The best public option discussion you'll read today
We recognize that taking a strong public option off the table may be necessary to enact reform legislation. But this will mean, at a minimum, higher government subsidy costs by not permitting a payer with substantial market power to bring cost containment pressure on the system. The outcome is likely to be that costs will continue to spiral upward. In effect, the nation would be relying on the range of promising pilot approaches to cost containment that would take some time to be successful. If they are not, we may be left with increasingly regulatory approaches, such as rate setting or utilization controls that apply to all payers. This would mean much more government involvement than giving people a choice of a low-cost public option that would be required to compete with private insurers.
That's Bob Berenson, John Holahan, and Stephen Zuckerman in an Urban Institute report that's as clear-headed on the public option as anything I've read. In particular, they emphasize something that, in retrospect, I've done a very poor job articulating. The potential of the public option is not as a competitor to private insurers. It's as a competitor to providers.
That's why being able to partner with Medicare's payment rates and networks is so important, and why having a large base of customers is so critical. The leverage to get providers to give you good prices is that they need access to your customers. That's why Gillette gives Wal-Mart good rates on razor blades. It's not because it likes selling razor blades for cheap. But the public options under consideration can't partner with Medicare or offer themselves to most people or employers looking for affordable insurance. As the report says, "As written, none of the current legislative proposals include any of these elements of a strong public option."
The report goes on to consider various compromises, and comes down on the side of a trigger that would pull a strong public option into existence. "The goal would be to allow the private insurance system to prove that it can control costs with a new set of insurance rules and state exchanges. The triggering events could be the level of premiums exceeding a certain percentage of family incomes or the growth in health care spending exceeding certain benchmarks. Since the public option would only be triggered because of excessive costs, however measured, we assume that a relatively strong version of a public option would come into play."
If Congress were serious about cost control, this would be a no-brainer. Speaking of Congress, I have to run to the Hill for a few hours, but I really encourage people to read this report. It's as good a discussion of the theory of the public option and the possible compromises as I've seen.
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