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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Maria Cantwell. Click image to expand.
Maria Cantwell

The Senate finance committee has received a Congressional Budget Office estimate on its amended health-reform bill that improves its prospects for committee passage. According to the CBO, the bill would save $81 billion over 10 years (as opposed to the $49 billion the unamended version was projected to save) and would extend coverage to 29 million of the 45 million uninsured, just as the unamended version did. Still, there remains one problem: The finance bill, which could get an up-or-down committee vote as early as this week, does not include a public option, unlike the versions previously passed by the Senate health committee (text, summary) and by three committees in the House (unamended text, summary; the three House markups have not yet been blended together).

It remains possible that what Sen. Charles Schumer, D-N.Y., calls "some kind of public option" will be incorporated into the bill. But odds are this won't match even the watered-down versions approved by the four congressional committees that have advanced health reform thus far. It will be Public Option Lite. Two versions of POL have been kicking around for months; two newer and better versions of POL surfaced during the past week.

The two most familiar kinds of POL are plainly unacceptable. They are the nonprofit health care co-operatives proposed by Sen. Kent Conrad, D-N.D., and the trigger (or "safety-net fallback plan") proposed by Sen. Olympia Snowe, R-Maine. The Conrad proposal, which would cost $6 billion, was folded into the finance committee bill. The Snowe proposal was not, but it could come up on the Senate floor.

Having the federal government help health co-ops to compete with private health insurers is a bad idea because, as Sen. Jay Rockefeller points out, health co-operatives are "a dying business model for health insurance." Depending on how you define them, there are between four and seven health co-ops in business today, and these don't operate in a way that's appreciably different from private insurance companies.

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Putting into the bill a trigger that would create a public option if affordable coverage remained unavailable to at least 5 percent of the population is a bad idea mainly because, as I've noted before ("Triggernometry"), legislative triggers almost never get pulled, especially when they're embedded in health care legislation. A further problem with Snowe's proposal is that the trigger wouldn't be national; it would be applied state-by-state, thereby weakening the public option's leverage in negotiating doctor and hospital fees and drug prices.

The new versions of POL, although a poor substitute for the real thing, are a significant step up from Conrad's and Snowe's offerings. They are the low-income state plan proposed by Sen. Maria Cantwell, D-Wash., and the state public option proposal by Sen. Tom Carper, D-Del. The Cantwell proposal, which would likely lower costs, was adopted as an amendment last week by the finance committee. The Carper proposal is still in the discussion stage.

Cantwell has said, "My proposal in no way substitutes a robust federal public option, which I will continue fighting for." And it isn't really a public option at all, because it does not involve the creation of a government health insurance program. Rather, it would give states the option of redirecting subsidies for the purchase of private health insurance on the insurance exchange. Instead, the state itself could negotiate with health insurers to provide health insurance to the uninsured, in effect substituting its own muscle to leverage volume discounts for the insurance exchange's principle of market competition. The population on whose behalf the state could bargain would be limited to those whose annual incomes were between 133 percent and 200 percent of the federal poverty level (that is, between about $29,000 and about $44,000 for a family of four). Cantwell estimates this group to represent about 75 percent of the uninsured.

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