Is the Obama Administration Giving Up On a Public-Sector Insurance Plan?

I doubt it.  Progressives are in the middle of a long negotiation with conservatives that will end in  conference committee late this fall, where politicians will merge the Senate and House versions of the bills, hammering out the differences. We know that the House bill contains a strong public sector plan. It seems likely that the Senate plan will offer, at best, a weak public sector alternative. What will happen then? 

No one knows. But as I have suggested in the past, conference is what matters. Whatever compromises Senator Max Baucus does or doesn’t make in the Senate Finance Committee’s version of the bill may not, in the end, be that important. 

So why would the administration throw in the towel now, during this August half-time, when the game is far from over? A few weeks ago, the president spelled out what he expected to happen in conference:

“Conference is where these differences will get ironed out. And that's where my bottom lines will remain: Does this bill cover all Americans? Does it drive down costs both in the public sector and the private sector over the long term? Does it improve quality? Does it emphasize prevention and wellness? Does it have a serious package of insurance reforms so people aren't losing health care over a preexisting condition? Does it have a serious public option in place? Those are the kind of benchmarks I'll be using. But I'm not assuming either the House and Senate bills will match up perfectly with where I want to end up.” (Thanks to Ezra Klein for calling my attention to this statement.)

The Media Wants an Answer Now

Nevertheless, the media has been quick to interpret remarks made by President Obama and Health and Human services Secretary Kathleen Sebelius last weekend as proof that the administration is folding—giving up on the public plan. Why?

Because editors need headlines, and some reporters are fixated on getting “scoops.”  A headline that tells us: “Still Not Clear Whether the Administration Will Insist on a Public Option” does not sell newspapers.  So the media has been pressing the president to tell them exactly where he will “draw a line in the sand.” 

But as the president pointed out to reporters at a press conference not long ago:  “You guys are on a news cycle, I’m not.”  In other words, the media would like a definitive answer in time for “News at 5.”  The president is under no such pressure to announce his bottom line. He’s playing poker with the conservatives—why would he throw down his cards first? It makes much more sense for him to keep them close to his vest.

Nevertheless, many perfectly honest reporters believe that President Obama was sending a “signal” last weekend, when he told a Town Hall meeting: “The public option, whether we have it or we don’t have it, is not the entirety of health care reform. This is just one sliver of it, one aspect of it.”  Then, during an interview on CNN, Health and Human Services Secretary Kathleen Sebelius, suggested that the public option is “not the essential element” for reform. To many in the media, that clinched the story: the administration is backing-tracking on the public option.

Monday, The New York Times ran the headline that summed up the media consensus:  “Public Option’ in Health Plan May Be Dropped.”

But, to the Times’ credit, the piece that followed made it clear that most news reports were simplifying the story. At the town meeting the Times’ reporters observed, the president “strongly defended the public option” before saying that it’s not the “entirety of health care reform.” In fact if you look at the speech, you’ll find that the president devoted over 700 words to explaining why the critics of the public option are wrong. Click here to read the speech. Scroll down to the phrase “So far, so good” to see the president’s full argument in favor of a public-sector insurance plan.

Here he makes it clear that taxpayers will not be supporting the public plan; it will fund itself with the premiums it collects. He explains why the public plan would be less expensive; pointing out that over the past ten years, healthcare spending under Medicare has not been climbing nearly as quickly as spending under private insurance plans. Medicare has been trying to rein in health care inflation, while private insurers have been paying drug-maker and hospitals whatever they ask—and then passing the costs on in the form of higher premiums.

At the same time, the president stressed, the public plan would not save money by slashing  payments to providers. The House bill is clear the public plan will not simply adopt Medicare or Medicaid rates. It will negotiate rates with hospitals and doctors—just as private insurers do. No doctor would be forced to accept public insurance. The public plan would be forced to offer reasonable reimbursements, or it will lose in the competition with private insurers. Finally, the president suggests that the only real reason to oppose the public plan is if you agree with Ronald Reagan: “government is always part of the problem, never part of the solution.”

But if you share Reagan’s ideology, this means that you are essentially against any type of health care reform. And in fact, that is where most Congressional conservatives stand. They want to preserve the status quo—and the profits that our exorbitantly expensive health care system generates for those special interests have been contributing to the conservatives’ campaigns. For the conservatives, universal coverage is not a priority unless it is going to lead to more revenues, and fatter profits. But, if it does that, we won’t be able to afford universal coverage. Indeed, we won’t be able to afford the insurance we have today.  

