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The not-a-public-option compromise, and beyond

PH2009112202369.jpg

There's a lot left to be decided in health-care reform, or at least there should be. The subsidies could use some help, and the Medicare Commission should be strengthened. The House and Senate need to figure out their revenue measures, and Ken Thorpe is right that more could be done on the delivery side. But whatever issues are left to resolve in the policy, the politics have come down to hammering out a compromise on the public option.

Last week, Harry Reid convened a working group to develop a compromise. Five liberals and five conservatives would attend. Chuck Schumer, Jay Rockefeller, Tom Harkin, Sherrod Brown and Russ Feingold would represent the left. Mark Pryor, Blanche Lincoln, Mary Landrieu, Ben Nelson and Joe Lieberman would speak for the moderates. But Lieberman didn't show up.

Twice.

With Lieberman's message received (though his staff still attending the meetings), Tom Carper stepped into the process. Lieberman, meanwhile, began attending talks with another group of moderates. This group included Mark Warner, Kay Hagan, Mark Udall, Jeanne Shaheen, Ron Wyden and, over the weekend, Olympia Snowe. Some of these folks support a public option, some don't. The importance was really Snowe and Lieberman in a room together. The bill will need at least one of them in order to pass, and both have stated their firm opposition to a public option of any sort. So the compromise being developed by Reid's group is not a public option.

Currently, insurance plans are regulated by the states, which means they're different in every state. That makes it hard for them to achieve certain efficiencies of scale or maximize their leverage against providers. But back in September, I noticed a promising provision in Max Baucus's draft that would allow for national insurance plans, so long as they met a minimum level of federal regulation. That seemed like a potentially huge change, but I never heard another word about it, so I let it go.

The compromise being discussed is built atop that provision. The idea is that the Office of Personnel Management would choose nonprofit plans that met national standards and offer them on every state exchange (unless states opted out). These plans would be private, but the OPM would act as an aggressive purchaser, ensuring that they met high standards and conducted themselves properly. It's a private option with a public filter, essentially. But more importantly, it's a menu of national, nonprofit plans, which would be much more interesting from a competitive standpoint than state-based, public plans.

But the fact remains that private plans are not public options, no matter how much extra scrutiny they're subjected to. Though the liberals in the room are listening to this compromise, sources close to the discussion tell me that the conversation is opening up beyond the insurance offerings. In other words, the compromise on the public option might end up being more than a compromised public option. This is, in my view, an extremely promising development, and I'll say a bit more on that later today.

Photo credit: William B. Plowman/Associated Press.

By Ezra Klein  |  December 7, 2009; 8:15 AM ET
Categories:  Health Reform  
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Next: Five compromises beyond the public option

Comments

OPM is no better than anyone else at negotiating low rates. FEHBP premiums are scheduled to go up 8.8% next year.

A single national exchange is better than state exchanges, but a single national exchange IN ADDITION to state exchanges is a step backward.

From the standpoint of someone who cares about working families and health care, this bill sucks. But I see some opportunity for a compromise that would allow the Sanders state-based single payer amendment. Other than that, I would like to see government regulation of payment rates. If neither are possible then this plan is not ready for prime time and the individual mandate and the tax on employer benefits should be deferred.

I strongly oppose the Collins proposal to allow everyone to purchase catastrophic insurance. This will further undermine preventive care (which is already severely compromised by this bill) and cost us more in the long run.

Posted by: bmull | December 7, 2009 8:20 AM | Report abuse

"Currently, insurance plans are regulated by the states, which means they're different in every state. That makes it hard for them to achieve certain efficiencies of scale or maximize their leverage against providers. "

Ezra,

Not really true. National plans could get leverage on purchasing drugs, medical equipment and supplies- that's pretty much it. The reality, however, is that local plans pool their leverage via purchasing pools such as PBMs, hospital supply consortia, and others. So the leverage here, given already existing methods of purchasing leverage, is minimal.

On the provider side, you're simply wrong. A national plan has no leverage over local providers. There is no benefit to a provider in Pittsburgh to accept patients from a national plan because they've got millions of patients on the West Coast. Similarly, patients don't really care (except for travel) what providers on the West Coast are in the plan if you live in Pittsburgh. Pittsburgh provider negotiations will be about a provider's leverage in Pittsburgh versus the health plan's concentration of Pittsburgh patients. Just like every other provider-payer negotiation. Medicare isn't successful with a "take-it or leave-it" reimbursement approach with providers because its a national plan. Its because they have roughly 40-50% of the health dollars in every local market in the US.

PS This is best described as an "exchange within the exchange." In my head, OPM would be functioning very similarly to the exchange administrators: negotiating basic terms to be able to allow insurance plans to be offered in the exchange (or national health plan). There's not really a difference I can see besides the politics of offering the activist left a "national health plan."

PPS I agree that there are better things to get in exchange for the public option. But that's ALWAYS been the case.

Posted by: wisewon | December 7, 2009 8:28 AM | Report abuse

Some of what wisewon said is true. I am not a big believer in exchanges. I am mainly against having BOTH national and state exchanges because it further fragments the subscriber base and will lead to regulatory arbitrage.

