The Alan Katz Health Care Reform Blog

Health Care Reform From One Person's Perspective

Public Health Plan Key to Health Care Reform Compromise

Posted by Alan on April 28, 2009

President Barack Obama came to Washington promising a new era of politics where pragmatism trumped partisanship and the search for common ground was more than a prelude to a political rumble. Health care reform will be his opportunity to deliver. Specifically, it will be interesting to see if the Administration is willing to accept meaningful health care reform that does not include the creation of a public health plan to make government sponsored health care coverage available to all Americans.

Whether there should be a government-run health plan to compete with private carriers, even if only in the individual and small group market segments, is shaping up to be the most controversial element of the health care reform debate. Many Democrats and progressives see it as a critical tool for controllingcosts and for maintaining a balance of power between consumers and insurance giants. Many Republicans and conservatives see it as the first step toward a single-payer system. Each side has made clear that they are implacable on this issue.

Except for the Obama Administration. Maybe. It has already indicated a willingness to negotiate how such a public health plan would operate. However, there’s been no sign the President would negotiate away his campaign promise to make available to all Americans health insurance at least as good as members of Congress receive through a government program if that’s what it would take to pass an overall reform package.

Part of the problem is that the President is trying to have it both ways: introduce a government-run health care plan while preserving the private, employer-based system. Today, government-run health plans shift costs to private carriers. No one seriously denies this reality. By setting Medicare and Medicaid reimbursements rates low (sometimes lower than providers actual costs) doctors and hospitals are forced to increase their charges to privately insured patients. This results in higher private insurance premiums. A government-offered alternative to private coverage for all Americans would, in theory, work the same way. As more costs shifted to the private carriers the price differential would increase resulting in more consumers moving to the public plan. Eventually, the public plan would be the only viable alternative in the market.

In suggesting the Administration was open to a compromise on how the public health plan would operate, the Associated Press reported Director of the White House Office on Health Reform, Nancy-Ann DeParle, as suggesting that “the public plan pays hospitals and doctors rates similar to what private insurers pay. That would address fears that government would use its muscle to pay rock-bottom prices for medical services, allowing the public plan to charge discounted premiums that private insurers couldn’t compete with”.

But if they are going to have a cost structure comparable to the private market, why bother? If a goal is to control medical costs, how can a public plan not use it’s clout to negotiate lower charges from providers? Is a government official going to go before the press and say “We could bring down the cost of health care, but we choose not to?” 

If the public health plan is setting reimbursement plans at the same level as private carriers it’s not contributing to cost containment, which is the most powerful rationale for creating a public health plan in the first place. Yet if it creates a public health plan that does impose lower costs, it will eventually drive private carriers out of the market.

It’s too early in the process for President Obama to negotiate away creation of a public health plan. But it may be a compromise he’ll be forced to make, in which case the sooner he cuts the deal the more valuable the bargaining chip will be.  The reason for this calculation is that President Obama may lack the political clout to push through Congress health care reform that includes a government-run health plan competing with private carriers. The political reality is that Republicans are adamantly opposed to the idea and Democrats are not unified on the issue.

Democrats will soon have a (theoretically) filibuster-proof 60-seat majority in the Senate with Pennsylvania Senator Arelen Spector switching parties to become a Democrat, the likely seating — eventually — of Al Franken as a Senat0r from Minnesota, and with two independents caucusing with them. Yet 15 of those Democrats and one of the independents have formed a moderate caucus that has raised questions about the cost of the Administration’s health care reform package and about a government program. Senator Specter is likely to join this group. With 17 votes they would hold the balance of power on key elements of the reform package. If advocates of a public health plan try to ram the idea through Congress without any Republican votes, it may find it lacks the necessary Democratic votes as well.

Then again, they may. President Obama is an adept politician. He may be able to swing enough moderates into support of a government-run health plan. While this certainty remains, the idea of a government-run plan could be the key to achieving a compromise on the overall health care reform package. Assuming Republicans and moderate Democrats are willing to negotiate. If they’re not, the Obama Administration should simply try to get everything it’s seeking rammed through Congress, giving ground on nothing. But if all sides are truly interested in reaching a consensus, the public health plan element is among the most valuable bargaining chips President Obama holds. 

By making clear — at the right time — what he would want in exchange for leaving out the government-run plan, President Obama will be able to gauge how serious Republicans and moderate Democrats are in compromise. And learning that information, in and of itself,  is worth the offer.


5 Responses to “Public Health Plan Key to Health Care Reform Compromise”

  1. Dave B said

    I would not be for Health Care Reform if it is going to be run like the Medical Assistance programs are in the Commonwealth of Pennsylvania. Children and adolescents wait months to see specialist like psychiatrist or even non-specialist like dentist because so few accept their insurance. Further, Community Care Behavioral Health (CCBH), the organization that manages the authorization of behavioral health services, has routinely cut services to children and adolescents receiving behavioral health rehabilitation services even when the child’s psychologist, therapist, and parent are recommending that it continues. CCBH has even denied children and youths access to residential facilitates and psychiatric hospitals when teams of experts have agreed that it is the least restrictive environment for the person.

  2. Ron said

    I agree, but to make it simple. You have a choice to buy insurance to help cover your expenses, just in case you need it. Or, self insure, get the treatment you need when you need it, and pay for it out of your pocket. Nobody is forcing you to buy insurance, it is just smart to get covered. You can also negotiate fees with the hospital and doctor on you own, and see how that goes for you

  3. Alison said

    I found your blog by accident. I own a small insurance agency. I find your views very relevant and on point. I have been a sponge for information since the ARRA issues and keeping all of my clients up to date on how the COBRA and GA Cont Subsidy affects them and their employees. Now I find myself reading everything I can get my hands on about the Healthcare Reform, Reconcilliation avenue of passing the budget, National Heathcare Exchange, and beyond. I stumbled into your blog and am very glad I did. You are educated and informed and I plan on coming back. Thank you for taking the time to do this.

  4. jimmy1920 said

    You hit the nail on the proverbial head.
    I have a hard time understanding the public plan option idea. If the public plan idea is superior, then why include private plans? Isn’t that what the fight about Medicare Advantage is all about?
    You are one hundred percent correct in stating that the public plan claim their advantage in their ability to negotiate prices. That works in the current anti-competitive, cost shifting environment. It cannot be a serious part of health reform.
    Health care reform need to take provider reimbursement out of the hands of the intermediaries. A system where a provider gets paid based on the age or economic status of the patient is unacceptable. Let plans compete on the basis of value added. Leave provider reimbursement to others. In that kind of level playing field, a public plan option should not be a threat.
    A model might be the way the pension system works in either New Zealand or Australia, where public plans compete wtih private plans.

  5. Dave Wood said

    Another excellent post Alan-

    Exactly how is the govt. plan going to lower costs? True the plan can simply bully some lower reimbursement fees, and it can rearrange the way it pays providers. But we all know that private runs a tighter ship that public, EVERY TIME.

    If the two MAIN aspects of American health care that contribute to the high costs are 1. the health status of the American people, and 2. the inefficient, wasteful, and unfair structure of our so called system, then how exactly does the Obama plan reduce costs?

    Obama does not reform much of the existing fragmented system. We continue to get subsidized employer based insurance, Medicare, Medicaid, SCHIPS, and all its inherent wasteful paperwork and bureaucracy.

    In fact the overly fragmented current system only gets more fragmented and complicated with the Obama plan. We get a new government ran exchange, new mandates on the insurers, ramped up SCHIPS, more subsidys for low income people to buy private insurance, more new rules and regulations to qualify for new government programs, and on and on.

    As for the health status of the American people, according to the Centers for Disease Control website the percent of adult Americans who took the following medications in the past month of the survey in 1995 versus 2003 were:

    antidepressants 1995 14% 2003 28%
    blood pressure 6 21
    diabetes meds. 9.5 19
    cholesterol 5.4 21

    And in another piece in the Jan 07 journal Health Affairs by A. Rosen, the piece claims that INCIDENCE of MI (heart attacks) went from 1101 per 100,000 population among Medicare folks in 1987, to 1120 per 100,000 Medicare folks in 2000.

    We see that we are taking ever increasing amounts of heart disease medications yet we see a rising incidence of heart attacks among the over 65 crowd. And we have not yet seen the price for the massive increase in obesity. THAT bill will be interesting to watch come down the pike. IF you think health care is expensive now, YOU AINT SEEN NOTHIN BABY!

    The problem is that the entire structure of the current system is wasteful, inefficient, and unfair. We have no large authority to impose any programs to fight obesity, smoking, and excesses in the treatment arena. Nobody can say no.

    Only a dedicated, limited, and elected authority can tackle these ingrained problems. It is not easy to get little Johnny to put down the fries, or to get mom and dad to walk a few miles each week. We are our own worst enemies. Our wealth is literally killing us. We dont mow our own lawns, wash our own cars, wash our own clothes, or even cook our own food. Our quality of life is better, but is it really if we cant have sex normally, cant walk through the airport without getting winded, cant play ball with the kids, and have to suffer from side effects of the massive amounts of drugs we take? These are the facts and nobody mentions them. This is why only a single, limited, focused authority at the local level will be able to communicate the facts to the American people. Obama wont do it, neither will the Congress or Governors. They are all too busy with other issues.

    Join me in spreading the word about the TWO BILL SOLUTION, read about it at my non profit site spaprogram dot org

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