When we see articles advocating for and against the Public Option, we have to ask one very simple question.
Which Public Option are you talking about?
There are three very distinctive flavors of public options that are floating out there. Each move to some degree more people to insurance and coverage that pays providers rates that are closer to Medicare rates than current commercial rates and they will all save the Federal government some money but they have very different plumbing demands, political requirements and changes on the competition matrix.
The three major versions of the public option are a Medicare build-out, a negotiated rate Medicare package and aggressive small ball with loose 1332 rule making authority. This is the order of cost savings (and political complexity) from high to low.
Let’s look at the options below the fold;
The Medicare build-out option is the “true” Ur case of the public option. It would require providers who want to maintain their participation status in Medicare to sign up for the Public Option Build-out. Providers would get paid based on what Congress wants to pay them. From a plumbing perspective, Medicare Build Out Public Option would offer tweaked benefits to become a qualified health plan (QHP) with a very broad network and very little active case management and few systems of no. It is Medicare Fee for Service in structure. It has low provider payments (probably Medicare plus 5% or 10%), low admin cost and most likely higher than expected medical utilization.
It is also a political nightmare as it takes money out of the pockets of providers with a massively coercive stick of threatening to yank providers out of old people Medicare if they don’t play ball. Wonks, Congress and insurance companies operate at a massive disadvantage compared to hospitals, doctors, nurses and pharmacists:
We are good evil bastards vs town's largest employer AND most trusted profession in America https://t.co/I7BrdpEesI
— Richard Mayhew (@bjdickmayhew) July 18, 2016
The second option is a negotiated rate public option where Medicare still provides the back-end but the network is significantly different. Here participation in the public option would be severed from participation in current old-people Medicare. Provider payment rates would increase (probably to somewhere between Medicare +10 and Medicare +25 for common specialties, to full ESI for critical specialties and facilities). The administrative complexity of the project goes up as there is now an active network management function and some desire to steer people to lower cost providers. But again, with benefits redesigned to meet QHP standards, this is a kissing cousin to current Medicare. It will be a scooch more expensive and less expansive than the first option. It will take off some political heat as participation is voluntary and a bit less coercive but providers will still scream.
The final option is administrative small ball as we discussed in February:
Reading this in wonkese, I get something a little different than a grand plan. It is a concentrated effort to play small ball. What I see is the following sentence:
“A Clinton Administration will help states with their 1332 waivers and will lean in the direction of more coverage and state flexibility rather than the most stringent financial models. States that want to experiment can count on HHS accepting Arkansas like 1115 assumptions”
The 1332 waiver process allows states to do a lot of experimentation, customization and tweaking as long as the resultant program covers the same or greater number of people at the same or better coverage, does not leave behind the most vulnerable and does not cost the individual nor the federal government more money. Federal government cost neutrality is a key barrier. A friendly administration like the Obama Administration can allow states to make far fetched assumptions on cost neutrality to further other goals like Arkansas did for their Medicaid expansion waiver. This is what the Clinton campaign is actually promising. They’ll put the thumb on the scale for expansion and allow the supporting cost arguments to be pro-forma.
Administratively this is the simplest option. A Clinton Administration Department of Health and Human Services can approve waivers that if you squint right are budget neutral over the life of the project instead of budget neutral every year. It does not require Congressional action. It puts all of the pressure and provider side lobbying down at the state capital.
The states can get very creative and do quite a lot within the confines of a 1332 waiver. However the implementation challenge is simple. The states that are most likely to benefit from an increase of low cost, low provider reimbursement insurance products are the ones that are the least likely to apply for a 1332 waiver as they have multiple veto points held by people who think PPACA is the work of the devil himself. Massachusetts or California could probably assemble a political coalition to have state level public options but they would gain very little from it.
So when you see someone argue for or against the Clinton proposal for an expanded public option, let’s ask them what they are arguing about as there are at least three flavors out there.
Thank you for this post, Richard.
Major Major Major Major
I remember that post from February! Good times.
No thanks. Actual policy discussions seem to confuse most people who talk about it. It’s either some liberaler-than-thou shibboleth type or a government-hands-off-my-Medicare type.
