The Wonk Room

Blanche Lincoln’s Website Still Says She Supports The Public Option

This afternoon, Sen. Blanche Lincoln (D-AK) announced that she would vote for cloture on the motion to proceed but promised — at least 3 different times — to filibuster reform if it includes a public option. “I’m prepared to vote against moving to the next stage of consideration as long as a government-run public option is included,” she said. But Lincoln hasn’t always opposed a public plan. In July, Lincoln wrote in the Arkansas Democrat-Gazette: “Individuals should be able to choose from a range of quality health insurance plans. Options should include private plans as well as a quality, affordable public plan or non-profit plan that can accomplish the same goals as those of a public plan.”

In fact, that language is still up on her Senate website:

By September 1, Lincoln changed her mind. “I would not support a solely government-funded public option,” Lincoln said at an event in Little Rock. “We can’t afford that.” This afternoon, Lincoln expressed concern that the option could ignore the letter of the law and charge premiums that would not cover the cost of the program. (H/T Jon Walker)

Blanche Lincoln Justifies Opposition To Bill That Includes Public Option With Disingenuous Argument

NOTE: We are live-tweeting the Senate vote for cloture on the motion to proceed at @wonkroom.

In a dramatic and long winded speech on the floor of the Senate, Sen. Blanche Lincoln (D-AR) announced today that she would provide the 60th vote “in support of cloture on the motion to proceed” to the health care reform bill. But Lincoln also stressed that she is “opposed to a new government administered health care plan as a part of health care reform and will not vote on the health care proposal introduced by leader Reid as it is written”:

I’ve already alerted the leader, and I’m promising my colleagues, that I’m prepared to vote against moving to the next stage of consideration as long as a government-run public option is included. The public option as a part of health insurance reform has attracted far more attention than it deserves. While cost projections show that it may reduce costs somewhat, those projections don’t take into account who pays if it fails to live up to expectations. If in fact premiums don’t cover the cost of the public plan, it is taxpayers in this country who are faced with the burden of bailing it out.

Watch a compilation:

The Senate bill requires that “the premiums for the public plan be set to fully fund expenditures for medical claims, administrative costs, and a contingency reserve” and instructs the Secretary of Health and Human Services to negotiate reimbursement rates with physicians. The Senate’s public option would save the government $3 billion over 10 years, the Congressional Budget Office has concluded.

Lincoln, who supported giving Americans the choice of enrolling in a public option as recently as July, is arguing that the option could ignore the letter of the law and charge premiums that would not cover the cost of the program. Her skepticism may be well-founded, but it’s also short-sighted and inconsistent. She is doubting the integrity of the public option, while tacitly assuming that private insurers — who have a long-standing practice of exploiting loopholes in the law and skimming on coverage for beneficiaries to increase profits — will follow the new benefit and rate regulations. Lincoln supports ‘building on the current system’ and regulating private insurers without questioning their commitment to “live up to expectations.”

Ultimately, if she’s is worried that the language of the health care bill won’t be properly implemented, she should encourage the Senate to establish a federal oversight mechanism that could force private health insurance companies and the public plan to abide by the new rules of reform. As it stands now, her objection to the public plan sounds rather manufactured and hypocritical.

Refuting Lieberman’s Cost-Shift Arguments Against The Public Option

This afternoon, Sen. Joe Lieberman (I-CT) appeared on Fox News to defend his intention to filibuster any health care reform bill that includes a national public option. Lieberman argued that a public plan would “stifle” the economic recovery and increase “the debt.” “It’s just unnecessary,” Lieberman said. The public option is “a new entitlement program and the tax payers and the premium payers are going to end up paying for it, or else the debt will go higher.”

Responding to proponents of the public plan who argue that it would actually lower costs, Lieberman insisted that if the public option paid lower reimbursement rates than private insurers, medical providers would shift costs to Americans with private coverage:

If the public option, the government run health insurance company negotiates hard to lower the reimbursement — the money it’s paying to hospitals, doctors — they’re [providers] going to have to get that money somewhere. And where they’re going to get it is from the 200 million Americans who today have private health insurance. Premiums will go up. It’s exactly what’s happened with Medicare and Medicaid….When people hear public option, I think they think it’s for free. It’s not for free. Somebody is going to have to pay for it and you can bet it’s going to be the taxpayers and the people who pay health insurance premiums now.

Watch it:

Contrary to Lieberman’s claims, the public option envisioned by Majority Leader Harry Reid (D-NV) would be required to compete on a level playing field with private insurers and charge premiums “in an amount sufficient to cover expected costs.” Instead of stifling the “economic recovery” and increasing “the debt,” the Congressional Budget Office concluded that the self-sustaining public option (similar to the one envisioned by Reid) could actually save the government money and slightly lower premiums.