Last weekend, the president’s defense of the public plan was clear and articulate. One can only wonder: why did the media ignore that section of the speech and focus almost exclusively on those two sentences that said it was one part of health care reform—not the whole enchilada?  Maybe it’s because those two sentences fit so nicely into a sound bite.

The Liberal Response

If you read the entire Times story which appeared Monday, you’ll find that much of it is devoted to how liberal Democrats have reacted to media reports that the administration might give up on the public plan.
     Senator John D. Rockefeller IV, Democrat of West Virginia, affirmed his support for the public option. “I believe the inclusion of a strong public plan option in health reform is a must.”

    “I am not interested in passing health care reform in name only,” Senator Russ Feingold of Wisconsin said in a statement issued on Monday. “Without a public option, I don’t see how we will bring real change to a system that has made good health care a privilege for those who can afford it.”

    Former Governor Howard Dean of Vermont said on Monday that he saw a public plan as inextricably linked to a health overhaul. “I don’t think it can pass without the public option,” Mr. Dean, who is a physician and a former chairman of the Democratic National Committee, said on “The Early Show” on CBS. “There are too many people who understand, including the president himself, the public option is absolutely linked to reform,” he said. “You can’t have reform without a public option. If you really want to fix the health-care system, you’ve got to give the public the choice of having such an option.”

The Times summed up the progressive reaction: “Dropping the public option might weaken support for a health care overhaul among Democrats in Congress.” The paper added that, in an interview on Sunday, the Times reported, Mr. Obama’s senior adviser, David Axelrod, assured progressives that the president remained convinced that a public plan was “the best way to go.”

Reading about the responses on both sides, I couldn’t help but wonder: was Secretary Se
belius asked to float a trial balloon? Was the president also testing the water, to see how many prominent liberals might declare: “I won’t vote for a plan without a public option”? If so the White House got its answer.
The president’s comments rallied liberals around the public sector option.

The next day, Tuesday’s Times reported: “on Monday [the White House] sought to allay concerns by emphasizing that President Obama still supported a so-called public option and had not decided whether to drop that concept to make legislation more palatable to moderate Democrats. The president will avoid committing to either path until at least next month, aides said, in hopes of keeping the issue from overtaking the entire health care debate.

“The White House, administration officials said, increasingly believes it will have to rely almost entirely on Democratic votes to advance the health care legislation as Republicans move to solidify their stance against it.”

Do They Have the Votes to Pass the Public Sector Option?

That last sentence is important. While Max Baucus continues to scrounge for Republican votes, the White House has acknowledged what has seemed clear to many for a while: Republicans do not want health care reform. It is pointless to try to cobble together a bill that will please them.

Could the White House pass a plan without progressive Democrats on board?  I doubt it. Legislators like Senators Rockefeller and Dodd are among the strongest voices in Congress. The Blue Dogs just aren’t that popular—and when they stand for re-election, they will need the White House’s support. Put it this way, they do not want to face primaries in their home states.

Unlike the vast majority of reporters, Ezra Klein understands that the White House has not caved on the public sector option. Today, in his Washington Post column, Klein offers this provocative analysis of what may happen in Conference:

“The members of the conference committee” who will merge the House and Senate bills “ are chosen by the leadership. They include the relevant chairmen of the committees — Max Baucus will be there, and Chris Dodd will probably serve in Ted Kennedy's stead, and they will meet with Henry Waxman and Charlie Rangel and George Miller — and a handful of others. The final bill needs a majority of both the House and Senate negotiating teams. . .  If Harry Reid stacks the Senate team with enough left-leaning senators to ensure a majority for a liberal-leaning bill (this is where Jay Rockefeller, chairman of Finance's health care subcommittee, and Barbara Mikulski, chairwoman of HELP's retirement and aging subcommittee, could play a role), a liberal-leaning bill, with a public option, is a pretty good bet.”

If such a bill comes out of conference, it would pass the House, no problem. What would happen in the Senate? Klein reminds us: the rules say that the Senate cannot amend a bill that has come out of conference. They can’t edit it; they can’t hold it up in committee. Senators can vote against the whole bill. And they can attempt a filibuster. “If three Democrats opposed the legislation and wanted to kill it, they would literally have to filibuster it (this is assuming that Democrats have 60 votes, which is not certain given Kennedy's health)” Klein observes. “That would be a very hard thing to do at that stage in the game. It would isolate the obstructionists, ensuring funded primary challenges and the enduring enmity of the Senate leadership and the White House. Kent Conrad can say that there aren't enough votes for a public option and imply that he's just protecting the final bill from defeat. But is he willing to be one of those "no" votes? Is he willing to filibuster? That's a different game indeed.”

