Guest Post: Don’t Kill the Bill over the Public Option

As you can probably tell from reading my blog, I support health care reform.  I have weighed in before when the reform discourse has focused on taxes, and I’ve invited my friend Akshay to share his thoughts.  Akshay is a friend from school currently serving as a research assistant on a public health study at the University of Missouri – St. Louis.  He knows much more about the details than I do; his views are his own, though I agree with most of his essay.

The public option brouhaha over the past couple of days has left me with very mixed feelings on a host of issues. I simultaneously feel that (a) Lieberman is a schmuck, and that (b) the loss of the public option and the Medicare buy-in that the bill has made the bill weaker, but that (c) the removal of these policies doesn’t damage the bill so much that it’s unworthy of passage. I also feel that if health care reform sans public option happens it will both be (d) a genuine achievement for Obama while still (e) falling short of what he probably could have gotten.

On the first point, I don’t think much elaboration is needed. As for the second, the loss of the public option and the Medicare buy-in is unfortunate. A negotiated rates public plan, which was essentially a government-chartered non-profit, would have been an important backup option for millions. And although it was limited to the exchanges, the health care bills clearly envision that the exchanges are where the vast majority of Americans would eventually buy their health coverage, meaning even a “weak” public plan could eventually attain substantial scale, putting some downward pressure on the premiums for private insurance. For its part, the Medicare buy-in, depending on its structure, could have provided an affordable alternative to private insurance for the age group hardest to insure.

That being said, it’s important that both policies be kept in perspective. Many people – on both the right and the left – tended to ascribe too much power to the public option. A public option modeled on Medicare, funded from general revenues, open to everyone, and able to use Medicare rates, would have been revolutionary and brought us something quite close to single-payer. Neither the House bill’s “weak” public option limited to the insurance exchanges nor the Senate bill’s even weaker public option with a state opt-out clause created a system anywhere close to that. Neither was likely to ever control more than a fraction of the market. And given that these versions of the public plan would have had to be self-supporting and negotiate reimbursement rates on their own, what downward pressure they could exert on insurance premiums was going to be quite small.

The key features of these bills were and remain the individual and employer mandates, the subsidies, the exchanges, the Medicaid expansion, the new insurance regulations, and the cost control measures. All those features would impact tens of millions more people than either a weak public option or the Medicare buy-in. As supporters never cease to point out, this bill will provide 30 million people with health coverage, roughly half through the Medicaid expansion and the rest through the exchanges and the subsidies. At best, both the weak public option and the Medicare buy-in would have served less than five million people.

The argument that progressives should now seek to “kill the bill” rests on the assumption that the public option was the most important aspect of these bills. They insist that the public option was the “only significant cost control” – something that would only be true if insurance company profits were the main factor behind the high cost of insurance premiums. If this were the case, then a non-profit, negotiated rates public plan should have offered much lower premiums. It didn’t, which illustrates that the main reason insurance premiums are high is because the cost of health care is high. Health insurance profit margins are, in fact, quite thin. The reason single-payer systems are cost-effective isn’t because they lack a profit motive; it’s because the government can use its status as the only purchaser in order to negotiate low reimbursement rates from providers. This is the same reason that Medicare offers low reimbursement rates. A government-chartered, non-profit public plan was unlikely to seriously drive down prices in this fashion. Only a public option pegged to Medicare rates would have put serious downward pressure on private insurance premiums. Since that policy failed to get majority support even in the House, the only public option that could conceivably pass was the weak one.

Many progressives also argue that even a weak public option or a Medicare buy-in would serve as a “foot in the door” for something closer to a single-payer system. Maybe. But there was no inevitability about it. Creating Medicare for the over 65 set hasn’t automatically lead to it being offered to everyone else, for example. And opening Medicare isn’t dependent on it first being opened to the 55-64 crowd. And expanding either program was dependent on Congress passing additional legislation in the future, something which Congress is likely to do regardless of whether a public option is included at this point or not.

