The Alan Katz Health Care Reform Blog

Health Care Reform From One Person's Perspective

Compromise on Public Health Plan Not Easy to Find

Posted by Alan on May 7, 2009

If Congress is to enact comprehensive health care reform on anything approaching a bi-partisan basis, Democrats are either going to have to jettison their calls for creating a public health care plan to compete with private insurers or fashion a compromise that makes such a government-run plan acceptable. This won’t be easy.

Last week, 17 Senators  signed a letter to Senate Finance Committee Chair Max Baucus and Health, Education, Labor and Pensions Committee Chair Edward Kennedy insisting that a public health plan needed to be a part of any health care reform package.  The 16 Democrats and one independent argued that “There is no reason to believe that private insurers alone will meet the public purpose of ensuring coverage for all Americans at affordable prices for taxpayers.” According to The Hill, the originator of the letter, Senator Sherrod Brown, told reporters that “A public plan option ‘would provide competition to the sometimes dysfunctional private insurance market.'”

Seventeen Senators is a significant block of votes, especially when they’re expressing the position of the Obama Administration as well. Yet Republicans are, thus far, united in their opposition to a government-run plan.  And not all Democrats are sold on the idea, either. The New York Times counts Democratic Senators Ben Nelson and Arlen Specter as among those expressing “reservations about a public plan.” If these and other moderate Senators object to the public plan, their liberal colleagues will be faced with the need to either give in on the issue or give up on comprehensive health care reform.

Thus the search for common ground.

The New York Times reports Senator Charles Schumer is attempting to do just that. The article  is indispensible reading as Senator Schumer’s was asked to search for a compromise by Finance Chair Baucus. Senator Schumer identified four principles that might make a public health insurance plan acceptable to moderates:

  • “The public plan must be self-sustaining. It should pay claims with money raised from premiums and co-payments. It should not receive tax revenue or appropriations from the government.
  • “The public plan should pay doctors and hospitals more than what Medicare pays. Medicare rates, set by law and regulation, are often lower than what private insurers pay.
  • “The government should not compel doctors and hospitals to participate in a public plan just because they participate in Medicare.
  • “To prevent the government from serving as both “player and umpire,” the officials who manage a public plan should be different from those who regulate the insurance market.”

This approach was echoed, with less specificity, during testimony before the House Ways and Means Committee by the new Secretary of Health and Human Services, Kathleen Sabelius. According to The Wall Street Journal, she told a Congressional  Committee, “What I can assure is that it can be done as a level playing field.” The key, she went on to say, is how the program is set up. “It is about the rules that are established at the beginning.”

But there’s the rub. The rules in the beginning are not necessarily those that apply long term. California had a government managed health plan competing with private carriers in the small group market not all that long ago. The Health Insurance Plan of California (HIPC) was created by AB 1672 as part of a comprehensive small group health care reform package. The HIPC operated under many of the prinicples put forward by Senator Schumer. Ultimately the HIPC, which was spun off from the government and became the PacAdvantage, failed.

Yet almost immediately after it’s creation, legislators from both sides of the aisle put forward proposals to buttress the plan by giving it special status. Government, regardless of the party in charge, when seeking to build new programs, tends to look to existing programs as a foundation. Which means the level playing field promised by Secretary Sabelius may not last long. The principles enunciated by Senator Schumer may not last. As with any public program, once a government run health plan is in place, the rules that apply can be changed at any time. And someone is likely to try.

This doesn’t mean the search for a compromise shouldn’t continue, but  it highlights the difficulty involved. Unless the restrictions on the public plan aimed at preventing it from gaining an unfair advantage in the market are strong and long lasting, any compromise will simply be a milestone on an inevitable journey.


4 Responses to “Compromise on Public Health Plan Not Easy to Find”

  1. michael pramenko said

    A great compromise to a alternative public health plan in a reformed system:

    Locally based non-profit insurance carriers.

    We have one in Mesa County,Colorado. We rank at the top on the Dartmouth Atlas study for Medicare efficiency and cost containment. We also have one of the lowest re-admission rates in the country (3%).

    Locally based and non-profit status leads to collaboration on quality and cost between the doctors and the insurance company.

    We must redirect the focus from shareholder profits back to the patients. This is a proven way to achieve those goals. And we can do it what would be seen as a politically nuetral manner.

    Michael J. Pramenko M.D.
    Mesa County, Colorado

  2. Dave Wood said

    What we are witnessing is that the Republicans are now reeling from their historic elections losses, and now must go back to their roots, their Reaganesque less govt. roots.

    Republicans have now rekindled those anti govt. emotions and will NEVER go for ANY big govt. solutions on health care reform. At least not anything significantly big, like the Public plan. Perhaps they will go for some type of subsidy for the uninsured.

    The Democrats lead by Obama, now express their true pro govt., big govt. solutions. No surprise there. They trust big govt.

    How can there be any compromise? A smaller big govt. plan? We all know what happens to these Federally financed programs. They grow and grow and never die.

    The truth is that if Obama gets his way, this will be the end of any type of more competition and more choice conservative lead type of reforms. The money train Obama creates will NEVER be derailed. Once the insurers and hospitals and Doctors and drug companys get their hands on that cash, forget about shrinking that program.

    Obama will create another giant Federal program that we cannot afford. And the providers and insurers will glow in the knowledge that Uncle Sam has no limit on his credit card.

    If you think health care is expensive now, YOU AINT SEEN NOTHING BABY!

    If your interested in my idea on how to fix the system, read my non profit website at spaprogram dot org

    • mark said

      The big Insurance Companies have taken “Real” choice out of the equation the past eight years. They have bought up many smaller Insurance companies, then keep the names of the company in their sales pitches. They say they are brings greater choice to the market, but it’s a big Lie, they own the smaller companies they bought up, then say there is real competition.

      We need a Government run plan to give REAL competition the the system!

  3. TIE said

    One dimension of compromise that has gotten only a little attention is the federal fallback option. More in this post.

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