More Than The Public Option

The battle over including a public insurance option in health care reform has become a proxy fight between progressives and moderates over how best to use the popular mandate of the 2008 election. That alone is an important fight. Jon Cohn has an interesting column questioning the primacy of that public option in health care reform generally.

In many respects, this is a good thing. I happen to be a strong public plan supporter myself, for reasons this magazine laid out in a staff editorial several weeks ago: It will guarantee the possibility of affordable, reliable coverage to everybody; it will promote cost control, by leading the way on reforms of how we pay for medical care; and it will promote a healthy competition with private insurers, keeping them in line and--hopefully--prodding them to perform better. (For a more detailed explanation, please read the actual editorial.)

And yet I confess to a certain ambivalence when I hear, as I frequently do, statements like the one Dean made at the rally. Yes, the public plan is a key element of reform. But it is not the only one.

Just consider what was going on inside Capitol Hill meeting rooms as Dean was speaking. Over the past week, leaders of the Senate Finance Committee have been busy hacking away at their proposed legislation, in order to bring the total price tag in at under $1 trillion over ten years. To accomplish this, the committee leaders have proposed cutting the subsidies that reform will make available to people who have trouble paying for insurance on their own.

If those cuts end up in the final legislation, fewer people would get assistance and, quite possibly, those that still got assistance wouldn’t get as much. The result would be more uninsured and more underinsured.

I would add that the "public plan" has become a catch-all phrase for any health insurance option managed by the government. While progressives have distinguished between Kent Conrad's co-ops and the public plan, the former being a poor substitute for the latter (and while Kathleen Sebelius is not totally wrong that a co-op could mimic a public plan, the nomenclature will sink such a compromise, IMO), they have not distinguished between a public option that would use Medicare bargaining rates to drop premiums as much as 30%, and Chuck Schumer's vision of a "level playing field" public option that would not use that bargaining power and would essentially become another non-profit competing for insurance, with little benefit on cost and a danger of becoming "a dumping ground for sicker and older patients."

There's a certain appeal to the notion that the public plan would be an enduring feature of the future of health care, and while other areas of reform could get tweaked, we either enact competition for the insurance companies now, or we get the forced monopoly that's coming to us. And the right word really is monopoly; there is virtually no competitive marketplace for health insurance right now.

The report, released by Health Care for America Now (HCAN), uses data compiled by the American Medical Association to show that 94 percent of the country's insurance markets are defined as "highly concentrated," according to Justice Department guidelines. Predictably, that's led to skyrocketing costs for patients, and monster profits for the big health insurers. Premiums have gone up over the past six years by more than 87 percent, on average, while profits at ten of the largest publicly traded health insurance companies rose 428 percent from 2000 to 2007.

Far from healthy market competition, HCAN describes the situation as "a market failure where a small number of large companies use their concentrated power to control premium levels, benefit packages, and provider payments in the markets they dominate."

So extreme is the level of consolidation, in fact, that one former top Federal Trade Commission official working with HCAN has sent a letter to the Justice Department's Antitrust Division, asking for an investigation into the health insurance marketplace.

The problem is most acute in small rural states, according to the report. In Shelby's own state of Alabama, the biggest insurer, Blue Cross Blue Shield, controls 83 percent of the statewide market. There, and in nine other states -- Hawaii, Rhode Island, Alaska, Vermont, Maine, Montana, Wyoming, Arkansas and Iowa -- the two largest health insurers control at least 80 percent of the market. So much for Shelby's "marketplace for health care."

Predictably, small-state Senators in states with virtually no competition in the health insurance marketplace are also those most opposed to a public insurance option to foster that competition. The resulting effect hits the pocketbook of Americans in a very real way - a monopoly can set their own prices. So including a public option is also the most tangible element of health care reform that the electorate can touch and feel.

So I guess I'm on both sides of this. I understand the highlighting of the public option, on political grounds, and even on the policy grounds. But I understand Cohn's complaint, that a bill with a public option and also failures to reform the system in other crucial ways will not succeed, and also that health insurance is not health care, and plans must provide a minimum level of that at an affordable price. Cohn lists several important elements of reform that have not received nearly the same level of attention as the public plan. In particular, I would highlight this questionfrom Cohn: "How aggressively will the government try to change the way medicine is practiced, to improve quality and reduce waste?"

That's a key question I've been looking at ever since Atul Gawande's article of the moment comparing health care costs in McAllen and El Paso, Texas. Gawande agrees that the incentives for doctors need to change if we really want to change the effectiveness of care in this country relative to cost:

I had a hard time connecting the dots. My vantage point on the world is the operating room where I see my patients. And trying to think about whether a public option would change anything didn't connect. I order more than $50,000 worth of health care in a day. Would a public or private option change that?

People say that the most expensive piece of medical equipment is the doctor's pen. It's not that we make all the money. It's that we order all the money. We're hoping that Medicare versus Aetna will be more effective at making me do my operations differently? I don't get that. Neither one has been very effective thus far [...]

The Washington debate -- there are smart reasons to think about including a public option in the mix, but we have not been thinking hard enough about how we control costs and make a better system. I think it's achievable in about 10 to15 years, and maybe even faster. I can tell you three things that will transform McAllen overnight. But CBO doesn't score them.

This gets to the question of how we pay doctors. Do we continue the fee-for-service model that incentivizes more service, and more ordering of tests and treatments without looking at effectiveness? Or do we try to build a new model, looking at what works in some cities, where the costs and the effectiveness line up better, and encourage that? It's an important question, and lots of smart people are debating it. Some feel we can slow cost growth and improve care at the same time by paying for episodes of care rather than specific procedures, paying a single price per patient for their health care, and other innovative methods. But the point is that this debate, fun for academic circles, has no antecedent in the debates of activists and even politicians when it comes to health care. We're focused on this public plan, and we may miss the opportunity to truly reform how we manage, receive and pay for medical care, to bring it in line with most of the industrialized world.

I tend to think that there is more of a gestalt at work here than Cohn and others recognize, that a profit-based insurance industry begets a profit-focused industry of doctors and hospitals. But it's a point worth making that, on the same level, activists must look at every part of the health care debate, and not narrow their focus.