@Major Major Major Major: Okay, we hang in different crowds, I’m around a lot of people who either are legitimate wonks or want to be seen as such
Major Major Major Major
@Richard Mayhew: I should hope we do, given our respective vocations. It would be strange if we didn’t!
I only have a handful of friends who care about this sort of nitty-gritty stuff.
Jim, Foolish Literalist
@MomSense: seconded, and as M-4 indicates, getting past the idea that this is just a matter of political will is important too. Saying over and over again that “every other industrialized country has single payer!” is not a policy, or persuasive to people who think their insurance is free, or are merely desperate to maintain the precarious status quo they’ve achieved. Or, you know, true.
We’ve been footstepping around provider payment rates for so long. It drives me insane that this is the biggest driver of healthcare cost growth and we refuse to do anything as a nation about it. I get that it’s a problem of politics but at what point do we say enough is enough?
Just One More Canuck
what is the real goal – ‘single payer’ or ‘universal coverage’ – if it’s the latter, there are probably any number of ways of achieving it
@Mike: Our political system favors concentrated groups that can scream about the pain a policy change will inflict upon them while the dispersed and the diffuse general population who will see incremental improvements (netted out, improvements greater than losses) don’t care and won’t organize.
This is true for sugar subsidies. It is doubly true when the group(s) getting whacked from growing fat on publicly funded rents are some of the most sympathetic and trusted groups in the country who can easily make it a contest of trusted US versus Evil Bastard Insurance Companies and their useless Congressional Lackieys. As an employee of Evil Bastard Insurance, I lose that fight as soon as it starts within that frame.
I think the best that can be done within this political environment ( and short of 1932-1934-1936 triple wave elections for Democrats, I don’t see us getting out of that environment) is slow the rate of growth of provider reimbursements and find ways to get rid of some of the truly stupid and perverted incentives that are currently in the system.
218 and 60. Necessary conditions for anything serious to happen.
@Richard Mayhew: Could you do a stupid and perverted incentives post? Would be good to know what fixes would be great if we could get them, just to be able to start talking about them.
This is a very timely post for me right now, as I’ve been asked to go out on the road to support the Colorado Care initiative! Thanks, Richard!
I think that talking about ‘flavors’ of the public option now is actually a good sign for those of us who supported the basic idea of a public option all those years ago. After all, any talk about it was so quickly shut down the first time that an in-depth examination wasn’t allowed to happen. It’s also vital to keep pushing for it, because people who are quick to say ‘We got Obamacare, you can shut up now!’ aren’t the folks who are going to push for expansion of Obamacare. As you noted, squeaky wheels get the grease.
Amanda in the South Bay
@burnspbesq: Also a minimal number of ConservaDems in those numbers is necessary.
@Richard Mayhew: Depressingly accurate description of how the sausage gets made.
Back when Obamacare was working it’s way thru Congress my Doc and I had a brief discussion during a routine appointment. We’d worked though the nobody knows what anything costs problem quite amicably. I’d recently become aware of just how much more US medical stuff cost than our peer countries. He thought the cost of Obamacare would be astronomical. I said only because you and everyone else in the system get paid way more than other countries. He didn’t know how he could get his costs to run his practice down and I said the Europeans managed it. Kinda awkward. He’s a good guy takes any Medicaid people that show up but figures he loses money on every one. Second generation small town doc. His dad was our doc when I was a child.
If you want to discuss how to add a public option to the existing system of Obamacare, most people here are happy to discuss that and game that out.
If you want to drag up all of the complaints from seven years ago and do another round of coulda-woulda-shoulda and We could have had a public option if Obama hadn’t personally killed it! then the conversation will die pretty quickly.
@NobodySpecial: nobody — Flavors 1 and 2 were being actively debated in the House in 2009 and at least one Senate committee. Flavor 2 IIRC was what was in the House bill that passed October 2009. It got yanked as it was not a have to have to make the bill work and there were not the votes in the Senate.
