Bill Scher: Big Push for Public Health Plan Option

The effort to reach and persuade skeptics was evident in the rhetoric. Some proponents of the public plan option have described it, quite brazenly, as a first step towards a single-payer system. (I’m pretty sure I’ve done that on a few occasions.) But the title of Hacker’s paper is “Healthy Competition” and the emphasis, throughout, is on how a public plan might co-exist with private competitors--each one improving the other, based on their varying strengths and weaknesses...

...Hacker also emphasizes a point he, and other public plan advocates, have made before: That a public plan is an essential backstop to private plans, since--even with the best regulations--some private insurers might find ways to avoid covering sick people or addressing their needs properly. In other words, a public plan is essential to make sure private plans don’t keep conducting business the way many of them do now.

But it is on cost control where, Hacker says, the advantages of a public plan are most apparent. It’s not just that public insurance plans operate with lower administrative costs. It’s also that public plans have more bargaining leverage--and, to some extent, are more willing to use their bargaining leverage--than private insurers. A recent report from the Lewin Group backs up this claim: It found that a public plan, using government bargaining power, could reduce premiums dramatically--by around 30 percent...

...(the arguments) are also a response to a paper, published in the last few weeks, by two other influential health care experts, John Bertko and Len Nichols sketched out a public plan option based loosely on existing state employee insurance plans. The key distinction between their proposal and Hacker’s was that theirs would not give the plan--or plans, as it were--government leverage to set payment rates.

The rationale for the Bertko-Nichols plan was, in many ways, political: If a public plan can’t operate the way that Medicare does, it wouldn’t threaten doctors and hospitals the same sort of pricing power--nor would it threaten the insurance industry with extinction. Such a scheme would not have the same ability to control costs, innovate, or even provide the same measure of security. But, as my colleague Harold Pollack wrote recently, it might be the best alternative politically.

Public plan proponents aren't ready to make that concession. And in the new paper, Hacker argues that a real public plan shouldn’t arouse so much fear and suspicion.