Posted by: bmull | December 7, 2009 8:49 AM | Report abuse

Dems could easily and quickly enact the senate bill as-is if they desired.

All they have to do is schedule a final vote for the bill and announce that if that vote fails, they will immediately then undergo a reconciliation vote for an alternative bill that includes single-payer.

Under threat of passage of a single-payer bill (which would require only 50 votes in this scenario), moderates of all colors would immediately vote for the Senate bill to ensure the death of single-payer.

The fact Dems are failing to use their leverage indicates to me they are not truly interested in passing health care reform.

Posted by: Lomillialor | December 7, 2009 8:59 AM | Report abuse

I do have to say it's good see Wyden involved in some of these negotiations. A bill with Wyden-style "choice" provisions would be much better than one with the kind of gelded public option that could get Lieberman/Collins' support.

Posted by: NS12345 | December 7, 2009 9:32 AM | Report abuse

On the provider side, there's truth to your argument, but it's not the whole story. National plans can do more to set payment rates, and more to negotiate with national hospital chains, which are, god knows, quite prevalent across the country.

That said, I don't want to overstate the amount of leverage these plans would have. They wouldn't be gamechangers, by any means. But I think it would be a real regulatory step forward to have a national insurance market.

Posted by: Ezra Klein | December 7, 2009 9:56 AM | Report abuse

Of course they are moving beyond the public option. They'll attack the new taxes next to kill the bill's funding which will lead to a decrease in subsidies and finally you'll be left with the individual mandate and nothing else.

Posted by: endaround | December 7, 2009 9:59 AM | Report abuse

Even if "Reconciliation" ends up not being used, the threat of it could provide an "out" for blue dogs who have laid down the marker for filibustering a Public Option. Or, when the witching hour comes, end up voting against the Filibuster on grounds that the majority will use the maneuver which could wind up creating a very strong PO, so might as well let it be voted up or down as is.

Just a possibility, but a real one I think, at least after these recalcitrents extract their ransom from Reid.

And it not, will the 55 Senate dems who support a PO actually trigger reconciliation if push comes to shove. Stay tuned.

Posted by: arnold104 | December 7, 2009 10:19 AM | Report abuse

Although there are ways to lower costs without injecting a PO into it, that remains completely, or largely private. I just don't think, and most liberal senators either from what I can gather, that any device outside of government control would survive industry tampering and loop holing into irrelevance.

This is why a relatively tamper proof program with immutable mandates is the only way. Though even those can be messed with by GOP administrations. Or attempting to, though medicare and SS have survived every major assault since their enactment.

And when the public gets clued in that these programs are good and their friend, they become valuable assets that even wingers start championing, as we see with the crocodile tears for Medicare Advantage.

Posted by: arnold104 | December 7, 2009 10:43 AM | Report abuse

"Under threat of passage of a single-payer bill (which would require only 50 votes in this scenario), moderates of all colors would immediately vote for the Senate bill to ensure the death of single-payer."

I'd love this. But we don't have 50 votes for single-payer.

It would be useful to remind the conservatives of just how much we've compromised to get here, though.

Posted by: adamiani | December 7, 2009 10:48 AM | Report abuse

Ezra, your description of the role of the OPM in this, specifically:

"...OPM would act as an aggressive purchaser, ensuring that they met high standards and conducted themselves properly."

begs the question, what kind of enforcement or policing mechanism would the OPM have? I suspect the answer is essentially none. Once several millions of people are covered by a particular plan, the threat of shutting it down for non-compliance is an empty one. If the OPM has the power to assess fines - which is an open question - that wouldn't mean much either since it would be the plan members who would have to cough up the funds.

Posted by: adagio847 | December 7, 2009 11:21 AM | Report abuse

This idea of having two Exchanges with different standards seems ridiculous to me. How do you ensure that the risk profile of one Exchange is similar to that of the other Exchange? If this isn't the case, then the plans on the Exchange with stricter standards could cost a lot more than the Exchange where the standards are more lax. This has the smell of adverse selection written all over it.

Posted by: moronjim | December 7, 2009 1:39 PM | Report abuse

My point is that this is just the Senate getting really sloppy in order to pass a bill. But with each part so interdependent of other parts, you can't do this with health care. This idea of two Exchanges is a really, really bad idea.

Posted by: moronjim | December 7, 2009 1:40 PM | Report abuse

*All they have to do is schedule a final vote for the bill and announce that if that vote fails, they will immediately then undergo a reconciliation vote for an alternative bill that includes single-payer.*

You keep forgetting that to go to reconciliation, the Senate needs to pass a bill to go to conference with in the first place. They have to pass *something*. If a bill fails and they haven't passed any alternatives, then they have nothing to "reconcile."

Posted by: constans | December 8, 2009 4:47 PM | Report abuse

Hey Dems. Here's a strategy: Write a bill that denies all members of congress their free health care. Let them surf the open market. Of course, most of those old fat cats qualify for Medicare, that single payer system they're so fond of having and supposedly defending. If there's any way you can deny them that too so they understand how it is for the rest of us, please do so.

Posted by: paul37 | December 14, 2009 10:38 AM | Report abuse

The comments to this entry are closed.

 
 
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