Yesterday’s post on the decline and fall of the Vermont single payer experiment will be leading to a couple of long responses from me as there was a great discussion on building universal coverage and default enrollment schemes in the comments. I think single payer in this country will be extraordinarily hard to do because it is such a massive disruption of middle class and upper middle class lives. And those are the people who vote in disproportionally large numbers, so pissing them off is a great way to lose political power.
I also think that if PPACA is not gutted at the Supreme Court this summer, the groups that benefits from single payer will continue to shrink as more and more people will get and maintain either Medicaid expansion coverage or Exchange individual policy coverage. Single payer is hard. It is also not necessary for universal or near universal coverage as the rest of the OECD has examples of successful systems that produce better results, at less cost than the pre-PPACA cluster fuck and still better results at lower costs than the improvement upon status quo kludge that is PPACA.
JGabriel asks if continuing a campaign for a public option would be a good way to get single payer:
The most obvious answer – to me anyway, but I am not a health policy expert – would appear to be a public option that could become single-payer by default as more and more people began using it.
So, Richard, is a public option a viable route for transitioning to single-payer?
I don’t think a public option as passed by the House but disapproved by the Senate in 2009/2010 would lead to de facto single payer. I think in several states, such a public option would be the market leader, but in most states given the experience that we’ve seen in the 2014 and 2015 rate cycles, a public option as passed by the House with three votes to spare in 2009 would be an interesting choice but not a market leading choice.
I am only looking at public options that are no stronger than the 2009 House public option that passed with three spare votes. I think I am putting my thumb on the scale signficantly in favor of a public option with that qualification as it is as I don’t see a more liberal public option passing any chamber of Congress at any point in the next ten years.
Why is that?
CBS News had a good explainer of the House public option in 2009:
House bill mandates that the program be self-sustaining and run without federal subsidies, which means it must pay administrative costs and benefits out of premiums from its subscribers…
fees will be negotiated rather than imposed, and second, the public option will have less bargaining power than the massive Medicare system because it will likely have far fewer participants.
That is the most liberal public option that has passed a single chamber of Congress ever. Its fee structure would be in the range of Medicare to Medicare plus 10%. It might have access to slightly cheaper credit than typical due to a perceived implicit federal backstop but that is speculative. The major area of cost savings for a CMS run public option would have been on the administrative end. Medicare has a Medical Loss Ratio (MLR) of roughly 95% to 96%, so if we assume a public option has an MLR of 93% to 95% (individual market with geographic specific plans is just more expensive to run), the public option would still have best in class MLR rate and thus a low administrative rate. MLR would be higher if there is a single EPO like product offered nationally with regional pricing variations. MLR would be lower if the public option creates multiple products with multiple networks per region.
How does this fit in the marketplace as it is today?
In competitive regions, the typical 1st and 2nd priced Silver plans are narrow networks with Medicare plus a bit pricing. Claim costs are kept down with two metrics. The first is the actual reimbursement rate is fairly low. In my region, the low cost Silver plans cluster their provider payment rates from Medicare +3% to Medicare +7%. A public option as passed by the House would also have provider payments in this range. Current low cost Silver plans often exclude high Medicare cost providers such as academic teaching hospitals that don’t have a quality edge over community hospitals.
If the public option was a single plan design with a national network, it would not be cost competitive for the low cost Silver segment which is by far the largest single Exchange segment right now. The public option would have a 2% to 5% MLR advantage but that would be eaten up by competitors having lower average net provider payments per unit of service rendered. If the public option was to customize its offerings for each region and slice and dice its provider network, the MLR advantage shrinks while pricing probably gets closer to low cost Silver pricing per unit of service rendered.
So in competive regions with lots of current insurers in 2015, the public option would be a decent choice but it would not be a clearly dominant player. Going forward as more and more health insurance companies increase their MLRs, the wedge that the public option would have exploited (low admin costs, equal provider payment rates) gets narrower.
The public option as passed by the House would have been useful and popular in regions with minimal market competition. For instance, West Virginia would probably flock to a public option even at the broad/non-differentiated version as the state has a single insurer selling Exchange plans in the state. New Hampshire in 2014 could have seen aggressive enrollment in a public option as again, only a single insurer was selling plans in the state. In 2015, New Hampshire would have transitioned to a competetive market, so the public option would be less notable/desirable.
In this counterfactual world, the public option gets decent enrollment with it more focused in low competition states as well as providing a good national network for people who travel a lot but it is not a dominant player. It could not dominate the subsidy Silver segment so it is just part of the landscape but it does not take over the markets in five years. It would serve its role as keeping pricing honest by being a competitive entity.
Baud
Although I would have been happy to see a public option as part of the ACA, the demi-god status given to the public option on the blogs has always escaped me. It depresses me to recall how much time and energy was wasted after the ACA was enacted in bemoaning the absence of the public option.
Davis X. Machina
I remember more than once, in 2009/2010, the phrase ‘single payer public option’ turning up on progressive sites and in blog comments. Not with an alternative slash — single payer/public option — but strung together in apposition.
It’s the ‘federal debt/federal deficit’ confusion of the left. Different things that people who don’t pay attention consider the same.
It’s a confusion with some heartfelt supporters, but some cynical ones, who profit from the conflation.
