The Alan Katz Health Care Reform Blog

Health Care Reform From One Person's Perspective

Public Option Compromises Gain Traction

Posted by Alan on October 1, 2009

President Barack Obama wants a public insurance plan to compete with private carriers. Democrats in the House of Representatives want a government-run plan. Apparently so do a majority of Democrats in the Senate. However, as of now there’s enough Democrats in the Senate opposed to the idea to keep the support below the 60 votes needed to pass health care reform legislation. A compromise being considered in the Senate, however, could change the math, creating the potential government health plans will be part of the health care reform package ultimately enacted by lawmakers.

Advocates for public plans were set back when the Senate Finance Committee defeated amendments to add a government medical plan to the health care reform bill its writing. But liberals immediately pledged to keep pushing for the public option and many claim a public option is critical to meaningful reform. Whether progressives would defeat health care reform which doesn’t include a public health insurance plan is uncertain, but it is possible.

Enter Senator Tom Carper from Delaware. Senator Carper is a thoughtful moderate who voted against one of the public option amendments in the Senate Finance Committee, but voted for another. He is floating a compromise that not only may appeal to liberals, but to moderate Democrats and, conceivably, to Republican Senator Olympia Snowe, the only member of her party considered likely to support a Democratic version of health care reform. reports that Senator Carper proposal would give “states the option of creating a competitor to private insurers, (these competitors could be) a government plan, a network of co-ops, or a large purchasing pool modeled after the revered Federal Employees health Benefits Plan.” Unlike a compromise suggested by Senator Snowe which would create a national government-run plan only if private carriers failed to offer affordable coverage to at least 95 percent of the population, Senator Carper’s plan envisions only state (and, perhaps, regional) public plans and permits states to move forward, according to another posting, “if affordable insurance is not widely available or the insurance market is dominated by only one or two players.” (It should be noted Senator Snowe has not sought a vote on her idea by the Senate Finance Committee)

Brian Beutler, writing on the Talking Points Memo blog, predicts Senator Carper’s idea may fail to gain support from either liberals or conservatives. He writes, “Liberal critics will charge that, while the plan doesn’t involve triggers, it does lack the heft that a plan organized at the national level would have to bargain down prices with providers” while conservatives will reject it as the first step toward a single payer system. “

Mr. Beutler may be right, but I think a compromise along the lines of Senator Carper’s proposal will gain traction. According to a second posting, lawmakers, both public option supporters and opponents, are speaking positively about Senator Carper’s compromise.

The political reality is that there probably will not be enough votes to pass the “pure” public option desired by liberals. So they will face a choice: no government-run plan at all, a host of state-run insurance plans, or no health care reform. To reject health care reform because the public plans competing with private carriers are not controlled by the federal government is a political argument few liberals will want to make.

At the same time moderate Democrats may see the compromise as a way to push the entire public plan controversy to the states. This would allow them to escape the intense pressure they are under from party activists (and, perhaps soon, the White House) without personally voting for a government-run plan. State’s rights are usually championed by moderates and conservatives. It is certainly reasonable for a lawmaker to conclude that the public option is an appropriate decision for states and not the federal government. It is interesting to note that one of the three Democrats on the Senate Finance Committee to vote against both attempts to add a public option, Senator Kent Conrad described Senator Carper’s plan as a “very constructive option,” according to Politico.

What the effort to construct a workable public health insurance option overlooks is that it is virtually impossible to create a government-run plan that will both lower medical costs and compete fairly with the private marketplace. A public plan can lower health care spending only by imposing (not negotiating) low reimbursement rates on doctors and hospitals, most likely by tying them to other government programs such as Medicare. (It is important to note that Medicare often pays providers less than their actual costs). But imposing rates, something only monopolies and governments can do, is unfair competition (which is why we have laws against monopolies). But a public plan that merely negotiates rates with doctors and hospitals like any other health plan does is unlikely to be effective in reducing costs.

I’ve long predicted the health care reform legislation eventually enacted this year will not include a government-run health plan. Now, however, I have to recognize the possibility that a compromise along the lines of those proposed by Senator Carper or Senator Snowe might make it into the final package. It’s far from certain, but it is a possibility.


