The Wonk Room

What Kind Of Public Option Compromise Would Grassley Support?

After encouraging AIG executives to commit suicide, but before endorsing the conservative smear campaign against comparative effectiveness research, Sen. Chuck Grassley (R-IA) indicated that he might compromise with advocates of a new public health plan:

GRASSLEY: At this point, everything is on the table. And you don’t negotiate when everything is not on the table even if there’s something that is on the table, that if it’s on the table at the end you don’t have a deal. So everything’s got to be on the table if you’re negotiating in good faith. But then let me speak to the substance of it because I think this is the most important aspect…you have a government plan and eventually it crowds out it says 118 million people. When you crowd out 118 million people, you want to have a private health insurance choice for people because we promised it to them. It becomes so expensive for the small pool thats left that eventually you end up with a single payer.

Watch it:

Several weeks ago, when Sen. Mitch McConnell (R-KY) wrote a letter to President Obama effectively taking the public option off the table, Grassley signed on. If he’s willing to compromise on the President’s proposal, then a competing public health plan would have to play by the same rules as private insurers.

So how would this competition actually work? Well, rather than allowing the new public plan to pay Medicare rates or use Medicare’s clout to bargain for lower costs, a politically viable proposal to promote competition between private health plans and a public health insurance option, will probably look something like what the New America Foundation has proposed.

As Elizabeth Carpenter explained it to me, “what makes the public plan ‘public’ in Len and John’s paper is that it would be operated by politically appointed managers and owned by the government who would also bear the insurance risk, not the private sector. The managers would be evaluated by patient satisfaction, not profits, and the people running the plan would have no incentive to stint on patient care in favor of the bottom line.”

In other words, public and private payers compete on a completely level playing field and follow all of the rules of the marketplace.The public plan would be actuarially sound, would not leverage Medicare to force providers to participate or use Medicare payment rates, and would have to adhere to the same rules regarding reserve funds. Patients who are weary of private providers would likely enroll in the public option.

Costs would be lowered through competition and system-wide reform. “The framework utilizes Medicare as a catalyst to inject value into our health system, but the overall approach to controlling costs is systematic and does not leverage Medicare’s buying power,” Carpenter writes.

The idea is this: if you reform the way Medicare and the public option reimburses for services (move away from fee-for-service and towards bundled payment, primary care, and care coordination) and if those programs become more efficient, the private insurers — who are now competing directly with the new public plan — would also have to adopt more efficient payment practices.