Like Lieberman, America’s Health Insurance Plans (AHIP) — the insurance industry’s lobby — and the Business Roundtable have also argued that a public option that reimburses providers at lower rates than private payers would force providers to raise costs for Americans with private coverage in order to make-up the difference. MedPAC, the Congressional Budget Office, and numerous actuarial studies dispute the insurers’ claims.

The problem is, these critics confuse cost shifts with price differentials. Economists point out that “price differentials are not necessarily the recouping of losses from one payer by overcharging another”; providers often “charge different prices to different market segments” to maximize profits, not to shift costs. In fact, MedPAC has concluded that “hospitals that are forced to run efficiently are adequately funded by Medicare payments. That is, Medicare payments are sufficient to cover costs but some hospitals run inefficiently and make it appear otherwise.” Therefore, increasing Medicare payments to hospitals would not reduce rates providers charge to private insurers. The research suggests that hospitals “are raising prices when they have the market power to do so,” not because they are reimbursed at Medicare rates. As the Congressional Budget Office points out, periods of increased competition between providers have “led to a limited amount of cost shifting and also encouraged hospitals to adopt cost-containment measures.”

Reid’s Merged Public Option To Compete On Level Playing field, Negotiate Reimbursement Rates

The opt-out public option that Majority Leader Harry Reid (D-NV) sent to the Congressional Budget Office (CBO) would establish “a national insurance plan with government seed money and be run by a private, not-for-profit board,” Fox News reports. The plan would negotiate its own reimbursement rates with providers and allow state legislatures to opt out of the option by 2014 if they can provide comparable coverage in order to exit out of the federal plan.” States may also choose to establish a consumer-driven cooperative, although “states that opt out of the public plan could not offer co-ops.”

The comprise was developed by Sen. Chuck Schumer (D-NY), who converted Sen. Tom Carper’s (D-DE) original state-based opt-in proposal into a national opt-out option, and is far more conservative than the robust public option being considered in the House.

If the option is modeled on the provision in the HELP Committee’s bill, the plan would only save about $25 billion over 10 years, without significantly lowering health insurance premiums. It would likely lack Medicare’s market clout or leverage to significantly lower health care costs, but would still represent a not-for-profit alternative that can begin spearheading critical delivery system reforms.

Since both Senate bills establish state and regional based exchanges in lieu of a single national structure, it’s likely that the compromise in the merged Senate bill will establish 50 different options, all controlled by the Secretary of Health and Human Services. The public plan would have to attract a network of providers, charge premiums “in an amount sufficient to cover expected costs,” and meet all solvency and reserve fund requirements.

If Reid follows HELP’s template, then within each state or region the Secretary would negotiate reimbursement rates on behalf of the pubic option that would likely mirror the rates used by private insurers (the legislative language states that rates “shall not be higher, in aggregate, than the average reimbursement rates paid by health insurance issuers offering qualified health plans through the Gateway”). The HELP language also allows the public option to “develop or encourage the use of innovative payment policies that promote quality, efficiency and savings to consumers,” a critical provision that would allow the public option to invest in payment and delivery system reforms.

Reid aides stressed that the legislative language for the opt-out provision was a “work in progress” that has yet to be scrutinized by the Congressional Budget Office. The aide said “Reid delivered a menu of proposals to the CBO for review and will make a final decision about what the Senate measure will include once he receives cost estimates for the various policies, which could come within a week.”

The merged Senate public plan would still have to be reconciled with the House, where liberals “are keeping up their pressure on key Democrats — including President Barack Obama — and urging them to embrace a robust public insurance option” that reimburses providers at five percent above Medicare rates. (The Congressional Budget Office has concluded that the option could save approximately $85 billion more than a level-playing field proposal.)

Rep. Raúl Grijalva (D-AZ) — co-chairman of the Congressional Progressive Caucus — explained that there is “a big difference” between the Senate’s proposal and the Progressive Caucus’ demand. “‘My state would opt out immediately,’ [out of the Senate's public plan] he said, predicting that Texas and other conservative states would as well, despite having some of the highest rates of uninsured people in the country. “Without protections for those people who would be left behind, I would have a hard time,” Grijalva said. “Without the robust plan, based on Medicare plus 5 [percent], there is no competition, there is no mechanism to drive down costs for insurance companies and you hurt coverage,” Grijalva said.

Reid Announces Opt-Out Public Option, But What Kind Of Plan Would States Opt-Out Of?

This afternoon, Senate Majority Leader Harry Reid (D-NV) announced that the merged Senate health bill would establish a national public option that allows states to opt out of the plan by 2014. Reid did not indicate that he had 60 votes in support of the opt-out, but said that he would not submit competing public option compromises to the Congressional Budget Office. The answer suggests that the Senate would not use the trigger or any other compromise as an alternative if the opt-out measure fails to obtain the 60 votes needed for cloture.