Conrad’s Alternative

Conrad’s has been the loudest voice declaring the public option is dead. “The fact of the matter is, there are not the votes in the United States Senate for the public option,” Mr. Conrad said on “Fox News Sunday.” “There never have been. So to continue to chase that rabbit, I think, is just a wasted effort.”  

Let me suggest that the mainstream press should be wary of amplifying anything that Fox News says. It’s clear to many observers that Fox has its own ideological agenda. The fact Fox says the public sector plan is dead does not make it true.

Conrad has a vested interest in knocking the public plan. He has been pushing for an alternative: non-profit co-ops that would try to compete with for-profit insurers. The problem is that these non-profit co-ops would be small. This would be a David vs. Goliath contest– sham competition. (The co-ops would be very much like consumer credit unions going up against big banks.)  The Times quotes White House advisor David Axelrod, “from Mr. Obama’s point of view. . .one downside of a co-op [is] that it might be unable to ‘scale up in such a way that would create a robust competitor to private insurers.’”

He is absolutely right.

Is the Public Option Necessary?

Could we have affordable, high quality health care for all without a public insurance option?  Perhaps, if insurers were tightly and fairly regulated.  But the chances of that happening are slim, particularly if Max Baucus and other conservative Democrats play a major role in writing this bill.

As Paul Krugman wrote in the New York Times Monday: “Look, it is possible to have universal care without a public option; Switzerland does. But there are some good reasons for the prominence of the public option in our debate.

“One is substantive: to have a workable system without the public option, you need to have effective regulation of the insurers. Given the realities of our money-dominated politics, you really have to worry whether that can be done — which is a reason to have a more or less automatic mechanism for disciplining the industry.”

The U.S. is not Switzerland. Here, we practice what the French call the “le capitalisme sauvage”—unfettered capitalism. Our captains of industry resist regulation. They pride themselves on finding loopholes. They employ armies of lawyers to do just that. No doubt, they will be assiduous in trying to figure out ways to cover less—while charging patients more.

A public sector insurance plan could serve as an “automatic mechanism for disciplining the industry,” by setting a high bar that private insurers would have to compete with. A public plan would not have to please Wall Street—or shareholders looking for earnings growth. It would have one goal: to offer Americans comprehensive, affordable care at a reasonable price. The House bill suggests that the public sector plan will follow Medicare in beginning to pay doctors for the quality of care that they provide, rather than volume. Better outcomes will bring bonuses. The House bill would let Medicare negotiate for discounts on drug prices. Presumably the public sector plan would follow suit.

Finally, a public plan is likely to use comparative effectiveness research to determine which treatments provide the greatest benefit to patients who fit a particular medical profile.  Traditionally, for-profit insurers have said “no” to treatments based on price, without investigating benefits and risks. At the same time, if a treatment is very popular they will cover it—whether or not it is effective. They don’t want to lose market share. This is why for-profit insurers continued to cover the pain-killer Vioxx –even though medical research suggested that it might be causing fatal strokes and heart-attacks.

By contrast, the VA, which is a government plan, along with Kaiser and the Mayo
Clinic (both non-profits) stopped prescribing Vioxx for most patients when they discovered that the pricey pain-killer was not more effective for most—and might well be riskier. The VA, Kaiser and Mayo pulled Vioxx from their formularies more than a year before the manufacturer was finally forced to take Vioxx off the market.

Insofar as for-profit insurers try to bring premiums down, experience tells us that they will do this by shifting costs to patients. Their least expensive plans are likely to carry very high deductibles and co-pays, just like the high-deductible plans that for-profit insurers offer on the menu of Federal Employees Health Plans. In New York State, only 60% to 70% of customers say that they are satisfied with these plans. Satisfaction rates among patients on traditional Medicare are much higher.

The problem is that when low and middle-income families buy high-deductible plans, often they cannot afford to use them.  Some months ago, Consumers’ Union reported on a woman in the Midwest who had a miscarriage, and an insurance plan that carried a $4,000 deductible.  This plan was all that she could afford. But when she had the miscarriage, she didn’t dare go to a doctor. She couldn’t afford to pay for the doctor’s visit. And what if he put her in the hospital for observation?  Instead, she reported “I just stayed in bed for a couple of days, and tried not to move around too much.”

This is not universal coverage.

If there were a public plan, there is an excellent chance that this woman would have been able to afford it.  According to the Commonwealth Fund, under health care reform, a public sector family plan is likely to cost $2500 less than comparable private sector insurance. That $2500 difference, plus a subsidy that will be available to both low-income and middle-income families, could make all of the difference.

