The public option is not the Medicare option
TPMDC's Brian Beutler asked Sen. Chuck Schumer whether the Democrats were right to brand the public option as separate and apart from Medicare. "Yes, definitely," Schumer replied. "In America, people like choices."
I've been thinking a bit about this as we've watched the public option get compromised down to the level-playing field, exchange-based option that states can opt out of. In other words, the public option won't be available to 90 percent of people even in the states where it's offered, and it won't have the pricing leverage to offer significantly lower premiums than those of its private competitors. The policy that so excited liberals and conservatives is likely to have a lot less impact than either side believes. That's not a minority view: Sherrod Brown, who has been one of the most ardent public option advocates in the Senate, told me that the public option "became bigger even than I, a strong supporter of it, think it is."
In part, this is a consequence of the decision to rally behind a "public option" rather than a "Medicare option," or something similarly lashed to Medicare. The idea of "Medicare" isn't all that flexible. It already exists in concrete form. The idea of a "public option" proved astonishingly flexible. To fit the name, it simply had to be an insurance option run, in some way, by the government. The public option, however, is not the Medicare option. But because the name held steady even as the underlying policy changed dramatically, a lot of its supporters still expect it to have a Medicare-like effect.
If the public option had instead been a program tied to Medicare, then it would have been based around Medicare's single largest advantage: Its ability to set prices that health-care providers can take or leave, rather than negotiating individually with each hospital in its network. That system makes Medicare cheaper than many private insurers for the same reason that Wal-Mart is cheaper than most mom-and-pops: Pricing power matters. A Medicare option able to bring -- and expand -- Medicare's bargaining power into the rest of the health-care market would start to get at the "pricing problem" that insurance industry Chief Executive George Halvorson spoke about this morning, though not in a manner that Halvorson supports.
A Medicare option would also probably have been a nonstarter in Congress, much as the public option attached to Medicare rates stands little chance of passage. But the advantage would have been that the ensuing debate would have been explicitly tied to the thing that makes a government option so effective: the power to negotiate on behalf of a huge customer base, as other countries do and as Medicare does. Instead, the debate has centered around the principle of an insurer run by the public, which is, at this point, going to have a lot less impact on premiums than most of its supporters expect. As a political move, that probably made sense, and allowed politicians to get to a place where they might just have a compromise that supporters like and skeptics don't hate. But the cost is that the compromise won't do what supporters wanted, and skeptics feared.
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