The Neutered Public Option—Where’s the Rage?

The public option contained in the House Democratic health care bill is hardly more than a neutered version of the “robust” public option one House Democrat after another said was a minimum requirement to keep their vote on health care reform. After threatening for months to fall on their swords if they didn’t get the “robust Medicare-like” version, there was nothing but enthusiastic support for the neutered version from almost all Democrats when the bill was unveiled last week.

Readers of this blog know that I don’t think the Medicare-like public option would be good policy because it would focus on provider price suppression as its primary cost containment tool when value based-purchasing is really the objective we need to be after. I have never understood why proponents thought cutting both the best and the worst providers payments exactly the same 20% to 30% was going to put us on a course toward better health care value.

So, what have they settled for?

From the CBO: The House version of the public plan “would typically have premiums somewhere higher than the average premiums for the private plans” in competition with it.

The House version is little more than the Senate’s co-op idea. At least Senate Finance wants to spend $10 billion setting those up. The House bill claims to be able to set up a national insurance plan for $2 billion!

But then what kind of value-based purchasing would you get from the new version of that public option. “60 Minutes” recently did a report on Medicare fraud pointing out that Medicare’s approach to cost management—pay all bills in 15 days without checking anything—has led to a rampant fraud problem as crooks, who steal lists of seniors, just bill Medicare for things that never happened, quickly get paid, and move onto their next location with literally millions of dollars in their pockets before Medicare finally catches on.

And, just which providers would contract with this House version of the public plan? The House bill makes provider participation voluntary and requires provider payments to come in no lower than Medicare and no higher than average commercial insurance reimbursement. Which doctors and hospitals would voluntarily take less than the commercial rates they already complain about? Likely not the best or most attractive providers.

If the public option has to pay the same rates commercial insurers do to get the best providers what price advantage would it develop?

But, you might argue, even this kind of public option will be cheaper because of its Medicare-like expense factor? Guess again. Just who processes health claims for Medicare in those 15 days Medicare mandates? Health insurance companies as Medicare contractors.

Move away from a universal program covering 40 million seniors and into a voluntary individual insurance program that will require marketing costs, individual policy issue, individual monthly billing, claim paying, the need to build a stabilization fund, raise money to build, negotiate and manage provider networks, and all of the rest, and what do you have? An insurance company.

To be sure the government insurance company will have a lower expense factor—it won’t pay taxes or pay shareholders. But now we are talking about a single digit expense difference all the while the public plan grapples with perceptions it is more like Medicaid than Medicare and likely saves little money actually managing anything.

But sick people might like the plan. If all the public option is going to do is pay claims in 15 days, patients looking to get away from the “hassle of managed care” might find it a lot more convenient!

Don’t expect any of the business interests to support the neutered House version. Their perspective is that it is set up to fail so that when it does it will need to be “rescued” in the form of converting it to the same Medicare-like plan that went nowhere in 2009.

While I have disagreed with proponents on the effectiveness of the public option as a cost containment tool, I have been gratified to see many of these same people point out the health care bills have little in the way of cost containment. Their response was that the public option was a necessary means to that end. Without the public option, many said, there was no hope for long-term affordability.

Now that the public option has been neutered in the House, and in that context an even more reluctant Senate is more unlikely to take any bold public option steps, just what will all of these people who saw it as the tool to manage costs say now?

As I have been saying for months, we are not on our way to health care reform or any real cost containment result. Maybe we are on our way to a trillion dollar entitlement expansion paid for half with modest provider cuts and half with $500 billion in new taxes. Undoubtedly a new infusion in the health care system of a trillion dollars, paired with cost containment “lite,” is a prescription for even more health care inflation.

I wonder what the robust public option proponents—beyond their outward enthusiastic support for the new House bill—really think about that?

So much for anybody falling on their swords.

On the issue of a public option being able to competitively manage the cost of care see also today's story: "Medicare Experiments To Curb Costs Seldom Implemented on a Broad Scale" at Kaiser Health News.