Reid said that the final legislation will also provide seed money for states to establish consumer driven cooperatives:

As we’ve gone through this process I’ve concluded — with the support of the White House, Senators Dodd and Baucus — that the best way to move forward is to include a public option with the opt out option for states. Under this concept, states will be able to determine whether the public option works well for them and will have the ability to opt out if they so chose….We’ve spent countless hours in the last few days in consultation with Senators who have shown a general desire to reform the health care system and I believe there is a strong consensus to move forward in this direction.

Watch a compilation:

The opt-out compromise, initially floated by Sen. Tom Carper (D-DE), is loosely modeled on Medicaid, which originally allowed states to “opt-out” of the program and today enjoys the participation of all 50 states. Supporters of the plan believe that if the public option proves itself in states where it’s functional, then legislators from conservatives states would be hard pressed to exempt their states from the program. After all, why reject an option that offers lower premiums and saves the state billions in health care costs? Rhetoric about a ‘government-takeover’ of health care may sound good on television, but it loses its appeal when you’re trying to balance your books.

But whether or not the public option will actually lower health care costs will depend on how it’s structured and how it pays providers. The public option has to be large enough to sway large provider groups to lower health care costs and initiate delivery system reforms.

So what are the states opting out of? Below are two basic options:

- A national plan that pays 5% above Medicare rates: A robust public option that initially reimburses providers at 5% above Medicare rates and strongly encourages all Medicare doctors to participate, was originally part of the House bill. This kind of plan would take advantage of Medicare rates, providers, efficiencies and administrative simplifications. According to the CBO, a robust public option could save $110B/10yrs, lower premiums by 10%. A second alternative would allow the public option to reimburse at higher than Medicare rates but could trigger the lower Medicare reimbursements if costs increased. This plan could also initiate greater delivery and payment reforms.

- A national public plan that negotiates payment rates with providers: A so-called level playing field public plan that reimburses providers at market rates would take advantage of Medicare efficiencies and administrative simplifications, but would not piggy-back off of Medicare-established reimbursements or provider reach. This kind of plan was part of the HELP bill. According to the CBO, the option would save $25B/10yrs but would not lower premiums within the exchange. This plan could also initiate greater delivery and payment reforms.

POLITICO is reporting that currently, Reid “has between 56 and 57 votes for the opt-out, which is being pushed by Sen. Charles Schumer, according to Democratic aides. A public option with a delayed “trigger” — supported by the White House and Maine Republican Sen. Olympia Snowe — has between 58 and 59 backers.” Reid dismissed competing public option proposals, telling reporters “We hope that Olympia will come back, she has worked hard, she is a very good legislator. I’m disappointed that the one issue, the public option, has been something that that’s frightened her.”

Of course, the other possibility — less likely given Reid’s reluctance to ask the CBO to score the proposal — is to combine the opt-out public option with a trigger — ensuring that states could only opt out of the public option if the private market offers meaningful and affordable coverage. Any opt-out proposal should also provide for a simple ‘opt-back-in process’ (mandating that state legislatures vote on the opt out every year, for instance.)

Another Case For The Public Option? Insurer Releases Third Report Threatening To Raise Premiums

Wellpoint CEO Angela Braly

Currently, a young and healthy individual may purchase comprehensive health insurance coverage for $107 per month in the individual market, and it is very reasonable that in the absence of a strong individual mandate, other elements of reform cannot overcome the impact of insurance market reforms and will multiply this premium for those purchasing coverage post-reform. We believe the pages that follow reflect a reasonable, honest assessment of the impacts those purchasing coverage would see post-reform. As shown, we do expect some individuals that currently exhibit higher risks to experience a drop in premiums as the result of reform. However, most purchasers will face higher premium costs post-reform, and as shown, purchasers of average age and average health are expected to face higher premiums post-reform.

If policy makers don’t require enough younger and healthier applicants to join the risk pool (and offset the costs of covering sicker applicants), premiums will increase for everyone, Wellpoint says. And it’s a valid point: modified community rating and guarantee issue can only lower costs if the size of the risk pool is expanded and the healthy balance out the costs of the sick. The merged senate bill should certainly adopt stronger mandate measures. But comparing today’s individual market policy with a post-reform product from the exchange (or even in the remaining individual market) is apples to oranges. If properly designed, the post-reform insurance plan will not be the porous, inadequate, high deductible policy currently available in the non-group market. Americans would be purchasing regulated policies from insurers that can’t rescind coverage or deny certain basic benefits. In other words, if you’re paying more, you’re getting a better plan.

