Politics Plus

This morning I read an argument against the public option that I consider too important not to share.

In the current battle over health reform, progressives may have set themselves up for trouble by pinning all their hopes on the creation of a government-run insurance plan. A public plan is not a bad idea — indeed, it could be a critical element in successful reform — but it could also easily turn out to serve the opposite purposes from the ones progressives intend.

All the proposals receiving serious consideration in Congress allow employers to continue to insure their workers and dependents directly. They also call for new "insurance exchanges" as an alternative means for individuals and employee groups to purchase coverage. If there is a new government-run plan, it would be one of the options in those exchanges.

The great danger is that the public plan could end up with a high-cost population in a system that fails to compensate adequately for those risks. Private insurers make money today in large part by avoiding people with high medical costs, and in a reformed system they’d love a public plan where they could dump the sick. Although the proposals before Congress aim to limit insurers’ incentives to skim off the best risks, the measures are unlikely to eliminate those incentives entirely.

Entry into the public plan for the eligible employed would be a two-stage process. First, employers would choose between paying into the exchange and buying insurance directly to cover their workers. Unless the exchange is such a good deal that nearly all employers take it, firms with a young, healthy work force would tend to buy insurance on their own, while those with higher-cost employees would go into the exchange’s pool. As a result, the pool would suffer "adverse selection" — it would get stuck with a higher-risk population.

Second, within the exchange, the government-run plan would compete against private insurers, yet it would likely abstain from the marketing strategies used by private plans to avoid high-risk enrollees. This double jeopardy of adverse selection could then more than nullify the advantage the public plan derives from its lower overhead (as a result of less money going for salaries, profits, and marketing).

How should a public plan work? According to one model, the public plan would resemble traditional Medicare and have lower costs than private insurers by dint of its lower overhead and greater purchasing leverage, which would enable it to pay doctors and hospitals less. On that basis, it could underprice private plans and attract an immense enrollment (131 million people, according to one estimate).

Some supporters favor this approach because they see it as a step toward single-payer, which is exactly what the opponents fear. Squeezed by the public plan, providers might raise prices for patients insured by private plans, sending those plans into a death spiral.

But a Congress that is not about to adopt single-payer is unlikely to adopt a Trojan horse for single-payer. Some compromise proposals — such as Sen. Charles Schumer’s — offer a second model, calling for a "level playing field" between private insurers and the public plan, including limits on the latter’s ability to flex its purchasing muscle. But tight controls on its bargaining power might doom it entirely if it faces severe adverse selection.

Here’s the delicate political problem: Depending on the rules, the entire system could tip one way or the other. Unconstrained, the public plan could drive private insurers out of business, setting off a political backlash not just from the industry but from much of the public. Over-constrained, the public plan could go into a death spiral itself as it becomes a dumping ground for high-risk enrollees, its rates rise, and it loses its appeal to the public at large. Creating a fair system of public-private competition — giving the public plan just enough power to offset its likely higher risks — wouldn’t be easy even if it were up to neutral experts, which it isn’t.

In any event, the success of a reformed insurance system is going to depend more on general features of its design, such as the rules that apply to all insurers and in particular whether premiums will be risk-adjusted (providing a bonus to plans with higher-risk enrollees and imposing a tax on other plans). A key question is whether the exchanges will serve nearly all employers, creating broadly shared risk, or remain on the margins as limited, high-risk pools… [emphasis added]

Inserted from <The American Prospect>

I hate to admit it, but he does have a point.  The public option could be fixed with a few key amendments.  First, tie it to Medicare rates, not negotiated rates, adjusted for rural inequity in the cost of service provision.  Second, make it available to anyone who wants it, such as people dissatisfied with their employers’ plans.  If we cannot get a public option worth having, we may be better off to pass the insurance regulation and the subsidies, but not the individual mandate.  If we celebrate a bad bill, the GOP wins.  Until we pass single payer, our work is not done.

