Let the States Decide: Proposing an Optional Public Option for Health Reform

13 Aug

Although there isn’t one health reform bill before Congress, but rather several overlapping yet distinct versions of legislation, it seems that there are some key points on which the debate is centered. One of these is the so-called “public option” or “public plan.” The reason this particular issue is so controversial is because it lends itself to the ideological debate over government’s role in the health care system.

As Robert Pear and David Herszenhorn put it, the public plan is labeled “socialized medicine” by conservatives, but “uniquely American” by progressives. The right sees the public plan as laying the foundation for a complete government takeover of the health care system — undermining the private insurance market because of government’s immense bargaining power, which would price the market below what private insurers could bear. The left sees the public plan as a way to regulate private insurers through direct competition in the marketplace, making them both more transparent and more efficient.

Both sides ignore the fact that government already has a major influence on the private insurance market because of Medicare. That’s right: Private insurers typically look to Medicare benefits to determine what health care services they will or will not cover. So, in many ways, the public plan, while new, isn’t a novel idea. It is, however, a politically contentious item. So much so, in fact, that more moderate Democrats have expressed a willingness to drop the public plan option in order to gain bipartisan support for reform from Republicans who adamantly oppose the idea. Many others, however, including Robert Reich, consider the public plan an essential element of health reform. If it’s not included, they say, reform is not worth having.

Right now, the public plan option is the gray area within which the most outrageous claims are being made about health reform. Just last night, in fact, I forced myself to watch nearly 15 minutes of Sean Hannity on Fox News. I heard, asserted as fact, the now notorious claims that the government was going to be convening death panels and using taxpayers’ money to fund abortions. All of this is being discussed in the context of the benefits of a public plan option that may or may not even make it into the final legislation, and which does not currently specify any particular benefits. Do you need any further convincing that the public plan is the hot potato item in this debate? If so, I refer you to an in-depth piece from John Holahan and Linda Blumberg at the Urban Institute.

All of this begs the question: Is there any way to make the public plan option more palatable to the public? I believe there is.

Congress should look to the Medicaid program for an example of how to roll out reform in a more politically feasible way. Medicaid, which was enacted in 1965, is a program funded jointly by the federal government and the states — and states are free to choose whether or not they will participate in the program. Today, all states participate in the program, but Arizona–the last state to join–didn’t do so until 1982. What if the public plan option were similarly instituted? That is, the federal government decides on the benefit package and cost of the public plan, but allows the states to decide if and when they would like to participate by offering residents access to the public plan?

I think this type of approach would substantially improve the chances of passing meaningful health reform for two rather similar reasons. First, it would allow Congress and the President to rightly claim that “We are doing nothing other than making an additional option available to the states.” That is, it redirects opposition efforts, because the real decision-making would be devolved to the states. Second, it would confound anti-reform efforts. No longer would opponents of reform have one very large and visible target at which to aim their displeasure. Instead, they would be forced to wage 50 separate battles against implementation of the public plan at the state level.

Those who support the public plan should not view such an approach as a compromise at all, because it greatly increases the likelihood that reform will pass and will include an optional public plan option, and experience with Medicaid shows that it is highly likely that all states will eventually choose to participate even if it takes them nearly two decades to do so. So you get the public plan in the end, even if you have to take a slight detour to get there.

With the debate reaching a fever pitch, now is not the time to draw lines in the sand that could derail the health reform effort. Neither is it the time to abandon key principles of what would be meaningful reform. Rather, it is the time to employ shrewd politics, because, as a colleague told me, “If health reform fails this time, the goal of universal coverage will very likely be buried for many years to come…a devastating defeat…will have repurcussions not just for health care, but for the whole national agenda.” It’s time we seriously consider a public plan option that lets the states decide whether or not to opt-in.
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Posted by on August 13, 2009 in Uncategorized


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