16 Responses to “Public Option Compromises Gain Traction”

  1. Cary White said

    Another terrific posting Alan – several additional thoughts:

    A single government option would also require a revolution in how insurance is regulated. Senator Carper’s plan is excellent in that insurance regulation, long regulated by states, could continue to be regulated by individual states.

    As for your absolute statement that “. . . it is virtually impossible to create a government-run plan that will both lower medical costs and compete fairly with the private marketplace . . .” I am not sure I agree entirely with your premise. It may not be a low cost competitor for all Americans, but it may be a low cost or coverage leader for people that cannot otherwise get affordable insurance because of their geographic location, their employment status or their health history. Health insurers are not monolithic providers to all that grace their doors. They compete on price on these factors every day adjusting their rates and criteria as often as is allowed by regulators to keep their mix of clients the way they want it.

    Furthermore, there has been a government option in workers’ compensation in many states for many years. These state funds have been essential to maintain the stability and availability of affordable workers’ compensation insurance for businesses in these states for some time. Despite the hot rhetoric on health insurance reform as socialist and other pejoratives, few businesses are advocating the elimination of state funds for workers’ compensation insurance.

  2. Bob said

    ALAN: “I’ve long predicted the health care reform legislation eventually enacted this year will not include a government-run health plan. Now, however, I have to recognize the possibility that a compromise along the lines of those proposed by Senator Carper or Senator Snowe might make it into the final package. It’s far from certain, but it is a possibility.”

    I think it is a near certainty at this point. As I’ve argued here before, rather than look at this from the perspective of “Democrats need 60 votes to pass health care reform in the Senate”, the real question has always been “Can Republicans get 60 votes to filibuster a health care reform bill?”. The difference is subtle but important when you get down to how this plays out politically. Blue Dogs will talk tough and bargain for all they can get (triggers, state plans, etc.), but ultimately they will not join Repbulicans to filibuster the most important domestic priority of their party and their President. I expect some bill to pass the Senate with 51 or 52 votes with several Blue Dogs voting “no” but few if any blocking the up/down vote itself by joining a Republican filibuster.

    The established meme that the Senate Finance Committee was the committee that “really counts” was entirely predicated on the fact that it was the best possibility for a bipartisan plan. While I believe Obama prefers a public option, he seemed eager to take less if it could be stamped “bipartisan” and could therefore offer some political cover in 2010. But as it became increasingly clear that the Republicans would not sign on to any bill (fueled by the desire to “break Obama” and emboldened by the August townhalls), any hopes for a bill without a public option went away, IMO.

    • Alan said

      Bob, thanks for your comment. I see your point, but I still think a public option is not a certainty. The reason is that it would take Republicans only 41 votes to maintain a filibuster, not the 60 you suggest. A filibuster can be held by any single Senator. It then takes 60 votes to end the filibuster through a process called cloture. And cloture requires 60 votes. So if the Republicans can hold their 40 votes whether health care reform is passed in the Senate depends on all the moderate Democrats in that chamber voting to end the filibuster.

      On the House it’s a different matter. That chamber will likely pass a bill that includes some form of a public option. Not all the Blue Dog Democrats will vote for the bill, but enough will likely come along if Speaker Pelosi structures the government-run plan right (e.g., require it to negotiate with doctors as opposed to simply applying Medicare rates).

      And while the Senate Finance Committee was the best chance for bi-partisan reform, it’s real purpose was to find a bill that the moderates in the Senate could support. That purpose has been served.

      • Bob said


        Thanks for correcting me– my phrasing of that was wrong. My point is that I don’t see any Democrats in effect “joining a Republican filibuster” by not voting for cloture. They can still save face by voting against the actual bill while stating that they felt the issue was too important NOT to go to an up/down vote in the Senate, blah, blah, blah…

  3. If you think the insurance companies are going to lower their cost while having a monopoly over the process – well I’ve got a bridge to sell you …and I think Wall Street should be completely unregulated – I trust strangers with my money…and pollution is good and we should take all of the air bags out of the cars….

    When industry has an iron lock grip on distribution and the markets – the government is driven by the people to take corrective action create competition and safe guard the markets and its assets through the rule of law. It’s our saving grace. Our market systems depend and only will thrive on competition; unregulated markets are a roller coaster ride of boom, bubble and burst.

    Individual businesses operate at a cross hair as to what is good for the markets and its assets and resources – those resources are not only minerals, timber, coal and oil but you and I and the air we breathe. Individual businesses want to eliminate all competition in order to maximize their profits – from the guy that runs Kinko’s – who worries about Copy Connection opening up down the street to Microsoft out maneuvering Netscape and Firefox to be the only player in the operating system market, to AT&T wanting to be the only Phone Company, or Cable wanting to shut out Satellite from operating in your neighborhood.

    The winner takes all mentality doesn’t take into account the whole system. Each sector of the economy impacts each other. It needs to be maintained through the rule of law in balance to operate at its most efficient. That’s what governments are for. The pure free market system is a myth. It doesn’t exist and as an economic model is closer to pure anarchy than anything else.

    Unfortunately a bill of goods has been sold to a section of the public – so much so they are willing not to vote their pocket book but emotionally respond to buzz words and fear mongering and to protest against their own self interest. The media is a powerful tool well underestimated by the millions sitting on their sofas watching it passively every night. But well understood by those who want to shape public opinion – not for the public’s own good but for their own profit and powerful self interest.

    As we are forced to re-regulate the markets because of the enormous damage done to our economy by the unregulated markets, foreclosures, unemployment and stagnating wages, and as we are forced to roll back the take of the middle men who run the insurance sector, and as we are forced to wean ourselves off oil and dirty energy sources that are crippling our economy by holding back the clean energy job sector and being a national security risk – we are going to hear all kinds of horrible things about those elected leaders pragmatic enough and smart enough to know that change is necessary. We are going to hear horrible lies, distortions of truth and promotion of violence as the status quo looses part of its grip.

    The bellyaching coming from their media outlets is going to be enormous.

    But at the end of the day if you vote your own pocket book and don’t care what happens to the millionaire strangers trying to pull the strings in Congress, and don’t take up their causes as if they were your own, and keep your eye focused on what is best for you and your family – then the Country will be fine.

    There is nothing dirty or evil about the words “Public” or “Option” – in fact those words are what make this Country go!

  4. Kelly said

    I am not convinced that the public option or health care cooperatives will work without a
    change in the fee-for-service model. Medicare costs continue to rise due to unlimited
    spending on services. Costs of an unregulated public option plan would do the same.

    The idea of the fifty states all coming up with their own public option plan defeats the aim of lowering costs. Twenty percent of our health care funds today are spent on administration. There must be some way to offer a public option that will save money on administrative costs and regulate spending; providing the private insurers with healthy competition.

    Maybe it is time to impose limits on how much profit hospitals, insurers, pharmaceuticals, and physicians can make. Physicians in the US make up to 200 times more money than those in other developed countries. A public option must include rate caps to be feasible.

    • PJ said

      As a patient advocate, I am extremely concerned about the rising cost of healthcare. I am strongly in favor of a plan whereby all American citizens will be able to access healthcare. Affordable healthcare is a must. Subsidies for those who are unable to afford insurance are a necessity. Presently Americans are paying for healthcare for the uninsured through taxes. There will always be those less fortunate who need assistance with healthcare. I believe that we have a moral obligation to make sure that American citizens do not continue to lose all or die because of loss of or no insurance. I also believe that those who are able to do so, should be held accountable for taking care of themselves and purchasing healthcare for themselves and their families. Preventive medicine will save money and help prevent debilitating diseases and worsening health problems. Teaching patients that hypertension, diabetes, and high cholesterol are reversible disorders will increase longevity and quality of life.

      • Kelly said

        I also agree that all American citizens should be covered. I have trouble with insurance companies continuing to make such huge profits. My fear is that coops or the public option would still be feeding that corrupt system if we don’t find a way legislatively to stop it. The system as it stands will continue to pad the pockets of investors rather than providing quality and accessible care.

