The Public Competitor = the Elephant in the Room

It's hard to avoid bumping into a discussion of the public option/plan/competitor which is shaping up to be the main impasse in discussing health care reform.  Sen. Chuck Grassley called it the point Republicans couldn't live with and Democrats couldn't live without.  As such, we have Roger Collier proposing a compromise on the public plan before said plan has even been unveiled, Len Nichols pushing a position paper on what an acceptable plan might look like, and a lively debate on the National Journal's Experts Blog about whether or not the public plan is a time bomb.  Looking at all the commentary, it's hard not to feel like I'm stuck in the fable of the blind men and the elephant - no one even knows what the public plan looks like, but everyone is reacting like they do.

No one knows what the plan looks like because neither politicians nor the plan's economic father, Jacob Hacker, have precisely described how it will work.  We know it will be part of an exchange where it will be compete directly with private insurance plans, all of which have a well-defined minimum set of benefits, so people participating in the exchange will compare like to like.  We know it will be "similar to Medicare" in that it will be administered and managed by the government using a combination of public subsidies and private co-pays to pay private hospitals and doctors.  And we have a wealth of material about how the public plan, with its built-in efficiencies and economies of scale, will force private insurance to change the way they do business in order to stay in business.  But honestly, that's all we know.  Neither Obama during his presidential campaign nor Sen. Baucus in his white paper are in a rush to explain much more than that.

It's smart politics in that you're defending a theory rather than a thing.  The theory is really tough to beat from an anti-reform side.  "Competition" is a virtue of the free market, meaning the only way to demonize it is to say, in effect, the reformers are lying.  Stuart Butler of the Heritage Foundation puts it best when he says, "The problem is that it is inconceivable that Congress would set up a public plan that would actually have to live by the same rules [as private insurance]."  It's the "Liar Liar Pants on Fire" debate tactic.  Our old buddy, John Sheils of the Lewin Group attempts to paint a scary picture of "crowd out," with people abandoning private insurance by the hundreds of millions, and hospital and doctor compensation hitting catastrophic lows.  However, given that his opening paragraph misstates both John Edwards and Hillary Clinton's campaign plans (Uh, John?  Neither one wanted to use Medicare to administer health care to all), how seriously can we take his analysis?

The public competitor works great in theory.  The hard decisions will come later - will compensation use Medicare rates or will the public plan have to negotiate with providers on its own?  Will any provider accepting Medicare automatically have to accept the private plan as well?  Does the government get a better deal than the one based on private insurance?  Or will cost savings come from changing the way care is compensated to focus on quality, like the San Francisco experiment which, although the wiser course, will cause pain of its own?

Right now, the public plan has a wall-like side, a trunk like a snake and a tail like a tree.  It's frustrating even for people inclined to support the option not to have details, but it's the plan's best chance for survival.

(Photo credit:  Suchana Seth on Flickr.)