Baud
@Davis X. Machina:
Do you mean the right?
Davis X. Machina
@Baud: True dat. At one point I had ‘”Shibboleth‘ is the ancient Hebrew word for ‘public option’ saved as a macro.
The ‘public option’ public-option-last-ditchers wanted was legislatively only slightly less improbable in 2009 than single payer. I felt that its symbolic importance — as an indicator that the netroots were being listened to — was the driving force behind insistence that one be included.
The legislative limitation on scope, the size of the affected population, the requirement to operate without subsidies, etc. were all known, if not widely known, at the time.
rikyrah
thanks for this futher explanation
Davis X. Machina
@Baud: It was/is a left phenomenon. DemocraticUnderground.com, e.g..
MomSense
Thank you for pointing out that the version of the public option that passed the house was problematic. As soon as I saw that the version that would have allowed the public option to pay Medicare rates failed, I knew that the public option wasn’t worth more than serving as a bargaining chip because it wouldn’t be financially viable. I seem to recall that there were also some eligibility requirements in the version that passed the House that would make it tough for the public option pool to pay the premiums that would be necessary to support the fees.
And all of this happened in Pelosi’s house. If we couldn’t get a better public option through the Pelosi Congress it just wasn’t going to happen.
I’m wondering what tweaks or changes you think might help the PPACA to not just lower the rate at which health care costs increase but to really bring our costs down. I’ve always thought it would be transitioning from a fee for service model to some form of bundling payments per condition with some sort of carrot/stick means to get providers to institute best practices. How do we take away the incentives providers have to run all the expensive diagnostics even when they are not proven to lead to better patient outcomes?
Baud
@Davis X. Machina:
I got it. I misread your comment.
MomSense
@Baud:
I noticed that the people bemoaning the loss of the public option were not the same people who were making calls with us at the phone banks. The public option that those people described wasn’t even real. It was like this amorphous utopian health care fix that was only dragged out as proof of Obama’s betrayal.
Davis X. Machina
@MomSense: I had “‘Shibboteth’ is ancient Hebrew for ‘public option'” saved as a macro at one point…
BR
Is it possible for a state, especially a large state like California, to offer its own state-level public option on its state exchange? (Is that allowed under the PPACA?) I remember something about nonprofit co-ops being allowed under the PPACA, but I don’t really know what that means for a state-run insurance option rather than an independent nonprofit co-op option.
MomSense
@Davis X. Machina:
HA! Well today is Festivus for the rest of us so it’s the perfect day to air our grievances.
You will appreciate this memory. I remember how mad the left was about adding that clause about not paying for eebil abortions even though they weren’t financed by the PPACA anyway. I was making calls into French Catholic places like Lewiston Auburn and man but people were convinced that Obama was trying to fund abortions. That addition was helpful.
I guess there are some progressives who feel that they speak for all progressives and that may be true however the Democratic party is a coalition party so we have to accommodate and tolerate in order to get anything accomplished.
Davis X. Machina
@BR: The largest player on the Maine exchange is an independent non-profit co-op
BR
@Davis X. Machina:
Does the state run the co-op? I ask because I think BCBS is a nonprofit (though not a co-op) but I don’t trust them at all and know they have huge management overheads.
Davis X. Machina
@BR: Not state-run, but a co-op and non-profit though, like the old mutual insurance/banking model that was ubiquitous when I was a kid.
Maine went this route with great success with workers’ comp insurance during the ’90’s when companies pulled out.
Regulators here are familiar with the genera; model, and have 20 years of experience dealing with it.
burnspbesq
ICYMI, oral argument in King v. Burwell is now set for March 4. It’s the only case set for argument that day. The Justices have given themselves room to allow more than the customary hour of argument.
Violating my own rule against reading too much into routine administrative actions by the Court, I find that worrisome. In a sane and just world, oral argument in this case would consist of seven Justices brutalizing petitioners’ counsel for 30 minutes, followed by 30 minutes of oral sex for the government’s counsel. That the Justices may think there is more to talk about is bewildering, but not surprising.
MomSense
@burnspbesq:
I felt it was a bad sign when they decided to hear this turd in the first place. I’m sick of feeling like we have to read which color smoke comes out of the building.
The Raven on the Hill
The basic problem here is that, as with public housing in the period 1950-1980, for some range of incomes, the poor are expected to pay for their own charity. This did not work with housing, and I don’t see how it can work with health care. The subtext, of course, was racism. The ACA tax credit, to the administration’s credit, is colorblind, but if the Court decides that states can opt out of the ACA, racism will in health care policy will be intensified. How ’bout it, Richard? Any idea of what the racial composition of beneficiaries of the tax credit are in red states? We already know that the refusal to expand Medicaid in southern states disproportionately afflicts blacks and Hispanics. What about the tax credit?
Meantime, I am contemplating the potentially depressive effects of the revocation of the ACA subsidy in many states. Blurgh.
Bob Hertz
Being a non-profit does not mean that a public option would be cheap. We have seen many examples just since 2009 of state exchanges wasting money and paying high executive salaries.
The fact that the public option would pay Medicare rates may not be a game changer either. In some cases the private plans actually pay very low amounts to providers, but this is hidden by chargemaster gimmicks and discounts.