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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.

By Ezra Klein  |  October 27, 2009; 2:39 PM ET
Categories:  Health Reform  
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Comments

The public option makes the subsidies cheaper, and thus more sustainable in the long run. Period.

We should not make this weaker because senators are filthy ******. Let them pursue the world's oldest profession when debating defense spending, not people's health care.

On a related note: I'm so tired of overpaying because our political system is run by money.

Posted by: rat-raceparent | October 27, 2009 3:14 PM | Report abuse

A state-based entity that gets no special federal help? Why even fight about this on the "public option" terrain? How is this any different from Conrad's co-ops (presumably they would have gotten federal startup funds too)? For that matter, given the fact that these automatically define the "floor" for private coverage, how do these differ from the unaffordable state high risk pools?

Am I missing something here? Isn't calling this castrated thing a "public option" just picking a MUCH bigger fight than it calls for?

Posted by: NS12345 | October 27, 2009 4:16 PM | Report abuse

Ezra: I would be interested in seeing you think about this in an "incramentalist" view like you have other things in the reform package.

Such as, getting an exchange established is important as it can be built on.

If you have a PO established, how might it be enhanced in the future via futher legislation, even the reconcilliation process?

John

Posted by: toshiaki | October 27, 2009 4:31 PM | Report abuse

I keep trying to tell people that the PO isn't what it used to be, and they reply that it's the foot in the door that matters. This tells me that people aren't going to forget about this. There's going to be a movement behind this thing going forward.

Posted by: bmull | October 27, 2009 4:32 PM | Report abuse

My hopes are basically exactly what the right fears: that once you overcome that huge initial threshold and create the thing, it will be a lot easier to expand it over the next decade or two. I guess the blogger left doesn't want to admit this for pragmatic reasons, but I think it's in the minds of many of the actual activists I've met. Start small, and increment up; it's the starting that's the hard part. Socialism on the march!

Posted by: Ulium | October 27, 2009 4:41 PM | Report abuse

I really hope that going forward the public option and the exchanges are expanded to more and more people. What I fear is that the public option won't fundamentally change our cost problem and eventually a Republican Congress will gut it. I just hope it's established in enough people's minds by that point as a necessary part of the safety net to make gutting it a third rail.

Posted by: MosBen | October 27, 2009 4:43 PM | Report abuse

As far as I'm concerned, the entire public option discussion is a diversion. Competition among insurers has ZERO to do with the cost of care and the public option has been purposely designed to be too small and weak to make any other kind of difference.

Opponents paint it as the camel's nose that will somehow lead to "socialized" medicine. In fact, it's just another time and money wasting tactic to prevent discussion that would lead to real reform.

Posted by: Athena_news | October 27, 2009 4:57 PM | Report abuse

Ezra,
Instead of engaging in happy talk, here you are engaging in some realistic assessment of the PO. Thanks! Hope for more straight-shooting in the future.

Posted by: michaelterra | October 28, 2009 12:51 AM | Report abuse

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