In the end, we cannot trust for-profit insurers to set priorities for our national health care system . We need a public sector insurance option to set a high standard for the marketplace.

19 thoughts on “Is the Obama Administration Giving Up On a Public-Sector Insurance Plan?

  1. You are right on track. The legislative process is not something which fits neatly between commercial breaks on headline news. In the end, Democrats will get what they want via the committee process. The President is demonstrating he has learned the important lesson from former President Carter which is to allow Congress to be involved in the crafting of a bill.

  2. you couldn’t be righter. as a great political philosopher once said, “it ain’t over ’til its over.” and at the risk of identifying him, fact is this is barely beyond the second inning. each side has reason to say that today’s momentum makes victory inevitable in hope that wish fathers the deed. media is complicit in its endless appetite for come from behind victories, which means they have to describe the ultimate winner as being at death’s door. fact is next benchmark occurs just after labor day when solons return and start recalibrating their positions based on what they’ve heard during the August recess. my guess is they’re hearing more than yells at town meetings. my hope, too.

  3. Chris–
    Thank you.
    I think that you are right; in the end progressive Democrats–and the White House– will get a good bill.
    Newspapers and television usually don’t have the space or time to explain the substance of what is going on.
    In theory, the blogosphere does have the space, but many believe that blog posts should be short–which also makes it very difficult to tell the whole story.
    Obviously, I don’t subscribe to the theory that posts should be short. I think that blogs, and blog posts, can take many different forms.
    It is probably true that long blog-posts limit
    the audience.
    On the other hand, I’ve found that an audience willing to read long posts tends to be a good audience that replies with substantive comments.

  4. Maggie: Thanks for the thoughtful analysis.
    Denis Cortese who was on with Charlie Rose, recently, praised TriCare. I’d never heard of it. Evidently, TriCare is used by millions of dependents of military personnel. It is administered by the DOD. As I understand it, TriCare uses private insurance, but the DOD bids the contracts out and negotiates with Big Pharma.
    Do you have an opinion about TriCare?
    Here is Cortese and Rose…
    If TriCare became the public option, would the Republicans have the craw to say TriCare was no good? Would they be willing to tell the nation that the families of our service men and women were underserved by an inferior product? That TriCare was good enough for them, but not good enough for the rest of us?

  5. There are probably at least half a dozen conservative Democrats from conservative states who would find it easier to vote against a bill with a public option than vote for it – Landrieu, Nelson, Conrad, Baucus, etc. However, once there are 60 votes for cloture to stop a filibuster, only 50 would be needed to pass the legislation. It would seem possible that within the Democratic caucus, some negotiations would occur to persuade the conservative Democrats to stop the filibuster while not attempting to dissuade them from voting against a bill with a public option when it finally comes to the floor.
    I would be interested in historical precedents for this type of approach.

  6. John–
    ON Tricare– this is what I know.
    I have a friend who is a career officer in the Army–stationed in Germany where he and his wife recently had a baby.
    The Army wanted him to come to the U.S. and recruit naive h.s. students to join the army and sign up for Iraq.
    He knows what would happen to those kids–and refused.
    As punishment, the Army sent him to Oklahoma–scheduling the transfer a month after his baby was born.
    He found someone in Germany, of the same rank who wanted to get back to the Southwest U.S. and was willing to go to Oklahmoa in his place. The army refused to let him do that.
    He went to Oklahoma alone, leaving wife and baby in Germany because “I don’t want the baby getting the kind of healthcare it will get from the Army stateside.”
    (I susect that military care in DC is better — but I don’t know.)
    The care his wife and baby got in Germany was excellent–because it was under the German government system. Free and just excellent in many, many ways.
    In general, any so-called govt plan that is contracted out to private insurers will be like most for-profit insurance– designed to put profits ahead of people.
    If you look at data on the Federal Employees Health plan, you will find customer satisfaction running about 70%–sometimes 60%– much, much lower than customer satisfaction among Medicare
    By the way, the army has now sent my friend to Korea. He may be there as long as three years. Again,
    he didn’t take his family–for obvious reasons. (He has been stationed in KOrea twice in his career, so knew what he was getting into. )

  7. Jim, Fred
    Jim– I very much appreciate your opinion. I know you have experience in Washington, and know how the process works.
    Fred, I don’t know about historical precedents, but what you suggest makes sense to me.
    And I think Ezra is right: any Blue Dog Democrat who participates in a filibuster can expect a primary when they run for re-election– a strong Democrat, running against them.

