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'The Public Option Act'

This is a good idea:

Congressman Alan Grayson, (D-Orlando), today introduced a bill (H.R. 4789) which would give the option to buy into Medicare to every citizen of the United States. The “Public Option Act,” also known as the “Medicare You Can Buy Into Act,” would open up the Medicare network to anyone who can pay for it. ...

The bill would require the Secretary of Health and Human Services to establish enrollment periods, coverage guidelines, and premiums for the program. Because premiums would be equal to cost, the program would pay for itself.

“The government spent billions of dollars creating a Medicare network of providers that is only open to one-eighth of the population. That’s like saying, ‘Only people 65 and over can use federal highways.’ It is a waste of a very valuable resource and it is not fair. This idea is simple, it makes sense, and it deserves an up-or-down vote,” Congressman Grayson said.

Comprehensive visions for reform and incremental visions for reform have been at odds throughout this process. That was proper, in many ways: When you're building a new structure where the different parts work together, you have to be relatively comprehensive about it. But once that structure is constructed, incrementalism makes a lot of sense. Want a public option? Write the bill. Want to outlaw fee-for-service in the exchanges, or give a tax break to insurers who are constructing networks where the doctors have a different payment structure? Offer it in committee. Think subsidies should be higher, or maybe lower? Amendments are a wonderful thing.

A lot of these reforms become easier to implement when there's a place to put them, and incentives you can offer to encourage their adoption. The exchanges are a big step forward in that regard. The public option is a good example. If we passed a public option now, how would you get it, exactly? Call the government? And how would you handle the adverse selection problem, where sicker people who were rejected by private insurers would use the government's offering as a last resort?

There are a lot of other good ideas that wouldn't work very well in the current system, but work a lot better when you've got a simple marketplace where a lot of different insurers are competing with transparent prices, standard descriptions, and some basic rules of the road. You need a comprehensive bill to set that up, but it can play host to a lot of incremental legislation going forward.

By Ezra Klein  |  March 10, 2010; 1:26 PM ET
 
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Comments

"And how would you handle the adverse selection problem, where sicker people who were rejected by private insurers would use the government's offering as a last resort?"

Don't the mandates and no-preexisting-condition provisions already address the adverse selection problem?

Hell, Medicare presently only insures people 65+. An insurance scheme that only covers the elderly represents substantial adverse selection by design.

Posted by: adamiani | March 10, 2010 1:32 PM | Report abuse

This has been my peeve since the HCR discussion started: why not just open medicare to everyone? That, I believe, goes a very long way to fix HC in the US, it's extremely simple to explain and implement, and (I believe) would be very popular.

I realize that by itself it would not fix everything, but if the current bill passes and then this passes, I'll call it a day and consider HCR done for a long while.

It won't happen now, of course, but it's the right next step to take.

Posted by: CarloP | March 10, 2010 1:52 PM | Report abuse

Here, here. Amendments are the way forward - and we can see how in the future, they would obviate a lot of the procedural delays and concentrate the debate on a single proposition.

http://realignmentproject.wordpress.com/2009/08/03/why-amendments-matter-a-theory-of-change/

Posted by: StevenAttewell | March 10, 2010 1:55 PM | Report abuse

Grayson's idea would never work in practice. For starters, Medicare has a pure community rating: the 67-year-old man who just completed his 45th Boston Marathon pays the same rate as the 89-year-old widow who needs a powered wheelchair to get around. The Senate bill has a 3:1 age rating and a 1.5:1 smoker rating. Why would a 27-year-old bachelor want to pay $600/mo. for Medicare when he could get an actuarially equivalent policy (0.73-0.76 AV) on the Exchange for $300-$350/mo. -- let alone a "young invincible" policy for $150-$200/mo.? And how would Medicare be affordable without the generational subsidy from those 20-something bachelors?

Also, how many pediatricians and obstetricians -- not normally needed for the Medicare population -- are going to participate in Medicare if they are paid Medicare rates? And if these doctors don't participate in Medicare, why would younger people participate in the program? Again, this has the smell of adverse selection written all over it.

People need to recognize that the biggest determinant of insurance premiums isn't competition -- it's risk selection. Buying insurance isn't like buying widgets. Whereas expenses are predictable at the widget store, they aren't for insurance. Whether Hank Healthy or Debbie Diabetic buys a widget, it has the same effect on the widget store's profitability. Not so with health insurance: Hank Healthy has a much higher probability of being profitable than Debbie Diabetic.

Please tell me where I'm wrong.

