Spotlight: A Public-Insurance Option

As the debate over health care gathers momentum, attention is focusing on proposals for a new, government-administered health-insurance program to help lower costs. President Obama said on June 23 that the so-called public plan “makes sense” as part of an overall health-reform package; on Capitol Hill, lawmakers are sparring over its pros and cons. Democrats–who favor a public option–can’t agree on a plan among themselves, while across the aisle, Republicans are warning of creeping socialism and health-care “rationing.” Hold on tight: this battle is just beginning.

PUBLIC PLAN

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THE UNINSURED 47 million (15.8% of Americans)

THE INSURED

The benefits …

LEVERAGE

A public plan with millions of members could use its large market share as a negotiating tool to get doctors and hospitals to accept lower reimbursement rates for individual services.

PORTABILITY

A nationwide public plan could let Americans keep their coverage when they moved, changed jobs or weren’t working–not always the case with private insurance.

LOWER OVERHEAD

Freed from marketing expenses, broker commissions and profit margins, a public plan could have lower administrative costs, which may mean lower premiums.

DATA COLLECTION

As with Medicare, a public plan could allow uniform and large-scale reporting of health-care procedures and costs–data that could be used to improve efficiency.

… and pitfalls

Insurance companies say a public plan would have “built-in advantages” that would allow it to “take over” the insurance market.

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Top 5 Insurers 2008 Market Share United Health Group 11.8% WELL POINT* 8.9% KAISER PERMANENTE 7.6% Aetna 4.2% HUMANA 4.1%

*Parent company of Blue Cross/Blue Shield

Doctors and hospitals say a public plan that forces them to accept lower payments would shrink their incomes dramatically.

Republicans worry that a public plan would amount to a “government takeover” of health care that would bureaucratize the doctor-patient relationship.

The Players

HOUSE TRI-COMMITTEE This alliance of three committees released a draft bill June 19, including a public plan financed by premiums. It would initially reimburse health-care providers using Medicare’s lower rates.

Waxman Rangel Miller

SENATE HEALTH COMMITTEE In a June 9 legislative draft, space designated for details of a public plan just read “policy under discussion.” Dodd and Kennedy favor a public-insurance plan.

Kennedy Dodd

SENATE FINANCE COMMITTEE No formal draft has been released, but a 10-page outline leaked on June 18 included consumer-run insurance “cooperatives” as a public-plan alternative.

Baucus Grassley

MORE

Amount of government involvement

How it might look: four models

MEDICARE-BASED Providers would be paid the same rates as from Medicare. Premiums would be the lowest of any model, but government costs would be the highest.

SELF-SUSTAINING Premiums collected would cover the cost of claims. Patients would pay more than under the Medicare model but less than for private insurance.

TRIGGERED A public plan would kick in at a future date if private insurers did not sufficiently expand coverage and lower costs to certain mandated levels.

CO-OPS State or regional consumer-owned and -operated health cooperatives would provide coverage and collect premiums.

LESS

Sources: Number of uninsured: CDC, 2006 data; poll data: ABC News/Washington Post, June 18-21, 2009; potential enrollees to a public plan: the Lewin Group, April 2009; insurance-company market share: National Association of Insurance Commissioners