07.19.2017
  • United States

The Case Against the Public Option

We have the capacity to wage a transformative health care fight in the days ahead. Medicare for All or bust.

A doctor examines a patient at a Bay Pines, FL hospital in 1967. Chris Warren / Flickr

The saga of Trumpcare may finally be behind us.

The wretched bill would have wrenched coverage from tens of millions, and — by many estimates — cost tens of thousands of lives a year. Liberals and leftists rightly united in opposition against it. And though Republicans are reportedly still planning on holding an Obamacare repeal vote next week, their agenda seems to have basically crumbled under the weight of mass opposition.

But if the Right’s health care agenda is dead, what is the next move for the Left?

It is by no means a settled question, for once we move past the question of fighting the repeal of the Affordable Care Act (ACA), a divide opens up — including within the Democratic Party, which will sooner or later return to power. On the one side are the most ardent supporters of Medicare for All; on the other, those who couple a defense of the ACA with advocacy for more incremental reforms, like the public option, which in most current iterations would be a government-run health care plan that would compete against private insurers on the ACA’s state-based marketplaces.

Admittedly, there is some overlap between the two camps: many look to the public option as a short-term, feasible reform that could help millions of people today, while serving as a stepping stone to a universal system in the future. Yet there is another case to be made: that a public option would be a largely ineffective less-than-half-measure, the pursuit of which could prove to be a major diversion that would paradoxically serve to perpetuate the injustices of the status quo.

Which is it? This is a debate worth having right now, well in advance of the 2018 and 2020 elections that may well determine the fate of the US health care system.

Before delving into this debate, it’s first necessary to lay some groundwork: what is the public option, and where it did it come from? What might it achieve, and what would it leave undone? And finally: should we embrace it or reject it in the days to come?

Choice and Competition

In concept at least, the public option has its roots — as public health scholars David Himmelstein and Steffie Woolhandler have noted — in the early 1960s, as an alternative to Medicare.

At the time, Wilbur Mills, the Democratic chairman of the House Ways and Means Committee and a well-known fiscal hawk, was obstinately holding up President Kennedy’s Medicare bill. As Philip J. Funigiello describes in Chronic Politics: Health Care Security from FDR to George W. Bush, moderate Republican lawmakers Jacob Javits and John Lindsay offered two bills as a potential compromise to break the gridlock.

“Important to Javits’ proposals and to other alternatives offered at the time,” historian Edward Berkowitz writes, “was the notion of choice. . . . [Consumers] could either accept government health insurance, to be run by the States, or a private health care plan.”

Therein lies the essence of the public option: it’s designed to offer a choice between private and public insurance. Thankfully, Javits’s and Lindsay’s bipartisan bills were rejected: had a compromise been reached, Medicare as we know it today would simply not exist. Instead, Democrats went on to wallop the Republicans in the 1964 election, and Medicare was passed and signed into law the following year as a basically public program (for the time being, anyway).

The current iteration of the public option is of a more recent vintage. Its genesis can be traced to two proposals that emerged in the first decade of the twenty-first century. In a 2010 article in Health Affairs, Helen Halpin and Peter Harbage locate the origins of the public option in a health care reform proposal called “CHOICE,” which was developed by a group of health care leaders who convened in Berkeley in 2001–2, led by Halpin.

CHOICE was a proposal for a “managed competition” model for California in which the public option competed against private plans in a state marketplace. (Most current public option proposals use something of the same template, albeit for the nation as a whole.)

The plan fell by the wayside until the 2008 Democratic presidential primary, when John Edwards released a health care reform proposal that, Halpin and Harbage note, “encompassed the principles of CHOICE.” While Edwards’ campaign disintegrated in scandal, Hillary Clinton and Barack Obama followed his lead on the issue.

The second key proposal was the work of political scientist Jacob Hacker — “the father of the ‘public option,’” according to NPR’s Planet Money — who, a mere two weeks before Edwards came out with his health care plan, published an updated version of his proposal for a Medicare-like public option for those under sixty-five. The public option that all three of the leading Democratic candidates ultimately embraced was, as a 2011 account describes, essentially “a recombination of Hacker’s original Medicare Plus and Halpin’s CHOICE models,” and (rather less clearly) “the only major new idea in the reform debate.”

Yet this ostensibly new idea was to have a short life. Though it became an important focal point in the 2009 health care reform debate, it was eventually killed off by a former Democrat, Connecticut senator Joseph Lieberman, who vowed to oppose the ACA if it included a public option. He got his wish, and a public option-less ACA became law in 2010.