There’s also an odd disconnect the keeps popping up: the “kill the bill” crowd continually asserts that a public option-less bill will never be improved, expanded, or tweaked even as they argue that a bill with a public option could move towards single-payer because it would be… improved, expanded or tweaked. Their cynicism that the effort can be improved later is also hard to square with their belief that Congress will somehow write a better bill if we kill the current one. Either Congress can improve or modify existing legislation or they can’t; if they can, then it’s hard to see the argument for throwing out everything that is in the bill simply because a fairly limited public option is not.

In the end, it is very hard for me to see how a “fix it later” strategy isn’t more viable. Get the bill passed. Then in the future, you can very easily increase subsidies, modify the taxes, and even expand public programs or create a public option through the 50-vote budget reconciliation process. Granted, you’d probably have to wait at least a few years, as it’s doubtful Congress will want to touch health care again for now even if it passes. But at least passing this gets you past the first step. Killing the bill now would mean we’re simply re-fighting all the same battles again next time around.

Also worth keeping mind is the history of health care reform. Each time health care reform has failed in the past, it takes over a decade for it to be resurrected, and each time it gets resurrected, it gets resurrected in a weaker, less radical form. The lesson that politicians take from yet another failed effort is that their last effort was overly ambitious, not that it wasn’t ambitious enough. Truman’s plan was more radical than Nixon’s plan; Nixon’s plan more radical than Clinton’s; and Clinton’s plan more radical than Obama’s. If health care reform dies in 2009, it won’t get another hearing until probably the start of the next Democratic presidency (possibly the 2020s). Or it would happen under a Republican president, and you’d get something akin to the Medicare Part D fiasco: something far more Byzantine, expensive, and unfunded than anything Obama and the current Congress are trying to achieve.

Lastly, what should one view of the White House’s role in all of this? I’ll caution that you can’t really grade anyone on anything until they’ve turned in the completed assignment. But I don’t think there is any contradiction in saying that the White House both deserves credit for getting any kind of health care reform passed, while also deserving some criticism for not fighting harder for a public option. On the plus side, health care is the Vietnam of domestic policy wars. There are reasons why every president that has attempted it has failed. The system is too vast, the interest groups too strong, the problems too complex. It is a minefield. If Obama gets a bill passed, it will count as a major achievement. And yes, it will count as the largest expansion of the welfare state since the Great Society.

At the same time, I think the White House could have gotten a weak public plan or at least the Medicare opt-in through if they really prioritized the issue. Yes, it’s true that, as Ezra Klein and Matt Yglesias often point out, presidents often have less leverage over members of Congress than people assume they do. And yes, I think the somewhat hands-off strategy of letting Congress hash out the details was probably wise given Clinton’s experience. But it’s also a myth that the White House hasn’t been involved in the drafting efforts. And they’re perfectly willing to play hardball on other aspects of this. They’re willing to twist arms for the Medicare payments commission. They’re willing to twist arms to kill drug reimportation (because it would threaten the deal that bought Pharma’s neutrality in this). Not, however, for a public option or Medicare buy-in. Given that the Medicare buy-in, especially, had 59 probable votes, they may have been able to get that last single vote from somebody.

The White House would argue that the public option and the Medicare buy-in were, as I’ve pointed out, relatively limited not worth risking passage over. Still, neither was a bad idea. And the Medicare buy-in very nearly passed. Saying Congress wouldn’t have approved it anyway assumes that nobody in Congress is ever persuadable and that all votes are fixed at the outset, which is ludicrous. And I think it exposes the fact that the White House is actually pretty risk averse. This White House strikes me as perhaps a great “B” student – they’re pretty competent at getting legislation passed. But they seem to settle for something less than they could probably get if they tried a little harder. Too often Obama seems willing to take 60% of what’s ideal with a 0% chance of defeat than try for 70% of what’s ideal with a 10% chance of defeat. Maybe “Yes We Can” should have been, “Yes We Can… probably… but we’re only going to try up to a point.”