A Chip They Should Not Bargain

Everyone's freaking out about Kathleen Sebelius' statements about the public option on CNN over the weekend. I'm actually quite pleased that the conversation is moving back toward this, rather than the media obsessing over old conservatives shouting or people holding signs that confirm their ignorance. At least we're back to the policy. And talking about a health care reform with or without a public option in some way presumes a health care reform law. So maybe the teabagger protests have outlived their theatrical usefulness and everyone's ready to move on.

As to the specifics: Sebelius said that the public option was "not the essential element" in any reform. Which is of course true, based on the legislation they crafted. A bill where the public option would be an essential element would be a single payer bill. The bill that the White House and Congress put together relies far more on mandates and regulation, with a weak, walled-off public option that can only attract customers from the individual market and select small businesses thrown in to allow for "choice and competition," in their parlance. It's MassCare, which, depending on who you talk to, doesn't constrain costs enough or works pretty well. And MassCare does not have a public option. That part of reform was pretty much always designed as a bargaining chip, in the context of this legislation. And the White House has been bargaining with it consistently over a number of months.

As far as I can tell, there's been no change in the administration's position. It has always supported a public plan option. It has never claimed it essential, or the only path to competition in the insurance market. The one deviation came in July, when Obama said the words "must include" in a sentence that also had the words "public option." But it's not clear whether he was talking about the health insurance exchange or the public option. And that only happened, to my knowledge, once. That statement, not this one, was the deviation.

Try as we might to pin them down, the White House will never, ever, ever view a public insurance option as essential to passing a bill. Or anything else, for that matter, other than abstractions about "controlling costs" and "providing affordability." They want something to pass. Something they can call health care reform and tout as a victory after 40 years of defeats. If they think the best path to getting that through Congress is dropping the public option, they'll enthusiastically endorse such an approach. If they think it's not dispensable because 64 liberals in the House won't pass a bill without it, they'll have to keep it. The space in between, where the House doesn't compromise any further below a public option and the Senate doesn't allow anything beyond co-ops, is what Matt Yglesias describes as the legislative dead zone. This is basically the question House progressives must ask themselves:

If it comes right down to it and the senate is prepared to pass a bill that:

(a) subjects insurance companies to tough new restrictions,
(b) taxes employers who don’t provide decent health insurance to their employees,
(c) creates a new regulated marketplace in which individuals and small business employees can buy quality health insurance,
(d) expands Medicaid eligibility, and
(e) offers subsidies to ensure the affordability of insurance for middle class families

I have a hard time believing that House liberals will really kill the bill. But maybe they will.

This is where Mr. Krugman comes in today, comparing the plan on offer to what is occurring in Switzerland, where everyone must buy insurance, lower-income residents get subsidies, and the insurance companies have very strict regulations by which they must abide.

So where does Obamacare fit into all this? Basically, it’s a plan to Swissify America, using regulation and subsidies to ensure universal coverage.

If we were starting from scratch we probably wouldn’t have chosen this route. True “socialized medicine” would undoubtedly cost less, and a straightforward extension of Medicare-type coverage to all Americans would probably be cheaper than a Swiss-style system. That’s why I and others believe that a true public option competing with private insurers is extremely important: otherwise, rising costs could all too easily undermine the whole effort.

But a Swiss-style system of universal coverage would be a vast improvement on what we have now. And we already know that such systems work.

(One thing nobody who endorses this type of plan talks about is the fact that we have no national regulatory framework for health insurance companies, and the regulatory vigor in the states, where they are now regulated, varies widely from one to the other, so the plan on offer would either have to create a large new bureaucracy to accompany that regulation of insurers, or rely on the balkanized state approach. Neither is ideal.)

The public option could be an element of a Swiss-style system, but not the essential one. In essence, there's very little daylight between what Krugman says and what Sebelius said yesterday. So, what is one to think?

Those trying to minimize the importance of a public option are only looking at the one currently up for discussion, which is not available to anyone who gets coverage through an employer. That's not really a big enough market to change insurance company behavior anyway, which is why I favor the kind of plan offered by Ron Wyden, where employees can opt out of their coverage and buy into the insurance exchange. In fact, we have historically seen a government program like the public option refined and tweaked once it came into existence, from Social Security to Medicare. So we should not view it as static.

Which is why it's important to include it now. Sure, the public option could be added in future years as a deficit reduction element, much as MassCare is considering going to fee-for-service medicine after getting their universal system in place. But we're having the conversation now, and including a government-managed element in isolation down the road would allow everyone to train their guns very directly. This will not be the last health care reform bill in the history of America, but it's certainly the one with the most potential to codify something like a public option into law. And all the action for doing that is in the Senate - the White House will go along with whatever can pass.

...also, too: this is bigger than health care reform, it's about the progressive wing of the party being credible on standing their ground. That has implications on a host of issues.