The Public Option, Revisited

I think too much has been made of the public option on both sides of the debate. It might be a good idea or not, government might be able to do some things right or not. Everything that could be said about that has been, from Roosevelt to Reagan. It's tired.

To be sure, according to the CBO, a public option would be better for the deficit than otherwise. It would be funded by premiums and subsidies, just like the private plans. The idea is that it would reduce costs through negotiated rates and market clout.

The problem with the legislation now under consideration is that the rates aren't all that negotiated, and the clout just isn't there.

Even if the "robust" version of the public option had made it in, at 5% over Medicare rates, how much of an impact would that have on health care costs if 90% of everyone aren't even eligible for it? How would it have any impact if it's mandated to just "negotiate" without having any leverage, marketshare, or regulatory largess?

Maybe a government program could outcompete the private sector. Even without the 5% over Medicare rates, a public plan might have lower overhead, and it certainly wouldn't have profits or shareholders to please, but private insurers would surely adapt over the longer run. All of that would lower costs, even premiums, but by how much? A public plan might help the process along with a bit of competitive pressure, but that's all.

In my thinking, the real action is with the "exchanges." If everyone could buy plans, public or private, on a regulated market that's open to all, we might see insurance companies having some stake in lowering costs so they could pass it on in lower premiums. Right now, I get a once-a-year window to choose from two or three plans, likely from the same company. That's about the same level of timing and choice I'd have if I were shopping for cars in East Germany, circa 1982. Imagine an open market with 20 plans. A public plan would only add to that sort of arrangement.

Myself, I like the idea of a public plan giving the boys in Hartford a run for their money. I'd certainly buy into a public plan if it were cheaper and without significant caveats, disclaimers, clauses and exemptions beyond the standard hassle of private coverage. But working for a business with more than 50 employees, I can't.

The debate over the public option has served the underhanded political purpose of keeping the real cost-reducing measures in the shadows, where they could be bound and gagged according to the wishes of everyone who makes a dime in health care. The American public has had an academic debate about the role of the state in the public welfare, while the backroom deals were signed and delivered long ago.

My prediction is that they'll pass a bill, and within 5 years of its going into effect, people will demand to be allowed into the exchanges, where the rates are lower and the service is better, public or private.

I say good.