70% polling support.
2. Medicare for all will not control costs. Fact 1: Medicare is far more cost-effective than private health insurance, with lower health care inflation rate. Fact 2: Public Option does not price the same as Medicare (people pay premiums, dummy), so it would not bankrupt the US.
3. Republicans will vote for the final bill. Fact: did he miss the stuff on coops this week? Did he miss Grassley saying there is nothing he would vote for?

Bottom line, Pearlstein is merely echoing the Republican's position. Ignore him.

Posted by: Dollared | August 19, 2009 7:56 PM | Report abuse

wisewon - You can't be too familar as they say the $400 Billion is saved each year, i.e. we pay $400 Billion less each year. This will not solve the growth problem, but it will keep people from dying, suffering and going bankrupt while we work on it.

I really don't understand the argument that since medicare patients get more care, they should have lower admin cost. Admin costs depend on transactions. It makes little difference whther 1 million people each have 1 transaction or 500,000 people each have two. It also depends on the complexity of the transaction which is closely tracked by the cost. So it seems to me that simply looking at the percentage of income that goes to benefits is a good approximation.

I do agree that it ain't a good idea to compare two different populations, but you can compare Medicare to Medicare Advantage or the overhead cost in the US to overhead costs in other countries. Again, different populations, but a lot more similar that young and old. In evey case the government run plans have much lower overhead.

Posted by: lensch | August 19, 2009 8:55 PM | Report abuse

wisewon - another thought. The $400 Billion savings is computed as a percentage of total private insurance costs, so it goes up as fast as the cost of health care. I don't believe in any of the projections, but if you like think of saving 17% of total health care costs each year.

Posted by: lensch | August 19, 2009 9:19 PM | Report abuse

@wisewon: "Medicare could change-- and replicate the managed care movement of the 90's-- but the success and failure of that was/is based on whether society wants real restrictions on health care, not whether its government or private sector based."

Medicare is changing, but the impact of these changes is blunted because high-cost providers are able to shift costs to private insurers rather than becoming more efficient.

The more people who are in plans tightly locked to the Medicare fee schedule the more leverage the government has to implement reforms in the public interest.

Posted by: bmull | August 19, 2009 9:21 PM | Report abuse

"You can't be too familar as they say the $400 Billion is saved each year, i.e. we pay $400 Billion less each year."

Relative to what would have been spent, that's a correct interpretation. But its actually a one-time savings for budget purposes. Meaning, we'll spend $2.2 trillion on health care this year. If we implement single-payer, Woolhandler argues it'd go down to $1.8 trillion next year. It doesn't go down another $400 billion the next year also to $1.4T. With a Medicare cost growth rate applied, the $1.8T would grow to $2.0T the next year and we'd be back at $2.2T the year after.

Posted by: wisewon | August 19, 2009 9:31 PM | Report abuse

Wisewon - I'm really explaining this badly, sorry. Let me try again. The basic idea is as the cost of health care increases, the amount of the savings increases.

More explicitly. They compute roughly that half of the savings is due to high private insurance overhead of 20% - 30% (I realize you dn't believe any of this, but I don't believe any of the projections, so this is purely academic). So if you compare the cost of medicare for All in two years to what private insurance would cost in two years, the savings will be larger because the overhead will be 20% - 30% of a larger number. So in effect, it will be something like $500 Billion savings the next year. Actually it may even be larger since private insurance companies had about 5% overhear in the late '80's, so it may be that they will have 25% - 35% in the next few years.

Does any of this make any sense to you?

Posted by: lensch | August 19, 2009 10:47 PM | Report abuse

Lensch,

I've read the papers themselves, there's no need to explain a cliff notes version.

Posted by: wisewon | August 19, 2009 11:13 PM | Report abuse

"you will get Republicans who realize they don't want to be on the wrong side of history going into the next election and will vote for it, despite pressure from party leaders -- if for no other reason, they will tell their leaders, than that it was going to pass anyway."

This is actually an extraordinary claim, and, as Carl Sagan used to say, it requires extraordinary evidence. Currently, the evidence (from the stimulus bill vote) is that this claim is likely untrue. But in any case, he has no recent evidence, in the form of recent votes from this crew of Republicans, that the leadership is incapable of keeping all their people in line.

Posted by: pj_camp | August 20, 2009 8:36 AM | Report abuse

Please let's all say the following together:

A federal government with a fiat currency cannot go bankrupt.

I get so tired of reading that this or that thing will "bankrupt the country." The US government cannot go bankrupt. Get that through your head. It can't happen. Zero chance.

Posted by: raulgroom | August 20, 2009 1:57 PM | Report abuse

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