Public option lite: What a Senate compromise on health care might look like.

How to fix health policy.
Oct. 7 2009 7:20 PM

Public Option Lite

What half a loaf might look like.

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The average health-insurance policy to be purchased through the health-insurance exchange is estimated to cost about $6,500, of which the income group affected by Cantwell's amendment could expect to pay somewhere between $300 and $2,000. Bypassing the health-insurance exchange could lower this group's costs, a finance committee aide told me, to somewhere between $250 and $800. (The estimate is based on the experience of Washington state's Basic Health plan, on which the Cantwell plan is closely modeled.) Under the Cantwell proposal, states could band together to negotiate with health insurers. The more states banded together, the larger the pool they'd be bargaining for. The larger the pool they bargained for, the larger the discount they could extract from private insurers—and the more this scheme would start to resemble a bona fide public option.

The only major shortcoming I see is that the Cantwell option demonstrates a little too starkly how superior a government-directed solution is to a market-based solution in expanding coverage while controlling costs. Why create a health insurance exchange at all? Single-payer, anyone?

The other new POL proposal seems a little more straightforward, though one can't know for sure because Carper has yet to go public. According to Carrie Budoff Brown in Politico, Carper would leave the decision about whether to create a public option to the states. Conrad, who voted against two versions of the public option in the finance committee, calls the Carper plan a "very constructive option," and Sen. Ben Nelson, D-Neb., who also opposes the public option, says he's warming to the idea. One drawback, noted by the New Republic's Jonathan Cohn, who has seen a rough outline of the plan, is that Carper would not permit states to set payments at Medicare rates. Then again, neither could Schumer's public option plan, and Rockefeller's (superior) version could do so only for two years. It isn't clear that Carper would allow states to band together to increase their market leverage, as Cantwell would. If the Carper plan did allow it, would Conrad and Nelson remain interested? Without the potential to scale up beyond state lines, state public options might not do a great job keeping costs down.

Cohn also notes that the Carper amendment may not achieve anything that Sen. Ron Wyden, D-Ore., didn't already achieve when he got finance committee chair Max Baucus to tuck into his chairman's mark a provision granting states a waiver to extend coverage and realize savings however they want, provided they meet the same benchmark predicted for the health insurance exchanges. That might make Cantwell's amendment superfluous, too. But Wyden's provision requires a waiver from the Health and Human Services secretary. The Cantwell and Carper proposals don't.


The Cantwell and Carper proposals are food for thought. That's more than you can say about Conrad's co-ops and Snowe's trigger.

Update, Oct. 8:  The Huffington Post's Sam Stein reports on an intriguing new variation on the Carper plan. Instead of allowing states the option to create a public option, the new version would allow states to optout of a public option. It's a clever application of Richard Thaler and Cass Sunstein's trendy Nudge theory, in which liberal ends are achieved by harnessing passivity and inertia, to health reform. Because the default position would be creation of a public option, and because passing up a public option would probably be an unpopular thing for a governor or state legislature to do, this version would likely cause many more states to opt in. That's what makes it a better plan. That's also what likely makes it a harder sell to centrist Democrats. Stein doesn't identify any who favor the idea.

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