  8. Thank you for the insightful reporting on this key issue. The main stream media is doing a terrible job covering it.

  9. Maggie, I feel very reassured after reading your analysis of where health care reform stands. I was out of the country from Aug 6 to 17 and alarmed at what I read online when I returned home on the 17th. The WaPo piece about WH leaks and Glenn Greenwald’s analysis disparaging the WH as abandoning the public option had my stomach in knots. I greatly appreciate your rationality and insights–as well as the comments posted in response.

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  12. Sally–
    Nurses know more than virtually anyone else about what is happening with health care in America.
    I am always delighted to hear from someone in your profession.
    Please tell other nurses about HealthBeat and urge them to comment!
    Yes, Medicare Advantage is not what it was cracked up to me. And, like other private insurance plans, it often delays payments to providers.
    This is why many providers prefer Medicare. Even if it pays less, it is far less hassle, and pays on time.

  13. Maggie,
    A great and thoughtful piece, which is not only reassuring but also rings true. Media really does love noise…and when it can’t find enough noise, it tries to create some. Conservative and anti-reform groups have succeeded in creating a lot of noise on their own behalf (I’d love to follow that money trail), and now there’s more noise as the President reacts to their noise… Hopefully there will be enough constituent pressure for real reform–and enough muscular support from progressives in the Senate and from the President–when crunch time comes.

  14. Paul–
    Thanks very much –good to hear from you.
    I really do think that the mainstream media has gotten this wrong.
    It is very encouraging to know that doctors like you are out there,who understand what is going on, and are pushing in the other direction.

  15. Insurance (any kind) is unique because it completely defies normal economic supply/demand curves. The principle of “Adverse Selection” says that the risk spreading mechanism itself is damaged by low-risk people who opt out. In essence, young healthy people say, “I’m young and healthy… I’d rather just NOT participate and keep my money, but thanks anyway.” And the market is left full of high risk participants.
    Now I pose the question: Should anyone be able to opt out of paying for roadways? (Highly socialized…except in Orlando and a few other places where there is a toll booth every 50 feet. Last time I traversed the city I wanted to shoot myself. Thanks so much, Mickey Mouse).
    Should anyone be able to opt out of paying for police, fire departments, or military? (Much like health insurance, all risk spreading mechanisms. All incredibly socialized).
    People with families should not have to work for large companies (groups) to attain low cost coverage. That effectively dampens job liquidity and hinders broader economic markets. What happens when GM closes down a plant and 800 workers find themselves constrained to working for another big company in order to find health care comparable to what they had before for their family? (Ever notice how manufacturing plants are often planted in small towns where there aren’t a lot of other big companies?)
    Job liquidity demands that health care decisions be completely separable from the job. So the current system patently discourages free markets and value flows rather than encourages them.
    There has not been enough head-on discussion of “Adverse Selection” and the underlying economics involved. “High Risk” pools are not going to get the job done.

  16. Kyle–
    That’s why we are mandating insurance– everyone will have to be part of the pool.
    This makes sense, just as it makes sense that we all help pay for the police–even though I hope the police never have to come to my house.
    And yes, ideally, insurance wouldn’t be tied to employment.
    But we’ve done it that way since WW II and we can’t just suddenly unwind the deal.
    Typically, big employers pay 75% of their emplyees premiums.
    If they stopped sponsoring insurance, it’s just not likely that they would wind up paying as much into a pool to help subsidize insurance for everyone.
    The fact is big employers have been paying a disproportionate share of health care costs. Once they no longer see a business advantage to providing insurance for their own employees (it helps them attract and keep very good employees) they are not going to want to continue to carry a disproportiontae share of teh burden.
    The rest of us–individuals–are going to wind up paying a larger share of our own insurance.
    But trying to do this all at once would cause major problems.
    Most low-income and middle-class (under $60,000 a year joint income) households cannot afford to pay, say 60% of the cost of a family plan that averages $13,000 to $14,000.
    If their employers are no longer paying 75% of premiums, a great many will need subsidies.
    If taxpayers had to provide those subsidies all at once, we would be looking at large, sudden tax hikes.
    So it is better to gradually move away from an employer-based system–which is what the House bill would do.
    In 2013, employees of small employers as well as the self-employed and the uninsured will be able to go into the big Insurance Exchange and pick a plan–either private sector insurance or the public sector optoin.
    A fwe years after that, employees of large companies can give up their employer-based insurance and go into the large Insurance Exchange–if they want to.
    Some will, some won’t. Over time, more may go into the Exchange. But it will happen gradually. This will give everyone time to adjust.

  17. Maggie – As you mention about the problem with today’s health care system, the media is under the same system – ‘money driven’ and that’s why the media may be TOO influential in a negative way in what’s best for us as a country when it comes to health care reform.