Many people are wondering why Senate Democrats are still trying to overcome the standard GOP filibuster requiring sixty votes for cloture.  The main alternative in the news is to go for reconciliation.  But that route is not the simple solution some portray it to be.

The single biggest complaint I hear by non-DC insiders is the sheer dysfunction of Washington. Whether it’s Jon Stewart’s very funny interview with Joe Biden the other day, or bloggers attacking Harry Reid for not just wrapping the health care issue up by going to reconciliation, people not involved in the day to day DC maneuvering and negotiating don’t understand why all this is so hard and takes so long. Insiders get very grumpy about this attitude, because they have to deal every day with the complications of the Senate procedural rules, the egos and turf battles of the powerful committee chairs, and the traditions and clubbiness of the Senate.

I have a lot of sympathy for people on both sides of the divide. Having served in the White House, and been in DC for 17 years now, I know how hard it is to get things done in this town. And having read my share of history books, I know how hard it is to get big things done in general – it just doesn’t happen very often, and it is never ever easy or painless. But I also know this: if Democrats don’t deliver now, there will be no excuses. They have to find a way to deliver the goods. History, the media, activists, and voters will offer them no mercy if they can’t get health reform done this time around.

So if failure is not an option, and there are four holdout Democrats [Wrong! Three DINOs and one pig!] in the Senate blocking the way to getting a reform bill the rest of the Democratic Party can live with, what is to be done?

A lot of people, including me, have been saying for a while that those four Senators would probably eventually force Reid to use the reconciliation process, where you only need 51 votes, and in the end they still might because there might be no other option. But a lot of the more liberal Democrats in the Senate (including Harkin, Rockefeller, and Schumer) have started arguing against that option. Their reasons include that the bill would have to be dramatically scaled back to fit within the reconciliation rule, the process would likely be slowed down making pending legislation tougher to pass, and that the bill would have to be referred to Kent Conrad’s rather conservative budget committee where all kinds of bad things might happen to it. There are also an undetermined number of otherwise more progressive Senators such as Robert Byrd and Russ Feingold who believe putting health care in reconciliation violates the spirit of reconciliation rules, and would vote against the bill on principle.

These are pretty compelling arguments, so my view is that progressives should not be demanding that Harry Reid put this bill through the reconciliation process. In the end, he may have no other choice, but to demand that before he has had the chance to pursue every other option makes no sense to me. To say Harry Reid – or the President or anyone else – can just force the bill through no matter what is simply not true. The American government, just doesn’t work that way… [emphasis added]

Inserted from <Alternet>

The Republicans passed many things by reconciliation, but the difference is that they always goose step together.  The Democratic Party encompasses almost the entire political spectrum and lacks the Senate leadership needed to pull them together.  Health care is not the only problem.  Even the most recent veterans bill that passed on the Senate floor 98-0 was stalled for weeks, because Coburn held it up.  Then just bring it to a vote took a full three days of floor debate, including overcoming three separate GOP filibusters.  When Democrats filibustered only the most egregious of the Texas Tyrant’s ideologue judicial nominees, the Republicans threatened a “nuclear option”, changing the Senate rules to outlaw the filibuster on judicial nominees.  But in the 110th Congress, Republicans more than doubled the previous record for filibusters, and now in the 111th, they’re on track to break that record.  The Republicans have crippled our government by filibustering every measure, even those without controversy, and sixty votes had become the de facto requirement to pass anything.  The filibuster was never intended to be used in this manner.  Enter Alan Grayson.  He has proposed to the Nevada Leg Hound, Harry Reid, that the rules be changed to require fifty five, not sixty, votes to overcome a filibuster.  The GOP cannot filibuster this rule change, so a simple fifty one vote majority is all that is required to pass it.  Last night, Keith Olbermann interviewed him.

The time has come to end this abuse, and I fully support Grayson’s suggestion.  I tried to visit the link Grayson gave, but it’s not there.  If any of you have it, please enter it in a comment.

To me this approach makes far more sense that reconciliation.