Posted by: moronjim | March 10, 2010 2:21 PM | Report abuse

Won't someone bravely speak up for the Medicare reimbursement rates of North Dakota hospitals.

If only there was someone...

Posted by: mayorm | March 10, 2010 2:22 PM | Report abuse

I should add: you can't make the Medicare buy-in optional; it has to be mandatory to prevent adverse selection. Which means 162+ million Americans will 'lose' their current coverage. That doesn't bother me, but I understand the politically it's not the easiest thing to sell.

Posted by: moronjim | March 10, 2010 2:24 PM | Report abuse

Let me add more. Here are what I see as the biggest shortcomings of the health care reform bill:

1. Self-insured aren't subject to the minimum benefit packages.
2. Affordability above 199 percent FPL. Worse, if an employer drops coverage, an employee with a family of four earning as little as $90,000/yr. will have to pay the full cost of a $16,000-$25,000 policy having 0.80 AV from the 3:1 community rating. Because they currently have a 40.3-50 percent marginal tax rate (depending on state income taxes), that's a major tax increase for this family as they will lose their tax subsidy from the employer tax exclusion. That also means such a family with a diabetic child will have to spend an enormous percentage of their income each year on health insurance.
3. Insurance rating rules -- particularly the age and smoker rating which both should be abolished -- are very weak.
4. Without extending the community rating to the midsize and large group markets, the excise tax will have unfair age, occupational, etc. effects.
5. The 60 percent minimum actuarial value and the "young invincible" policy still will cause a lot of people to go underinsured and also cause much adverse selection as young, healthy people will flock to these cheaper policies until they get sick, and then purchase a 0.90 AV policy.
5. The employer mandate still sucks.
6. The individual mandate isn't strong enough to deter a 27-year-old bachelor from going bare, and increasing premiums for everyone else.
7. State regulation of the self-insured is not exactly desirable.

Posted by: moronjim | March 10, 2010 2:44 PM | Report abuse

This is an idiotic idea. And it an embarassment that an econommics and policy analyst for a credible newspaper would promote enormous expansion of an already fatally-underfunded entitlement program WITHOUT any corresponding means of reigning in costs, and fatalistically hoping that future politician's have the spine to implement said measures is at best, incredibly naive, and at worst, gross incompetence.

But then again, incompetence and naivety is what I've come to expect from your 'columns'.

Posted by: gopoohgo | March 10, 2010 3:07 PM | Report abuse

Part A is $461/month. Part B is $110/month. Part D has a median cost of around $50/month. For a family of 4 this would be $2484/month or nearly $30k/year in premiums plus copays. And these are the premium levels under which Medicare plan is insolvent, and doesn't cover most of the services needed by families.

Such a deal!

Posted by: staticvars | March 10, 2010 3:28 PM | Report abuse

staticvars,

you forget that you need a Part C (supplement plan). You can't expect people to pay a $1000+ medicare part A deductible can you??

Government at work!!!

Posted by: visionbrkr | March 10, 2010 3:30 PM | Report abuse

This will not happen. Doctors and hospitals are not about to accept a 20-30% cut in reimubrsement that would occur should under-65's be able to buy into Medicare. Don't forget Medicare reimbursement is MUCH LOWER than private sector.

Ezra - You've posted and linked several times on the idea of Medicare early buy-in. But you have yet to provide a credible argument as to how any legislation could overcome the doctor and hospital lobbies' opposition. Please take the argument to the next step or stop posting on it.

Posted by: mbp3 | March 10, 2010 3:33 PM | Report abuse

1) It is a good idea.

2) It should be offered at 10% above cost, the surplus money should be given to the Medicare trust fund to make it solvent.

3) A family plan would need to be created, in order to make it affordable to families

4) Adverse selection won't happen because at $400-600/month for individuals, it is more than competitive with equivalent private plans (not including families-- see above). Since Medicare has less overhead (less than 4% compare to 15% or more for private plans), it will tend to become even less expensive with the addition of younger, healthier individuals and would help keep health care prices down.

5) If enough people opt for this (which may happen given the competitive rates), doctors/hospitals would be unable to drop Medicare, because the loss of a large pool of patients would hurt their bottom line more than serving a few people at higher rates.

