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Healthy Competition |
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Jacob Hacker has a new report out today, sponsored by the Institute for America’s Future. In it, he lays out how exactly a public health insurance option could compete fairly with private insurance and still drive down costs, increase quality, and give all Americans a real choice in their health care:
For public plan choice to provide such guarantees, however, the public plan must be properly structured, compete on a truly “level playing field” with private plans, and have the authority to use its bargaining power as one of many tools to encourage greater value in health care delivery. The most effective and easily implemented model for the new public plan is a “Medicare-like” plan that builds on Medicare’s administrative infrastructure and basic framework of coverage but is separate from Medicare’s risk pool and departs from Medicare in a number of key respects regarding payment and benefits.
To create a level playing field requires attention to the “three R’s” of workable public-private competition: rules that are the same for both the public plan and private plans, risk adjustment that protects plans from being competitively disadvantaged if they enroll a less healthy group of people, and regional pricing that allows private plans and the public plan to compete within regions on the same terms, rather than having the public plan compete on a national basis with regionally based private plans (whose premiums may be lower or higher in any given region).
Finally, giving the public plan the authority to bargain for reasonable rates is an essential item on the menu of cost control—and one that the Congressional Budget Office (CBO) and other budget watchdogs are likely to “score” as producing savings (in contrast with many other currently favored cost-control strategies). Nonetheless, there are reasonable concerns about how the new public plan will use its bargaining power—concerns reflected in current proposals for a price-taking (rather than price-making) public plan that would have limited ability to secure fair rates.
These rules, while leveling the playing field, would still result in the immense savings and the true choice that Americans need.
Most importantly, and something that gets missed altogether too often, a public health insurance plan, Hacker argues, would act as a check on private insurance, making sure it played fair and served customers. It’s clear that private insurance has failed to compete with itself - we see mass consolidation in the market and an unstoppable viewpoint of putting profits before people. The competition a public health insurance plan would create would ensure prices were low, innovation was fostered, and the health of the customer was kept in mind at all times.
Jonathan Cohn at The New Republic concurs:
Hacker also emphasizes a point he, and other public plan advocates, have made before: That a public plan is an essential backstop to private plans, since–even with the best regulations–some private insurers might find ways to avoid covering sick people or addressing their needs properly. In other words, a public plan is essential to make sure private plans don’t keep conducting business the way many of them do now.
But it is on cost control where, Hacker says, the advantages of a public plan are most apparent. It’s not just that public insurance plans operate with lower administrative costs. It’s also that public plans have more bargaining leverage–and, to some extent, are more willing to use their bargaining leverage–than private insurers. A recent report from the Lewin Group backs up this claim: It found that a public plan, using government bargaining power, could reduce premiums dramatically–by around 30 percent.
About that Lewin Group study. I asked Hacker what he thought of it and he responded that while he agrees with Lewin’s findings that a public health insurance plan would save a ton of money, he disputes the findings that millions of people would enroll in a public health insurance plan:
That last point is key. More and more employers are dropping their health insurance because they can’t afford it. Same goes for individuals. So, a public health insurance plan would be a choice these people could choose to get insurance. That may well represent a lot of people, but I’m not sure how that’s a bad thing.
It can no longer be a question whether public health insurance can compete on a level playing field with private insurance. It can, and we will all reap the benefits. Anybody saying differently is likely trying to protect the insurance industry’s profits from competition. That doesn’t sound very American to me.
(also posted at the NOW! blog)