Here is a good explainer from October 2009 regarding what the Senate was thinking about the public option at that time:
There was a lot of talk about a variety of flavors of public options; there were not enough votes to get one and it is not a have to have feature, it is “just” a nice to have.
@Richard Mayhew: I asked about one of their articles before, but have you seen the latest Motley Fool column, which concludes that Obamacare has been a failure? They focus on an area you have discussed here, the risk corridor.
So, while one side can point to Obamacare’s successes and want to expand on them by considering the public option, I can see opponents using these negative critiques as the basis of new assaults on the entire program.
@Brachiator: Co-ops like the public option were a nice to have but not a have to have in the architecture of PPACA. A world where the 19 or 20 co-ops are still up and running and prepping for Open Enrollment 2017 would be a better world than this one but they are not critical.
Anyways 1.7 billion dollars is not even a healthcare rounding error.
Let’s not quibble over the significance of $1.7 billion; any way you slice it 800,000 people scrambling to replace their insurance coverage is not good.
And the larger question is, what does the Obama administration do to try to better deal with these rough patches and to stabilize the insurance market? Is it a matter of increasing subsidies?
@Brachiator: There is not much the administration can do without help from Congress. Remember, at least half of the co-ops were killed because of Congress. They knocked out the risk corridor money that the co-ops were counting on to build healthy reserves for the first couple of years. Sure, a few of those co-ops would have been shocked at their risk adjustment liabilities and collapsed but without the risk corridor massacre, we would probably be looking at 15 to 18 co-ops getting ready for 2017 open enrollment.
Unknown known (formerly known as Ecks, former formerly completely unknown)
ok, can I ask the dumb question here. I don’t really understand option #1, but it looks like it requires insurance companies to sell some version of medicaid plans.
So… why? Why do any insurance companies need to be involved at all? They aren’t involved in providing the existing version of medicare, are they? So why bring them into this new version?
Why not take actual straight-up medicare, and make it available on exchanges as an option that people can buy? You would have to set a price for it, and to set up a way to collect payments, of course. But those don’t sound terribly hard.
It would involve some plumbing to calibrate costs for younger healthier people, who aren’t exactly well represented in medicare’s current mix, no doubt. And you could even work in a small profit margin to subsidize the tax man, and make it fairer competition for the private co’s… but none of that sounds like rocket science, at least to this guy who has never worked in the industry a day in his life, and who wouldn’t know an actuarial table if he was beaten over the head with one.
@Unknown known (formerly known as Ecks, former formerly completely unknown): option 1 would be the federal government selling a tweaked Medicare plan.
An insurance company might have a technical support contract but it would be Medicare for Exchange
Richard, I fear that like so many well-intentioned commentators, you focus too much on the rates that a public option would pay.
The more important issues are these:
1. Where does the public option get its reserves?
from the US Treasury (like Medicare)
from investors (I douht that a lot)
from pathetic little public programs like the ones that sunk the co-ops
2. iFclaims experience is bad, do premiums go up right away, or are increases politically controlled (like Medicare Part B)?
If the public option uses public dollars, it may as well BE Medicare.
Medical corporations, such as Guthrie or UHS etc, are criminal scam operations. They don’t treat doctors well, they extract money for administrators.
Doctors are bad enough, mostly worthless.
All I care is let me into Medicare or Medicaid. Now. Get me out of this sick private market where I pay through the nose for bad insurance to go to corrupt, thieving medical offices to see bad doctors. If I’m going to see bad doctors anyway, I don’t want to pay copays and I don’t want the government to allow the offices to loot money either.
Obamacare’s “exchanges” were a grotesque failure. The private insurance market was bad enough before, but it’s actually gotten worse, with higher premiums and worse coverage.
The Medicaid expansion worked great. Please expand it to cover everyone who isn’t on Medicare. Problem solved, OK?
“I think the best that can be done within this political environment ( and short of 1932-1934-1936 triple wave elections for Democrats, I don’t see us getting out of that environment) ”
Oh, we will get out of this political environment, within 16 years, maybe less.. Or there will be civil war. Which would also get us out of this political environment. This political environment is *unstable*.