6) Since Medicare provider rates are up to 50% reduced from private rates, this will help hold down cost inflation due to provider inflation
http://www.businessweek.com/news/2010-02-25/hospital-clout-spurs-higher-california-health-costs-correct-.html

7) New Medicare rules on using scientifically proven technology may help hold down costs due to medical technology inflation.
http://www.thelundreport.org/resource/new_technology_is_driving_up_healthcare_costs

Posted by: amendmv | March 10, 2010 4:07 PM | Report abuse

The medicare for all/robust public option tied to medicare reimbursement should be introduced every session of congress until it passes. It is the single most popular idea to come out of HCR. I can't wait to hear the reasons why dumbocrats and repiglicans vote against this time after time. and it would mollify those that feel the individual mandate is onerous because it forces people to buy private insurance.

Posted by: srw3 | March 10, 2010 5:14 PM | Report abuse

Won't adding a bunch of relatively younger, healthier people to Medicare make it more fiscally sound?

Certainly the savings in overhead over private insurers would be significant.

With the subsidy provisions in the current HCR, wouldn't medicare be affordable to most people?

Posted by: srw3 | March 10, 2010 5:24 PM | Report abuse

I'd agree with allowing people who want it to opt in to Medicare, provided you let those who don't want it to opt out (and take my payroll tax with me).

Posted by: NoVAHockey | March 10, 2010 5:33 PM | Report abuse

haha. Government SAVES money. That's a good one. Would your public option have to advertise srw3?

Would you have to actually SHOW the capital costs you'd incur (unlike Medicare)?

I see those "SAVINGS" dwindling.

Posted by: visionbrkr | March 10, 2010 5:49 PM | Report abuse

There are two fundamental problems with this idea.

One - Medicare can only exist as it does with an external private health care market that aborbs the under-reimbursed costs it pays to doctors and hospitals. Medicare reimbursement rates don't cover the cost to provide healthcare. It works now - because everyone else makes up for those costs by having them allocated to their bills and insurance reimbursements. About 10-15% of any bill you get from a doctor or hospital is covering that under-reimbursement. If you reduce or eliminate that external private healthcare market - they will have to increase payots (increase cost to those that buy in) or continue under-paying and then watch doctors leave practice and hospitals shut-down.

Two - Medicare/Medicaid is $37 TRILLION in the red. It's broke. It failed. It is unsustainable.

Other than these two small issues - it is a great idea.

Posted by: AllDayinVirginia | March 10, 2010 5:59 PM | Report abuse

This bill would have to be amended to fix some of the problems, but it's a way better idea than a standalone public option bill.

Of course, to have any chance of passing it would have to be done under reconciliation, and that means Obama and the leadership would have to fight hard for it (possibly replacing Kent Conrad as budget committee chair), which they have shown zero interest in doing.

Posted by: bmull | March 10, 2010 7:17 PM | Report abuse

The US government needs to get out of the health insurance business. We really need to start the next generation out without medicare. Medicare is nothing but a Ponzi scheme. People go to jail for Ponzi schemes. Get my point?

Posted by: shipley130 | March 10, 2010 9:19 PM | Report abuse

A majority of the American people WANT the public option! The failure of Congress to pass healthcare with the public option would only prove that the insurance industry has way too much influence.
The lobbyists play their game well. First they outright oppose H/C reform.......then they say "we will help you write the legislation" to twist it into something which benefits them (insurance industry).......and then they let us fight for WHAT THEY WANT! Wake up people! 41 (Nine to go!) Senators have signed letter to say they would vote for healthcare with a public option. Call AND write your Senator today. Thank them if they signed and demand that they sign on if they have not. It is time they honor the wishes of the people and NOT the insurance industry!
This is not about Democrats or Republicans......it is about the will of the American people! If they do not respect the wishes of the people....THROW THEM OUT!
Joseph Pijanowski

Posted by: Joe_Pij | March 10, 2010 10:14 PM | Report abuse

2010 budget $453 billion for Medicare and $290 billion for Medicaid = $743 billion
Waste and fraud are pervasive problems for Medicare and Medicaid, the giant government health insurance programs for
seniors and low-income people. Improper payments — in the wrong amounts, to the wrong person or for the wrong reason —
totaled an estimated $54 billion in 2009. They range from simple errors such as duplicate billing to elaborate schemes
operated by fraudsters peddling everything from wheelchairs to hospice care.

Estimated fraud and waste = $54 billion

The White House estimates that expanded use of private audits throughout the government could recoup at least $2 billion for taxpayers over the next THREE years, e.g. est $0.7 billion yearly.

So let me understand the yearly figures, total $743B out of which $54B ( 13.76% ) are fraud and waste Obama will save $0.7B
using private bounty hunters = so the savings he hopes to accomplish by the bounty hunter program is 0.942% per year.

