What about costs? Why we need the public health insurance option option
Posted on December 11th, 2009 by Jason Rosenbaum in Solutions that Work
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The public health insurance option is treated in the media like an ideological sacred cow, something that must necessarily be sacrificed to moderates in order to pass health reform. The reality is, the public health insurance option would perform an essential function in the overall health care system.
The public health insurance option gives us the way to control insurance company costs and behavior. No other proposal would do this.
First, cost. The public option would put a lid on insurance company rate increases.
Even the CBO - a notoriously conservative outfit - has confirmed this fact. In their analysis of the House health care bill, they concluded that the public option would keep overall insurance premiums within the health insurance exchange down.
This would work in the way you'd expect - through competition.
Say I'm one of the over 50 million people who will get health care through the exchange under the House bill. When the exchange is finally open for business, I'll get to pick from any plan available. Likely, that will include plans from the for-profit insurance companies (one from Aetna, one from Unitedhealth, etc…), plans from the non-profits like Blue Cross Blue Shield, and the public health insurance option. Every one of those plans has to provide good benefits for me, so nobody can sell cheap but junky insurance in the exchange. And I'll receive a fixed subsidy to help offset the cost if I can't afford the plans.
So, let's say the insurance companies decide to do what they always do and price their plans sky-high. That means in the exchange, every plan will have a huge price tag except for the public health insurance option, which, having no profit motive and no executives to pay, has no reason to raise prices like the private insurance companies do. Which plan do you think I'm going to choose? Given I'm getting a fixed subsidy, the public option is going to be better for my wallet. And I also know the public option is looking out for my health, not for profit, so I don't have to be worried it will deny my care like the private insurance companies do.
Taken in aggregate, if the insurance companies keep raising their rates, all of the 50 million plus people in the exchange - 1/6th of America's population - will choose the public option, costing the private insurance companies a huge amount of business. So what will insurance companies do? They won't raise their rates. In fact, they'll keep their prices low to attract business. In indeed, this is exactly what the CBO said would happen.
With private insurance pricing their plans below the public option, the public option is the one that gets to control overall prices in the exchange. No other alternative proposed would be able to do this. The latest alternative - allowing people to buy health care from the system members of Congress use - certainly doesn't. The system members of Congress use - called Federal Employee Health Benefit Plan (FEHBP) and run by the Office of Personnel Management (OPM) - has just as much rate inflation as any other insurance market in this country, and is seeing its rates increase by over 10% next year.
Indeed, all you have to do is compare Medicare's record of controlling costs to private insurance and you'll see the difference.
This is the key question when it comes to the public option and its alternatives: Would it control costs? The public option - even the moderated public option currently in the House bill, with negotiated rates instead of Medicare rates - would. (The CBO estimated it would save $25 billion.) It would give us a lever we can pull to keep the insurance companies in check. A plan like FEHBP, which would be made up entirely of private insurance companies, has proven itself unable to control costs. There is absolutely nothing that would stop insurance companies from jacking up their rates, because there is no meaningful competition to be found.
The public option isn't an ideological opinion, it's the only idea proposed so far that would prevent the very basic problem of insurers jacking up rates. All the other ideas - non-profit plans, a fixed medical loss ratio, and the like - would not stop any insurer from increasing their prices if they want to.
That is why the public health insurance option - available to everyone in the exchange from the day the exchange is created - is essential to health reform.
This will be a loss for the Democrat Senate and the House. With their indecision and falling short supporting the real health care reform bill for the people, they will have to deal with not only an already unified Republican force, they'll also have to deal the frustrated grassroots and former supporters turned against them. They could have come together and pushed through a strong reform bill and making Republicans eating their own words, rather quite a few Democrats are short sighted and become factious trying to play "political smart." Unfortunately as things now appears people start loosing confidence and give ways for the opposing force take over. The insurance companies are cheering as they can bet on continuing what they've been doing and more at the people expense. Bottom line is, not passing a strong reform bill equal to political suicide for the Democrats, as will be apparent in the coming election. Too bad for them, they've been taken the people supports for granted!!!
This health care reform debacle has 2 main causes: the stupidity of some of the public and some Democrats being wussy and stubborn. The only industrialized country with a Third-World lack of health insurance fatality total. Due to political greed, ideology and a disregard for the voters. If the Dems came with one main brain, they wouldn't allow the Repubs to put this down the drain. No more compromise and no more treason in disguise.