The Alan Katz Health Care Reform Blog

Health Care Reform From One Person's Perspective

Senator Reid Attempts to Find Middle Ground on Public Option

Posted by Alan on October 27, 2009

Senate Majority Leader Harry Reid’s challenge was to blend the liberal Senate Health, Education, Labor and Pensions health care reform legislation with the more moderate bill passed by the Senate Finance Committee. One of the most contentious issues concerned the creation of a public insurance plan to compete with private carriers — the Senate HELP Committee called for one; the Senate Finance Committee explicitly rejected the concept.

The problem for Senator Reid was that some members of his caucus were threatening to oppose a bill without a government-run plan while others were making the same threat if the legislation included such a provision. And Senator Reid’s number one priority was to find a compromise that could garner the 60 votes needed to pass a bill in the Senate.

His decision:  include a public option in the blended health care reform legislation he will be bringing to the Senate floor in the next few weeks, but include restrictions on it that, while appealing to moderates, are not enough to turn off liberals.

The legislation is being reviewed by the Congressional Budget Office and is not yet available online. But Senator Reid has announced he will allow states to opt out of participating in the public plan. This approach is very appealing to moderate Democrats such as Senator Tom Carper, who voted against one of the attempts to add a government plan to the Senate Finance bill. According to the National Underwriter, Senator Carper “has been a key advocate of letting states opt out of the public option health program and create their own alternatives to private plans.”

Not all moderates in the Senate are embracing the compromise yet. The Associated Press quote Senators Olympia Snowe, Ben Nelson and  Mary Landrieu as all expressing various levels of skepticism. But the White House is on-board with the compromise and will likely bring a great deal of pressure on these moderates to get at least vote in favor of ending the inevitable Republican filibuster on the health care reform legislation. By including an opt-out, these moderates can support the procedural movement and claim they were putting state rights above their opposition to the public option.

The other provision Senator Reid has apparently included in his compromise is that, in the words of Senate Charles Schumer as quoted in the National Underwriter article, “Any public option plan ought to operate on a level playing field with private insurers, and it ought to meet the same state requirements and use similar provider rates.”

How this limitation would be imposed on a government-run plan is, as yet, unknown. But if the public option must play by state-specific rules, it would be a step toward a more level playing field between the public option and private carriers — and certainly closer to the level playing field than is contemplated in the House version of health care reform.

What’s ironic is that, as I’ve written previously, a public option is likely to accomplish its primary public policy goal — reduce medical costs — only if it is allowed advantages in the marketplace such as the power to unilaterally impose reimbursement rates on providers. By restricting it to the same rules and pricing regulations as private carriers might meet, its effectiveness is reduced.

Whether a public health insurance option is part of the reform legislation eventually passed by Congress is far from certain. But Senator Reid’s proposed compromises keeps the possibility alive. At the same time, the restrictions he’s suggesting reduces the impact of the government plan. That’s a reality liberals will not accept willingly.

Senator Reid is doing what Majority Leaders have to do: find the middle ground that can garner the support of 60 Senators. It’s not an easy task. Nor will the result please everyone. It might even please no one.


9 Responses to “Senator Reid Attempts to Find Middle Ground on Public Option”

  1. Illinois Health Insurance said

    Great post. I don’t think the liberal democrats care about the details of the health reform plan, as long as their is enough of a public option to get their foot in the door. The can always come back later and expand the plan further. Entitlement programs seldom end, they just grow and grow. It will be interesting to watch the political manovering.

  2. Underwriterguy said

    Now that the Senate has added a public option to the health care reform bill there is need to make sure this is not a “backdoor” to single payer.
    Any bill should provide that payment schemes “negotiated” by the public option be available to any private insurer participating in that market. That is, if the public option pays Medicare rates any private insurer will have the option to reimburse providers at Medicare rates as well, although a private plan could negotiate to reimburse at a higher level.
    This simple arrangement has several salutary effects. First it maintains a level playing field between public and private insurers. Private insurance can compete with a state run scheme on every front save the coercive power of the state to mandate payment levels.
    Second, with both public and private insurers having access to the same payment schedules, providers will not have the option to “cost shift” as they do today. This leads to the third advantage.
    Without the ability to cost shift, providers will have to survive on the government mandated payment schedule or not participate in the public option. There will not be the political will to tolerate substantial numbers of providers opting out of the public plan, therefore the government will have to negotiate in good faith rather than mandate payment schedules. This will help preserve choice in health insurance plans for all Americans.

    • Rick said

      Initially I was thinking as you, that it was possible to compete with a government plan. However, after seeing the methods used, and other schemes used by this government, I came to the conclusion it will be impossible.

      Government will make sure the private market cannot compete on a fair and balanced field. They could do this through taxes and expenses of regulation. Private insurers will be competiting with a competitor that can afford an underwriting loss, and has the support of its founders to implement laws that negatively affect their competition.

      I came to the conclusion this Democrat Public Option, or whatever it’s called, is a premeditated plan for the sole purpose of a future single payer system. What should anger, and alarm, citizens is that a political party will use a devious method to implement their will knowing the majority of the people would reject them if they were open about it.

  3. Alison said

    It is my personal opinion that he is of the mindset that if you start off extreme then there is more room for negotiation to where he most likely anticipates its going anyway. If you give away the farm at first you have nothing left in your hand to negotiate with. I do not believe he anticipated this to fly at all but rather offers it as a calculated starting point.

    • Alison said

      and if I might add, also keeping his position in line with many in the far left that would be on his doorstep had he done anything else.

  4. This seems to me to be a case of political compromise being more important than coming up with something that actually makes sense.

  5. Why would a state opt out?
    Let’s look at the choices:
    1. subsidize the plan and get nothing.
    2. subsidize the plan and possibly get something.
    Where’s the choice?

  6. Rick said

    My understanding is that all branches of a State government would have to opt-out, making it almost impossible to opt-out. What State would opt-out knowing their taxpayers would be providing the government option subsidized start up funds? How long can we expect the government option to compete on a level playing field? Im sorry to use this sentence, but this opt-out plan is a sham, and I take it as an insult to my intelligence.

    Please correct me if I’m mistaken.

    • Dave Wood said

      Sham is not the proper word. It will be real.

      The irony of the public option is that the private insurers will see that as time goes on, the poorest and sickest will see that the public option has the least obstacles to their healthcare needs and the greatest offering of services. In other words, Blue Cross will still try to NOT pay for some of these very sick peoples claims while the public option plan will offer NO resistance to these expensive claims, THUS over time more and more of the sick and poor will flock to the public plan.

      Over time the public option will go broke, or need to raise prices on premiums and the public option will fail.

      Does anybody believe that states will allow the public option to fail? The only way to keep the public option afloat is to subsidize it, or change the rules to aid it. There is no way that the public option will be on a fair playing field.

      As liberals or conservatives get into power, the rules will change, subsidys expanded or reduced, campaigns paid off and politicians swayed to benefit one side or the other. The public option is no solution for this mess.

      What we need is a PURE private insurance based, more choice and more competition system like in Switzerland or the Netherlands….OR a pure single payer system with 80% govt. control like in France or Germany. THEN let states opt into either program through a local election. Vermont or ORegong may go for the single payer system. Kansas or Utah may go for the private insurance based system. What say you??????

Sorry, the comment form is closed at this time.

%d bloggers like this: