Perils of the Public Plan-- badly designed public plan could turn out to be the opposite of what pr

Perils of the Public Plan
A badly designed public plan could turn out to be the opposite of what progressives intend.


In the current battle over health reform, progressives may have set themselves up for trouble by pinning all their hopes on the creation of a government-run insurance plan.

All the proposals receiving serious consideration in Congress allow employers to continue to insure their workers and dependents directly. They also call for new “insurance exchanges” as an alternative means for individuals and employee groups to purchase coverage. If there is a new government-run plan, it would be one of the options in those exchanges.

The great danger is that the public plan could end up with a high-cost population in a system that fails to compensate adequately for those risks. Private insurers make money today in large part by avoiding people with high medical costs, and in a reformed system they’d love a public plan where they could dump the sick.

Entry into the public plan for the eligible employed would be a two-stage process. First, employers would choose between paying into the exchange and buying insurance directly to cover their workers. Unless the exchange is such a good deal that nearly all employers take it, firms with a young, healthy work force would tend to buy insurance on their own, while those with higher-cost employees would go into the exchange’s pool. As a result, the pool would suffer “adverse selection” — it would get stuck with a higher-risk population.

Second, within the exchange, the government-run plan would compete against private insurers, yet it would likely abstain from the marketing strategies used by private plans to avoid high-risk enrollees. This double jeopardy of adverse selection could then more than nullify the advantage the public plan derives from its lower overhead (as a result of less money going for salaries, profits, and marketing).

Here’s the delicate political problem: Unconstrained, the public plan could drive private insurers out of business… Over-constrained, the public plan could go into a death spiral itself as it becomes a dumping ground for high-risk enrollees, its rates rise, and it loses its appeal to the public at large. Creating a fair system of public-private competition — giving the public plan just enough power to offset its likely higher risks — wouldn’t be easy even if it were up to neutral experts, which it isn’t.

There are a lot of ways to defeat reform, not just by blocking it entirely, but by setting it up for failure. Those who think a public plan is a good idea no matter how badly designed are not thinking ahead.

(Paul Starr received the Pultizer Prize for “The Social Transformation of American Medicine.”)

http://www.prospect.org/cs/articles?article=perils_of_the_public_plan

And…

Will a Public Plan Bring Better Care?
The New York Times
June 24, 2009

To the Editor:

Re “A Public Health Plan” (editorial, June 21):

A public plan option that competes with private insurers won’t fix health care. Competition in health insurance involves a race to the bottom, not the top. Insurers compete by not paying for care: by seeking out the healthy and avoiding the sick; by denying payment and shifting costs onto patients. These bad behaviors confer a decisive competitive advantage; a public plan would either emulate them — becoming a clone of private insurance — or go under.

Moreover, the savings on overhead from a public plan option are far smaller than you suggest. While it might cut insurers’ profits (which is why they hate it), that’s only 3 percent of the roughly $400 billion squandered on health bureaucracy annually.

Far more goes for armies of insurance administrators who fight over payment, and to their counterparts at hospitals and doctors’ offices — all of whom would be retained with a public plan option. In contrast, a single-payer reform would radically simplify the payment system and redirect the vast savings to care.

Steffie Woolhandler
Cambridge, Mass., June 21, 2009

The writer, an associate professor of medicine at Harvard, is a primary care doctor.

Comment:
By Don McCanne, MD

The heated debate over the proposal to offer a public plan option is certainly warranted, but the much of the debate misses the point. While most people are arguing over the design of the public option, they are neglecting the fundamental flaws of our multi-payer system.

Adding a public option to this system, no matter the design of the option, can only result in a perpetuation of the waste, inequities and unaffordable costs that should be the primary drivers of reform.

Some say that private plan regulation will resolve these problems, but you need only look at the perversities of the regulated Medicare Advantage plans to understand that this is a fiction.

Decisions have already been made to include hardship waivers that would leave tens of millions without insurance, and to require only the lowest tier of coverage - the very definition of underinsurance.