How can anyone support a govt program that by it's own admission contains close to 14% fraud and waste and by it's own
admission would only attempt to cut that waste by less than one percent???

And they want to convert the rest of our national healthcare to this formula of govt corruption, fraud and waste?

Posted by: FlaKeys | March 11, 2010 8:31 AM | Report abuse

As a person that lives in Alan Graysons 8th District I am ashamed that he is representing us, did I say representing? Actually all of his actions are NON-representation. Al, is suppose to be a financially savvy person, he even teamed up with Ron Paul regarding the Fed, so he must understand that a "public option" will drive up the cost of medical care and lead to rationing, oh, I forgot he was one of the legislatures that took $500 billion dollars away from Medicare, so it seems he's firmly in his parties pocket of being out of touch with the people. Fortunately we have a true champion of the people in our district that does care about the people, conservative Republican Patricia Sulivan, who will replace Al this November.

Posted by: ric545Riker | March 12, 2010 9:40 AM | Report abuse

I agree with those who oppose this ridiculous idea, especially the comments of AllDayinVirginia. Alan Grayson has embarrassed the people of Florida once again. This pathetic so-called representative of those of us who live in the 8th district of Florida continues to come up with ideas that don't work, junkets to other countries at the taxpayer's expense, and a firm commitment to following the leftist leaders of his party.

Why does Mr. Klein think that amendments to a already-hopelessly-flawed bill will improve it? Why would the American people trust any lawmaker at this point to represent their interests after they have been bought and paid for by leftist special interests?

Alan Grayson's damage to our country and those of his socialist cohorts are short-lived, however. In Florida's 8th,we have a clear-minded, conservative candidate who will unseat him in November, Patricia Sullivan, who will work for private-industry solutions to health care issues, not a government takeover. Other sensible Americans are standing up in congressional districts across the nation. The Alan Graysons of the congressional world will soon be gone and we can take back our country.

Posted by: mountdoravoter | March 12, 2010 10:38 AM | Report abuse

Good grief ...here wee go with another Grayson lliberal scheme to siphon public fund without professiona controls to reduce fraud and corruption. I have been writing a blog on corruption in Federal Foreign Aid and other programs at FiscalRangers.com - so I am very aware that the Federal government cannot control fraud and corruption in the existing Medicare or Medicaid systems, so why let this program expand at all? I am against any new, and most existing liberal "feel good" spending plans until both the Dems and Republicans actually can show there is no more corruption and fraud in those programs. Lets stop rewarding liberal politicians like Grayson with funding more out of control programs. Down here in Florida, we want Patricia Sullivan to skunk Grayson in the upcoming elections for common sense spending practices.

Posted by: VJtraveler | March 12, 2010 10:53 AM | Report abuse

Yes only 54 Billion in Fraud and Waste.... Let us sign up for even more, LOL Grayson He talks a stupid game... Come on people how much more would you like to waste? Keep sending your hard earned dollars to the Federal Government to waste? Or Take a Stand get off your bottoms and do something, Join a Tea Party make a Stand for Principles and American Values and Vote the bums out. Start with Grayson BYEBYE.... Grayson... we are going to vote Patricia Sullivan District 8 in 2010

Posted by: grandmagail | March 12, 2010 12:57 PM | Report abuse

Love this idea, Rep. Alan Grayson! I think it would be great too if the cost of this Medicare buy-in could come directly out of the paychecks of Americans whose employer allows them to choose this coverage rather than they employer's health care coverage. Even if the employer doesn't offer any health care insurance to it's employees, I think it would still make sense for the employer to pull out the weekly cost from the employee's paycheck and then distributed to the government. Or!.....it could be paid out of our private accounts directly to the government. Either way, I think Grayson is right on!

As stated above, for this to be successful the price needs to be affordable that way even healthy single young people will want to purchase it along with families!

Posted by: KayInMaine | March 14, 2010 10:57 AM | Report abuse

Its a good idea for whom? Forget the fact that:
1. the Boomers are on deck for retirement.
2. The government takes thing and flogs them directly to hell. (think DMV, medicare, Indian Health Service)
3. These geniuses are adding 30 million uninsured, while reducing doctor's reimbursement rates.
4. To top all this, the Obama "brain-donor trust" is gonna lop one half trillion dollars from medicare which is already scary past insolvent!
and what do you get? healthcare by Red China's "barefoot doctors" or worse yet cuban-style healthcare.
I am praying that Patricia Sullivan wins, so she can walk us back from the "spendit like you gotit" democrat ledge!

Posted by: F1rstangel | March 15, 2010 6:30 PM | Report abuse

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