        • PJ said

          Preexisting conditions have been an issue with insurance companies for years. I remember I could not get coverage for my son because he had an ear infection and they refused to do his surgery when he needed PE tubes inserted and an adenoidectomy. I had to do payroll deductions becuse insurance called it a preexisting condition . Now domestic violence is preexisting. Will child abuse be considered preexisting in the future? Whe will the madness stop!

  5. jacksmith said

    Rockefeller and Schumer YOUR FANTASTIC! 🙂

    ATTENTION!! Congress Has The Votes Needed To Pass A Public Option – TODAY

    Why A Strong Public Option Is Essential – By jacksmith – Working Class

    Robert Reich explains the pubic option

    Hollywood Supports The Public Option

    It’s not just because more than two thirds of the American people want a single payer health care system. And if they cant have a single payer system 77% of all Americans want a strong government-run public option on day one (86% of democrats, 75% of independents, and 72% republicans). Basically everyone. 🙂

    It’s not just because according to a new AARP POLL: 86 percent of seniors want universal healthcare security for All, including 93% of Democrats, 87% of Independents, and 78% of Republicans. With 79% of seniors supporting creating a new strong Government-run public option plan, available immediately. Including 89% of Democrats, 80% of Independents, and 61% of Republicans, STUNNING!!

    It’s not just because it will lower cost. Because a strong public option will dramatically lower cost for everyone. And dramatically improved the quality of care everyone receives in America and around the World. Rich, middle class, and poor a like.

    It’s not just because it will save trillions of dollars and prevent the needless deaths of millions more of YOU, caused by a rush to profit by the DISGRACEFUL, GREED DRIVEN, PRIVATE FOR PROFIT MEDICAL INDUSTRIAL COMPLEX!

    It’s not just because every expert in every field, including economist, and Nobel laureates all agree that free market based healthcare systems don’t work. Never have and never will. The US has the only truly free market based healthcare system in the World. And as you all know now, IT IS A DISASTER!

    It’s not just because providing or denying medically necessary care for profit motivations is wrong. Because it is WRONG! It’s professionally, ethically, and morally REPUGNANT!, Animalistic, VILE and EVIL.


    The public option is ESSENTIAL because over 200 million of you are trapped in the forest of the wolves. Which is the forest of the DISGRACEFUL, GREED DRIVEN, PRIVATE FOR PROFIT MEDICAL INDUSTRIAL COMPLEX! With no way out except through needless inhumane suffering, and DEATH. While the wolves tear at your flesh, and rip you limb from lib. Then feast on your lifeless bodies like a dead carcase for transplant parts.

    At the most vulnerable times of your lives (when you were sick and hurting), millions of you have had to fight and loose cruel, but heroic battles. Fighting against the big guns of the DISGRACEFUL, GREED DRIVEN, PRIVATE FOR PROFIT MEDICAL INDUSTRIAL COMPLEX! in the forest of the wolves. All because you have no place else to go. You have no other CHOICE!

    But the PUBLIC OPTION will give you someplace safe to go. And it will give us someplace safe to take you. The public option will be your refugium (your refuge). Where the wolves cannot get at you when your down, hurting, and vulnerable. Where everyone who needs it can find rest, security, comfort and the care they need. Protected by the BIG GUNS of We The People Of The United States. THE MOST POWERFUL PEOPLE AND COUNTRY ON EARTH.

    This is why it is so critical that we do not lead another 50 million vulnerable, uninsured Americans into the forest of the wolves, without the protections of a Strong Government-run MEDICARE like public option. We The People Of The United States MUST NOT LET THAT HAPPEN to any more of our fellow Americans. If healthcare reform does not contain a strong MEDICARE like public option on day one. YOU MUST! KILL IT. Or you will do far more harm than good. And millions more will die needlessly. Rich, middle class, and poor a like.