In more recent years, conservatives and liberals have resurrected their own versions of the public option (although only the latter identify them as such). Republicans see it as an instrument for privatization. For instance, under the health care reform framework that Paul Ryan and the House Republicans published in 2016, traditional Medicare would be transformed into a public plan that would compete against private insurance plans in a “Medicare Exchange.” Though Medicare privatization was not included in either the House or the Senate Obamacare repeal bills, the voucherization (and essential destruction) of Medicare remains on the Republicans’ wish list.

In Democratic circles, a public option (for those under sixty-five) is viewed as a potential solution to the inadequacies of the ACA. While Bernie Sanders mainly championed Medicare for All in the Democratic primary, Hillary Clinton — claiming that single-payer would “never, ever” happen — argued instead for a public option and, somewhat similarly, a Medicare “buy in.”

Republican proposals to convert Medicare into a public option for those over sixty-five would obviously take us backward, further privatizing a largely successful and overwhelmingly popular public program. But proposals to create a public option for those under sixty-five, though well intentioned, would fail to take us forward in any meaningful way.

The truth is, both approaches have a common underlying flaw: the notion that “managed competition” between a mixture of public and private insurance plans could save the American health care system. But we don’t need competing public and private insurance plans any more than we need competing public and private air traffic controllers. It adds nothing but waste and a not insignificant degree of hazard.

The Public Option's Cardinal Flaws

Obamacare, most agree, has been going through a rough patch. As of July 12, some 24,525 enrollees in thirty-eight counties were at risk of not having a single insurance option on the ACA marketplaces in 2018, according to the Kaiser Family Foundation.

To some extent, this dysfunction stems from Republican sabotage, especially President Trump’s sometimes-childish yet very consequential threats to cut off payment of Obamacare subsidies to health insurers.

But that’s not the whole story — the malaise in the marketplaces predated Trump. Last summer, for instance, Aetna announced that it was withdrawing from most Obamacare marketplaces, a decision that followed exits by other insurers. Writing in Vox at the time, Hacker, like others, touted the public option as a solution to such troubles. “It’s enough to make a frazzled health care consumer in one of those feeble markets wish there were another option — perhaps even (dare one say it?) a public option,” he wrote.

But here again lies one of the public’s option’s cardinal flaws: whatever it does for those buying insurance on the Obamacare marketplaces (which I’ll return to in a minute), it does basically nothing for the large majority of the nation not insured through them. The so-called “Obamacare” plans cover some 12.2 million enrollees — a substantial number of people to be sure, but still a very small fraction of the population.

What would a public option do, for example, for the 28.6 million US residents who are uninsured? According to the Congressional Budget Office’s (CBO) 2013 scoring of a public option added to the ACA marketplaces, the answer is nothing: the public option, the CBO estimated, “would have minimal effects . . . on the number of people who would be uninsured.”

The goal of single-payer is to reduce that 28.6 million figure to zero; under the public option — at least according to this admittedly old CBO score of one particular variation of the public option — the number wouldn’t so much as budge. Perhaps a more ambitious public option could do a bit better. Nonetheless, it’s not clear that even a more robust plan would be a step toward universal coverage.

And how about for the underinsured? The roughly half of the nation currently covered through their employer saw a 2016 deductible that was 300 percent higher than a decade ago. Such cost-shifting of health care costs to workers is a major cause of financial suffering, as well as deferred medical care. Yet the public option would do nothing for the great majority of these families.

A longstanding aim of universal health care advocates — stretching back to the German Social Democrats’ 1891 Erfurt Program, which called for “[f]ree medical care, including midwifery and medicines” — has been to eliminate out-of-pocket payments (for example, copayments and deductibles) at the time of health care use. In Canada and the United Kingdom, this goal has largely been achieved: most health care remains free when patients use it. The public option, however, would do little to nothing to bring us closer to this goal.

Nor would the public option ameliorate existing deficiencies in the two big public insurance programs, Medicare and Medicaid. Medicare, like private insurance, often imposes high out-of-pocket payments on enrollees, and it excludes coverage for important health services like dentistry and long-term care. The partial privatization of the program (via Medicare Advantage plans, which are managed by private insurance companies) has yielded little but colossal waste over the years.” And while Medicaid has broader benefits and usually minimal out-of-pocket payments, as a result of its lower reimbursements, it sometimes provides inferior access to providers (a vestige of its heritage as a “poor person’s program).

The public option wouldn’t address the inadequacies of either public program.

