Things You Might Not Know About the Lewin Group and the Public Option

You’ve seen this as many times as I have. Some big Republican – Orrin Hatch or somebody – goes on television and talks up the problems with having a public health insurance option competing against private insurance plans as a choice in the Health Exchange. They’ll normally cite a study by the Lewin Group purported to show that 83.4 million Americans would “lose their coverage” and join about 20 million other people in the public option. There are a few faulty assumptions, a dash of conflict-of-interest issues and one rather sizable problem with this analysis: they’re describing a public option that no longer exists in bill they're analyzing.

Let’s start with the biggest problem: the Lewin Group version of the public option doesn’t resemble the HR 3200 version. They base their modeling on this notion of provider payment: “The public plan would pay health care providers using the Medicare payment methodology, with an additional 5 percent for those agreeing to see both Medicare and public plan enrollees.” The Lewin Group calculates savings in the 20-25% range. That would certainly give a public option a huge price advantage.  To be fair, this reimbursement scheme was part of the original draft of the bill in June… except not quite. Even there, the Medicare rates were a crutch to get the public option up and running.  They would give way after three years to a plan that negotiated rates directly with providers, like any insurance plan. At that point, you’re not even getting close to 25% savings. In fact, the CBO estimates it will be closer to 10%.

Thanks to the Blue Dogs, though, the whole point is moot – after amendment, the public option negotiates rates with providers from day one. So the crux of the argument just went bye-bye.

But let’s press on with their inaccurate model for pricing. After all, the questionable assumptions don’t end there. The Lewin Group presumes private insurance won’t be able to keep up and therefore won’t try. The CBO, on the contrary, presumes that in the face of competition, private insurance will practice some cost-containment – hence only 10% difference between public and private, and a net win for the rest of us. For another, the Lewin Group runs its calculations by the classical economics model that price is the only decision point – if I’m an individual, I’ll only buy the cheaper plan; similarly, employers will discontinue their current contracts, having done that to purchase coverage in the Exchange for their employees, will only buy the public plan because it’s cheaper. Speaking as a human being who’s drinking a $1.69 bottle of Coke Zero because the store that sells it for $1.50 is an extra two blocks away, I do not share this assumption that price is all that matters in making a decision.

Furthermore, the Lewin Group presumes that “about 89.5 million people would become covered under the public plan with an employer paying a share of the premium.” That actually represents “a net increase” of nearly 2 million people in employer-based insurance (pg. 18) – interesting for a study that often gets cites as proof that having a public option will unravel the employer-based benefits system. (Btw, the CBO sees a slightly bigger increase in employer-based coverage).  So it admittedly doesn't even directly support the talking point that millions would lose their employer-based coverage.

In closing, let me speak directly to those who are planning to trot out this faulty and inaccurate study in the future – please, please, for the love of God, please find someone else to crunch your numbers. The Lewin Group is a wholly-owned subsidiary of Ingenix, the database company that provides information on provider rates for most of the major insurance companies, and is itself a division of UnitedHealth, the nation’s largest insurer. This is the same UnitedHealth urging its customers to go to anti-reform tea party rallies. This is the same UnitedHealth, the subject of a congratulatory profile in Business Week showing how the insurance industry has subverted and manipulated the legislative process on health care.

Really? You can’t get someone else to come up with a study based on several odd assumptions and a misreading of the public option provider rates? You can’t cite some other study to say that the employer-based insurance system will unravel (despite the study suggesting it will actually be strengthened)? Really?

(Photo credit:  live w mcs on Flickr.)