    To those who would continue to obstruct good and true healthcare reform for the American people, and who seek to trap millions more vulnerable Americans in the forest of the wolves. We will continue to fight you. We are prepared to wage all out war against you, and will eagerly DESTROY! you. Time…is…UP! YOU HAVE BEEN WARNED! No Co-op’s! No Triggers! NO INDIVIDUAL MANDATES! without a Strong MEDICARE like public option on day one.

    Healthcare reform can be the GREATEST! Accomplishment of our time and century. A time when future generations may say of us, that we were all, AMERICAS GREATEST GENERATIONS.


    I therefore call on all my fellow Americans and the peoples of the World. To join us in this fight so that we may finish becoming the better America that we aspire to be for everyone.


    I have been privileged to be witness as many of you fought, and struggled to take your first breath, and your last breath on this earth. Rich, middle class, and poor a like. Life is precious.

    Whatever the cost. WE! MUST SUCCEED.

    God Bless You My Fellow Human Beings

    jacksmith – Working Class

    (ADMINISTRATORS NOTE: Numerous links from this post were deleted.)

    • Nosedoc said

      This blog has been a wonderful resource for people from different backgrounds all sharing an interest in the process of health care reform to discuss the issues and review the daily and weekly developments in an honest manner, and we try to keep the discussion non-partisan when possible. The above post is propaganda, and as such, is neither helpful nor informative.

  6. Meg McComb said


    What is the financial responsibility incurred by states that offer a public option under Senator Carper’s proposal? Would they match federal “seed money”? In cash-strapped states like California, this might not be possible. Thank you.

    • Alan said

      Meg: Good question. Apparently Senator Carper’s proposal includes seed money to help the state’s launch their public plans, but presumably, once established, those plans would need to be self-supporting. Of course, if the states simply open existing health programs they run (state employee programs, for instance) to the public then the start-up and operating costs would be signficantly reduced. Keep in mind that the Carper Compromise is currently just a single sheet of paper he’s showing Senators. There’s no legislative language and, I’m guessing, not a lot of detail yet. He is appropriately focusing on determining the viability of the concept first. If it looks like his compromise will be needed, I expect that’s when we’ll see Senator Carper flesh out his version of the public option.

  7. Nosedoc said

    Here are a couple of my thoughts:

    1. The first obvious advantage of this proposal over the federal “public option” that I see is that the nation’s proverbial “eggs” would not all go into one “basket.” Different states would take different approaches to entering the health insurance market–some would have sounder business models (i.e., get more value for the dollar) than others, and the ability to modify/improve the models based upon the ideas that have worked well over time is a clear advantage over a single, government-run bureaucracy, which by very nature of such entities, would be averse to changing for the better.

    2. Senator Carper needs to better define a situation in which a state is being “dominated” by only one or two health insurers. In Senator Snowe’s state, Maine, Wellpoint allegedly has a 70% market share, and that’s obviously a problem if it is true. But where to draw the line?

  8. Michael said

    The intent of a federal public option is twofold:
    1. Begin to address the ethical and moral concerns inherent in the rationing imposed by our current system, rather eloquently described in your blog several days ago. The fact that so many uninsured people die every year from
    2. Reduce the aggregate cost of healthcare by reducing the inefficiencies that result when people without insurance rely on urgent/emergency services rather than low-cost maintenance options – for example, universal access to no-copay vaccination alone would be an obvious net benefit on both fronts as well as an aggregate cost savings.

    Neither of these points appear addressable without a federal guarantee of basic healthcare for citizens and legal (taxpaying) aliens.

  9. Rick said

    The Democrats were very successful in portraying the high cost of healthcare as an insurance problem, which it is not. Health insurance companies only deliver the message of the cost of healthcare. I realize this is repetitive, but insurer’s now competiting are for-profit, non-profit and mutual’s. The non-profit’s control approx 60% of the market share. The mutual’s are owned by the customers and the for-profit carriers, as a group, have the second lowest return on equity of any American industry. One could squeexe out all waste & fraud include a faultless government plan and still be faced with healthcare inflation that exceeds the CPI.

    I own an independent insurance agency and 25% of the revenue is derived from small group health. The way Senator Carper’s plan is explained in this blog I could agree with, as long as we all play by the same rules.

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