Public, Private…. And Problematic

In the on-going wrangling over healthcare reform – which, sadly, continues to occur mainly behind the scenes – a rallying point has emerged for progressive advocates of major change: inclusion of what’s called a “public plan” in the mix of options for healthcare coverage. It’s helpful to understand why the public plan avoids a much harder discussion about the real meat of healthcare reform, and why so much more is needed.

The upshot?  A more modest plan for public insurance could be the answer to Medicaid.

President Obama spoke last week, in the “online town hall” meeting, about his own sense that we cannot abandon the “employer based” system of health insurance: a tax benefit for employers to deduct health insurance costs after World War 2 was used as a way to make health benefits part of a workers benefits package. Over the years, the flaws of such a system became readily apparent: those who didn’t, or couldn’t, find regular employment (or be married and included under a spouse’s policy) were out of luck on health insurance.

While there is a lot of energy and passion among progressive activists to abandon employer based insurance, Obama’s probably right: though we worry about the uninsured, a majority of Americans have some form of health insurance, and most get it through their employers. Any significant disruption would be bewildering to many (this is where the “behind closed doors” part of the discussion of reforms is a real problem).

However, if we retain employer based insurance, we have a problem mandating that everyone be insured: those who do not have a job, or where the nature of their work makes insurance difficult (very small businesses and self employed, for instance), have few options for obtaining coverage. Experts have debated, for years, how you can improve the “individual” market for insurance, but the main problem is increased costs: insurers can’t offer especially low premiums without having a “pool” of people to spread out risks of high cost needs with others less in need. And for individuals, not enough people are in the pool. (John McCain’s proposal for reform, essentially, would have pushed millions into the individual market, as a way of increasing the pool.)

A “public” insurance plan for individuals would probably be similar to Medicare’s coverage, offering reimbursement fees for services of doctors, administered by private companies. The devil, really is in the details: a public plan, for instance, that leveraged the government’s Medicare spending power and dominance in fee for service could undercut insurers by negotiating better drug prices, for instance. There’s also the question of premiums for a public insurance plan: if premiums were far lower than any private insurer could compete with, it’s possible that a “public plan” would become a backdoor way into Universal Coverage by the government, as individuals flocked to the public plan.

That’s unlikely to happen; already we face enormous crises in Medicare and the hardest issue in healthcare is the fact that Medicare’s fees for services are considered too low and result in doctors and hospitals setting enormous fees that most insurers (including Medicare) only partially cover – which is why the uninsured get slammed with even larger bills.

A more modest plan for public insurance could, though, be the answer to Medicaid: the historic failure of Medcaid programs to reach all of the poor could be greatly reduced by a subsidized public plan where premiums were charged on a sliding scale for income, perhaps sliding to 300 or 400% of the poverty line. As I’ve said before, the uninsured often fall in that area just over the poverty line, in low paying jobs that may not provide insurance. A public plan could, if structured well, offer these folks a way to get basic health services for little or nothing (especially if combined with expanded options for clinics and other lower cost service providers).

A public plan is probably the only way to get universal insurance… but universal insurance, ultimately, is only part of the answer in our healthcare crisis. We shouldn’t let a “victory” of getting a public option be the endpoint of reform; until we dive into the harder questions of reducing the cost of services, healthcare will remain expensive, and out of reach to many who need it.

(Photo by Lars Zapf)