The intensive labor and political capital that is being frittered away on the public option is a tragic diversion of human resources that should be directed toward resolving the fundamental flaws in our financing system. Once we get the financing right, we can use that power to ensure that all of us receive higher quality health care.

Physicians for a National Health Program
29 E Madison Suite 602, Chicago, IL 60602
Phone (312) 782-6006 | Fax: (312) 782-6007 | email: info@pnhp.org
© PNHP 2009

http://www.pnhp.org/news/2009/june/paul_starr_and_steff.php

as irrelevant as Ralph Nader. I do not understand why people don't deal with the truth in front of their face instead of boogiemen and goblins. If PNHP would come to the table in good faith with good input on what Americans really want - a public option alongside private insurance - then they would be heard.

the plan we should all be behind, and that is Medicare for all. PNHP is asking for the sun but will settle on the moon. Don't you get it? If you ask for the moon you will get nothing and that appears to be what's happening.

Because all they do is peel people off to the irrelevant left and then trash the plans that have the best chance of passing. Just Like Ralph Nader.

Howard Dean Supports The Public Option.

who incidentally are on the side of what the truth is in this matter.

because single payer doesn't stand any more chance of passing than Leonard Peltier does in getting out of jail. Incredible distractions that just make Democrats look stupid and confuse the public as to the real issues we're facing.

option instead of digging in your heels and demanding single payer. We might have actually gotten a public option then, but now we are going to get just some more insurance, the govt. might help us buy into.

and get it a lot faster if the single payer people would help instead of continue to fight in the wrong ring against the wrong enemies with the wrong gloves.

Medicare and nothing else will do. It's actually like health insurance used to be when it was non-profit.

Saves money, saves time, cuts out the ugly fat.

being a Ralph Nader and working for the insurance companies like PNHP probably is because they won't triangulate and support the insurance gloated plan with a public option, according to some here.

The "private sector" has had it's own way in health care since forever, and all they ever do is fuck it up worse. Time for a New Deal.

Nader did us a lot of good by digging his heels in and fighting the good fight. Those who oppose single payer (medicare for all) are giving in and will end up with a shitty plan.

The republicans don't plan nice. They never ask or give any ground when they try to inflict their agenda upon the unsuspecting public. If we try to play nice with them because the best plan "has no chance" we'll get nowhere. They'll make the public option ineffective so they can later turn and point to it and say how bad it is, thus bolstering their argument that the private sector is the only way.

They constantly try to do this with Medicare now by saying we can't afford it, by underfunding it, and by trying to cut payments to the doctors so that fewer and fewer of them will accept Medicare patients. Then they can say "Here, try these new Medicare Advantage plans run by private insurers."

It's frustrating to see watch it happen.

Can't we learn anything from them?

Really? Can't we?

Where is the money for corporations in actually serving the public.

Your question is more germane than almost all the others that get asked. As single payer gets trashed over and over, few seem to consider that the Canadians don't have any trouble making it work.

We have examples right here in the US that ought to serve as lessons.

We have medicare and the VA single payer and government run programs. Both work and are models of cost efficiency.

For an example of what you get when government "cooperates" with big business in the medical field we have the Senior Drug Plan. It funnels millions of dollars of tax money directly to pharma while screwing our elderly out of the medicine that the plan was supposed to supply. Seniors (like my mother) were much better off before the convoluted and misleading plans were laid out. That's what we will get if the insurance industry gets to sit at the table. Pharma wrote the Senior Drug plan. Insurance will write the "Public" plan.

My worry is that when this plan hits our mailboxes and computers next year, it will all fall on Obama. If the plan is crap, his administration will suffer. I know many seniors that I helped with trying to make the Senior Drug Plan work for them who had voted for and supported bush, but decided that they would vote Democratic next time because of the farce and insult of that wet kiss for Pharma.

out of business

If it's better it will - and therefore should. I fail to see the problem.

or the Canadians and send our ATM codes to Humana today! We are just too stupid to do what the rest of the world had done for decades on end. We are unable, too greedy and dumb and lacking in community spirit.