The Public Option Will Improve Private Health Insurance

By Robert Reich, AlterNet. Posted June 25, 2009.

Why has health-care reform stalled in Congress? Democrats, after all, control both Houses, and President Obama, whose popularity remains high, has made universal health care his No. 1 priority. What's more, an overwhelming majority of the public wants it. In the most recent Wall Street Journal/NBC News poll, 76% of respondents said it was important that Americans have a choice between a public and private health-insurance plan. In last week's New York Times/CBSNews poll, 85% said they wanted major health-care reforms.

So why the stall? Mainly because Congress can't decide how to pay for it. The hardest blow came last week when the Congressional Budget Office (CBO) estimated that the trial-balloon bill emerging from the Senate Health Committee would cost a whopping $1 trillion over 10 years and would cover only a fraction of Americans currently without health care. According to the CBO, another tentative bill, this one coming out of the Senate Finance Committee, would cost even more -- $1.6 trillion.

That spells political trouble. Republicans who never batted an eye over George W. Bush's wild spending habits have become born-again fiscal hawks. Blue Dog Democrats are nervous about mounting deficits. Even the president admits that the flow of red ink in future budgets keeps him up at night.

No one wants to raise taxes or even be accused of thinking about the subject. But honest politicians have to admit that universal health care will require additional revenues. The likeliest sources are limits on certain tax deductions and a cap on tax-free employer-provided health care. Would the public go along? The most intriguing finding in last week's New York Times/CBS poll was that most respondents said they would be willing to pay higher taxes to ensure everyone had health insurance.

But before we even get to this point, it's important to recognize that those terrifying CBO cost projections significantly overstate the costs. They did not include potential cost savings from the lynchpin of health-care cost containment: a so-called public option that would give people who don't get health care from their employer the choice of a public insurance plan. Why? For the simple reason that the Senate committees hadn't yet agreed on a public option. Yet without a public option, the other parties that comprise America's non-system of health care -- private insurers, doctors, hospitals, drug companies, and medical suppliers -- have little or no incentive to supply high-quality care at a lower cost than they do now.

Which is precisely why the public option has become such a lightening rod. The American Medical Association is dead-set against it, Big Pharma rejects it out of hand, and the biggest insurance companies won't consider it. No other issue in the current health-care debate is as fiercely opposed by the medical establishment and their lobbies now swarming over Capitol Hill. Of course, they don't want it. A public option would squeeze their profits and force them to undertake major reforms. That's the whole point.

Critics say the public option is really a Trojan horse for a government takeover of all of health insurance. But nothing could be further from the truth. It's an option. No one has to choose it. Individuals and families will merely be invited to compare costs and outcomes. Presumably they will choose the public plan only if it offers them and their families the best deal -- more and better health care for less.

Private insurers say a public option would have an unfair advantage in achieving this goal. Being the one public plan, it will have large economies of scale that will enable it to negotiate more favorable terms with pharmaceutical companies and other providers. But why, exactly, is this unfair? Isn't the whole point of cost containment to provide the public with health care on more favorable terms? If the public plan negotiates better terms -- thereby demonstrating that drug companies and other providers can meet them -- private plans could seek similar deals.

But, say the critics, the public plan starts off with an unfair advantage because it's likely to have lower administrative costs. That may be true -- Medicare's administrative costs per enrollee are a small fraction of typical private insurance costs -- but here again, why exactly is this unfair? Isn't one of the goals of health-care cost containment to lower administrative costs? If the public option pushes private plans to trim their bureaucracies and become more efficient, that's fine.

See more stories tagged with: lobbyists, howard dean, big pharma, ama, robert reich, publc option

Liked this story? Get top stories in your inbox each week from Health and Wellness! Sign up now »