Click here for a guide to following the health care reform story online.
Senate Majority Leader Harry Reid announced Dec. 8 that a 10-person working group had arrived at a tentative consensus "that includes a public option." He wouldn't elaborate until the Congressional Budget Office calculated its cost, but details leaked out here and there. I therefore treated this column as a one-man Wiki, updating it as often as necessary. Fine-grained detail was added as it became available. With Sen. Olympia Snowe, R.-Me., and Joe Lieberman, a Connecticut independent, both concluding during the past few days that they couldn't support the compromise's central component—a Medicare buy-in—the tentative deal now appears to be dead. I hereby declare this Wiki closed.
The components to the compromise were: 1) two new national nonprofit policies regulated by the Office of Personnel Management; 2) a new national public option to be created only if health insurers failed to create these new national nonprofit policies; 3) a Medicare buy-in available to people ages 55-64; 4) an expansion of the Children's Health Insurance Program; 5) a new regulatory requirement that insurers spend 90 percent of what they collect in premiums on health care.
A Medicaid expansion was considered and rejected, though Ryan Grim reported on The Huffington Post that CBO would score that, too, along with an expansion of Democratic Sen. Maria Cantwell's plan giving states the option of redirecting some federal money that would otherwise go to premium subsidies to negotiate with private health insurers a plan for 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). The Cantwell proposal was aleady included in the bill, but the expansion that was under (at least tentative) consideration would have opened eligibility to people whose annual incomes were between 200 percent and 300 percent of the federal poverty level (that is, between $44,000 and $66,000).
National nonprofit policies. These two policies would, in theory, be modeled on the Federal Employees Health Benefit Program—i.e., the health insurance available to members of Congress and other federal employees—and would be managed by the same agency, the U.S. Office of Personnel Management. But the new plans would be sufficiently different from the plans made available to federal employees that the whole construct looked like a stupid gimmick.
For one thing, the new insurance policies would be nonprofit. The plans available through the FEHBP are both nonprofit and for-profit. * (Please note that I am not complaining that the policies would be nonprofit; all other things being equal, nonprofit health insurance gives consumers better value.)
For another, the new plans would almost certainly have a lower "actuarial value" (i.e., they'd require more out-of-pocket spending). The most popular health plan available through FEHBP has an actuarial value of 85 to 87 percent, which is a little higher than what's typically offered in employer-based plans. Indeed, the Wall Street Journal's Janet Adamy recently reportedthat federal workers were ticked off to discover that as many as half of the nonfamily policies offered through FEHPB may be subject to the 40 percent tax on high-value "Cadillac" health plans. (It should be noted that this calculation was made by the insurance industry, which is trying to kill health reform, so take it with a grain of salt.) Buyers of the new nonprofit policies to be offered by the Office of Personnel Management wouldn't likely face this problem, because their policies would be stingier. Their actuarial value would likely be closer to 70 percent.
The idea of taking the FEHBP national has long had bipartisan appeal; according to James Ridgeway, it was introduced in the Reagan years by the conservative Heritage Foundation, whose Stuart Butler is an enthusiastic advocate. (Now, of course, Heritage's health reform blog is dumping all over the idea.) But the FEHBP is no great model for cost containment, according to the Yale political scientist (and public-option advocate) Jacob Hacker. While Medicare's administrative costs average 2 percent of expenditures, the FEHBP's average 7 percent for Preferred Provider Organizations and 10 to 12 percent for Health Maintenance Organizations.
The Office of Personnel Management is, as the name suggests, the federal government's human resources shop. It doesn't make obvious sense that it should be given vast new responsibilities to manage health care for the great many Americans who don't work for the federal government. The Federal Times, a trade publication forfederal workers, shared my skepticism.
Public-option trigger. If the Office of Personnel Management's invitation to private insurers to create national nonprofit plans failed to produce any such plans (or perhaps the requisite two), then the federal government would fill the void with a public-option plan. But Sen. Joe Lieberman, who was not part of the 10-person working group, said any kind of trigger, no matter how weak, was a deal-killer for him. The Washington Post's Ezra Klein speculated, plausibly, that the public option was only in there so Lieberman could "take it out and justify his eventual vote." I would add only that it always remained unclear that Lieberman would vote even for health reform that lacks a public option. Remember that he opposed the Senate finance committee version, which didn't have one.
Maybe the plan was to lose Lieberman but pick up Republican Sen. Olympia Snowe, R-Maine, who first injected the "trigger" idea into the debate over a public option. But Snowe posed difficulties of her own (see "Medicare buy-in," below). Compared with earlier trigger proposals, this one boasted an attractive lack of ambiguity; OPM analysists wouldn't have to crunch any numbers to figure out whether a private nonprofit has been created for them to regulate. But I remain skeptical that a public-option trigger would ever get pulled.