Finally, in terms of global costs, the public option’s effect would again be quite minor, as single-payer advocates have long noted. Eliminating both uninsurance and underinsurance would cost money, and reduced administrative spending ($503 billion dollars a year, according to one estimate) and reduced drug costs ($113.2 billion a year) are typically cited as key sources of savings. But although a Medicare-like public option may have lower administrative costs, only a small fraction of the efficiency savings of single-payer would be achieved if the multi-payer framework persisted (and drug prices wouldn’t be controlled on a system-wide level).

Or as Physician for a National Health Program’s Don McCanne puts it, the “public option would be only one more player in our wasteful, administratively-complex, fragmented system of financing care.” The upshot? It wouldn’t generate anywhere near the savings needed to fund a truly universal expansion of health care.

Would there be benefits? Probably for some. According to the 2013 CBO estimates, if the public option brought provider reimbursements more in line with those paid by Medicare, its enrollees — which it estimates would account for about 35 percent of those insured through the ACA marketplaces — would enjoy approximately 7 to 8 percent lower premiums. (A 2009 CBO score that did not make this assumption, it should be noted, found that premiums might actually be somewhat higher.) Assuming — as the CBO did in 2013 — that about 2 million more individuals would be insured through the marketplaces, this would yield a relatively small reduction in premiums for perhaps some 5 million Americans.

Others in the marketplace could conceivably see a drop in premiums as private plans were forced to compete with the public option. However, given that insurers are currently exiting the marketplace due to what they view as insufficient profitability (even as they raise premiums), it’s hard to see how this would happen.

Of course, if the public option winded up taking on people who are “less healthy — and therefore more costly,” as the CBO assumes, the reform might succeed in “stabilizing” the marketplaces by functioning as a “high risk pool.” In other words, it would essentially subsidize the private insurance industry by socializing the larger health risks (and perhaps increase its profits).

Yet this would also lock into place all the dysfunctions of the health care status quo, perhaps lowering private insurance plan premiums for some but potentially driving up the cost of the public option. More generally, uninsurance would persist while underinsurance could continue to rise.

And the sine qua non of our long-term health care vision — first dollar coverage of world-class medical care for everyone in the nation — would remain unrealized.

What Kind of Reform?

In the 1960s, the French socialist André Gorz introduced a new taxonomy for thinking about reforms. He divided them into two categories: the “reformist reform,” which preserves existing structures, and the “non-reformist reform,” which “is determined not in terms of what can be, but what should be,” and which changes existing structures, opening the door for more fundamental social change.

The public option unfortunately falls into the former category, insofar as it is meant to stabilize the existing insurance marketplace, and therefore the larger multi-payer system.

But this shortcoming isn’t its only problem. We should support defensive battles, and sometimes half-measures, that improve health care — and save lives — even when their long-term structural impact is limited. For instance, pressuring the nineteen state governments that have refused to expand their Medicaid programs is urgently needed. Thousands of lives hang in the balance. The same holds for organizing against Trumpcare, where the stakes have been still higher.

The public option, however, is a different creature: it would require a major nationwide political movement to achieve, and its benefits would not be commensurate with the effort.

Imagine, for a moment, that Democrats got squarely behind a public option, that social movements coalesced around it, that the balance of power in Washington shifted, and that through committed grassroots struggle the private insurance industry’s power was surmounted and a public option finally legislated into existence. Then imagine that all of this had the grand total effect of lowering premiums by, to be generous, 10 percent for a third or so of the 4 to 5 percent of Americans under sixty-five currently insured by marketplace plans.

Would this have been worth the years-long struggle? Sure, the ACA’s turbulent marketplaces might be a bit calmer (and, according to the CBO, the deficit might be smaller). But it would also leave intact the status quo’s injustices and most of its inefficiencies.

Even if we were to fight for a much more expansive public option — as some on the Left have argued we should — the overall picture would not change: costs would remain inadequately controlled, and coverage would remain sub-universal. And from a political standpoint, a public option designed to decimate the private insurance industry might be almost as difficult to achieve as single-payer — despite carrying few of the benefits. In which case, shouldn’t we just fight for the real thing?

A public option would probably help some, and the intentions of its proponents are good. But a public option would not only fail to bring about the long-sought goal of truly universal health care, it could prove to be a dangerous diversion.

We have the capacity for one transformative health care fight in the days ahead. Today, let us rejoice that vampiric Trumpcare seems to be dead. And tomorrow: onwards to real universal health care.