Many Versions of the Public Option---and Why It Matters Which One

By Steve Schulte of
Health Advocate Solutions

If you feel confused at this point about the health reform debate---as well as what a "public option" means you are not alone. This issue is confusing on a good day.

As the debate seems to be moving us ever closer to reform we are right to ask: what kind of reform?

It seems right now that there is general legislative agreement on key insurance reform issues. For example, coverage will be mandatory with some tax relief for those individuals with lower incomes and for certain lower-capitalized small businesses. Insurers will be expected to cover everyone----with pre-existing conditions or not. These things will be done through a variety of mechanisms: federal insurance regulation, coordination with the states, expansion of Medicaid (for example, to include some able-bodied adults, especially parents)and, as indicated, through use of the tax code.

The big debates center around: cost, whether healthcare inflation can be contained over time---and whether there is to be a public option.

The cost issue entertains a consensus of sorts: the final bill must be somewhat less than $1 trillion dollars over the next 10 years. Everyone seems to agree on this. It would also be great if the federal deficit gets lower over the 10 years ahead. That seems to be possible right now.

The second big issue---public option or not?---is much more complicated and its outcome harder to predict. What seems to be moving ahead in order to get enough votes for final passage is a govenment model (public option) that would set basic coverage standards and that would then have CMS (the agency that runs Medicare and Medicaid) negotiate prices with insurers, doctors, hospitals, manufacturers, etc. States would have the chance to opt out of offering this model after two years or so.

In contrast to this variation of the public option the so-called "robust" public option would do all of the above except that it would have insurers base their offerings on the prices set by CMS every year. (This works pretty well for Medicare right now by the way. Lots of company contracts follow this route.)But this model is opposed, not surprisingly, by insurers and their supporters in Congress. These all say that the robust public option would drive them out of business.

Given how small is the percentage of the population that would probably choose the public model this is extremely unlikely. Market reform might be the result. But isn't that what we want?

There are other "public option" models. For example, stick with the first model listed, the currently popular-with-legislators one, and don't let the states opt out. Or, let them opt in later. We now have at least four public option models on our table.

As I wrote previously, Wyden of Oregon has an interesting concept. He is for the public option. However, rather than limiting it to about 10-12% of the uninsured as is envisioned at this point, Wyden wants it offered all over the country. To everyone. Even if their employer contributes to only, say, two choices. Now that would most likely open up competition.

Finally, there is an idea that some Republican lawmakers prefer. It says that insurers should be able to do business anywhere in the country and that anyone, anywhere, should be able to buy their product. This could also blast open competition. But standards are different in every state so it would seem a public option is still needed to guide what a plan must contain and how it can be marketed.

Leaving aside the public option debate, how about cost control? Well, criticism that the current proposals don't go far enough seem correct. Wyden's model would clearly force cost constraints---as well as service differeniation--among the players. So would allowing CMS to set pricing. And, of course, the President already let the pharmaceutical companies off the hook when he declared that the federal government would not negitiate pricing with them. Mistake?

Unfortunately the issues here are very complex. We might want to see a bill written in 10 pages rather that nearly 2,000, but we are probably naive.

However, much is still at stake. As the train leaves the station it will be interesting---and it will matter---in which direction it finally gets going. Will we get the healthcare reform we expect and deserve?


To respond to this blog, email steve6schul@yahoo.com