The reality is, some reform provisions would tend to make premiums higher than current-law premiums; other provisions would “tend to make them lower.” Americans from different income brackets will pay different amounts for health care, but on the whole an analysis of Congressional Budget Office data suggests that reform will offer health insurance policies that are more affordable than what is currently available in the individual market.

If premiums do increase, however, insurers bear a fair share of the blame. As Families USA points out, insurers are “like a poker player who complains about his hand when, in fact, he is the dealer.” For all their concern about health care costs, Wellpoint has a poor track record of controlling prices or providing adequate coverage. According to a 2008 study by the American Medical Association, “WellPoint controls the largest market share in 9 of 42 states studied (CA, GA, IN, KY, ME, MO, NY, OH, and VA), dominating 71 percent of the market in Maine, 58 percent of the market in Indiana, and over half the market in Georgia, Kentucky, and Virginia.” It is the poster child for why progressives want to force large for-profit conglomerates to compete with a public option that places people before profits.

Wellpoint is heavily invested in the individual health insurance market and “has been among the most aggressive in pursuing healthy customers who are less likely to use benefits to pay for medical care.” The company has a “long history of putting its bottom line ahead of the welfare of its policyholders and their health care providers”:

- WellPoint Inc. has been barred from adding customers to Medicare plans after it denied prescription drugs to the elderly, endangering their lives.

- In 2006, WellPoint’s profits increased 34% as premiums and fees surged.

- WellPoint Inc., the nation’s largest health insurer that covers about 1 in 10 people in the U.S., fared the worst among its peers in a survey gauging how quickly HMOs process and pay claims to doctors.

- In March 2007, the state’s Department of Managed Health Care fined Blue Cross of California and its parent company, WellPoint, $1 million after an investigation revealed that the insurer routinely canceled individual health policies of pregnant women and chronically ill patients.

- California regulators uncovered more than 1,200 violations of the law by the company in regard to unfair rescission and claims processing practices.

- In December 2007, Insurance Commissioner Steve Poizner announced his office was imposing a $12.6 million fine against Blue Shield, saying the company had “committed serious violations that completely undermine the public trust in our healthcare delivery system.

Consider the source, but also understand the criticism. If we want to ensure affordable and comprehensive coverage we have to improve affordability standards (by injecting some real competition into the marketplace) and hold insurers accountable.

The Case Against Including An Opt-Out Public Plan In The Senate Bill »

Most news outlets are reporting that Majority Leader Harry Reid (D-NV) may include an opt-out public option in the merged Senate legislation. “Mr. Reid met with President Obama at the White House Thursday to inform him of his inclination to add the public option to the bill, but did not specifically ask the president to endorse that approach, a Democratic aide said.”

Here the reports diverge. The NYT is reporting that Obama “asked questions” about the opt-out, “but did not express a preference at the meeting.” POLITICO quotes a ‘Democratic source’ as saying that Obama “appeared” to prefer a trigger option. And The Plum Line’s Greg Sargent clarifies, via a White House response, that “Reid was specifically raising the possibility of a public option with an opt-out clause as one potential route.” “Reid has not made a final decision to take this route,” Sargent reports.

At this point, Reid may not have the votes to move a national opt out off of the floor; he is introducing a national opt-out with the understanding that it would become a state-based ‘trigger’ when the Senate formally takes up the measure. The maneuver is meant to satisfy progressives — Congress tried — but the final bill will include a mechanism that triggers a state-based public option if a certain affordability threshold is not satisfied (if 5% of the state population does not have access to at least two “affordable” options, for instance). The policy will then be presented as ‘the best deal we could get’ and embraced by both Reid and the White House.

But a state-based approach won’t have the ability to significantly lower health care costs or change delivery patterns. Progressives point to existing state-based employee ‘public options’ or Medicaid programs that contract out to private insurers and thus don’t provide a meaningful alternative or competition. A state triggered public option, would lead to the same outcome, they argue.

To avoid this scenario, the White House needs to stop sending clarification statements to Sargent and stake out a firm position — they will never find the votes if they don’t whip them. Why not start on higher negotiating ground and embrace the HELP bill’s (relativley) strong public plan (it establishes state-based public plans that are controlled by the Secretary)? If Reid was to include the HELP bill’s plan in the merged Senate legislation, he could conceivably negotiate it down to an opt-out public option with a trigger — ensuring that states could only opt out of the public option if the private market offers meaningful and affordable coverage. Similarly, the public plan could start paying providers at market rates but convert to Medicare-like reimbursements if costs don’t decrease.

That kind of compromise preserves the integrity and goals of the public plan and presents the final product as a compromise of warring factions. That kind of compromise lowers the cost of the bill and makes coverage more affordable for families. It becomes ‘the best deal we could get’ and it’s better politics and policy. It scores better and it looks better (Congress made coverage more affordable and struck back at insurers and their self-serving reports). Starting the debate with the state-based approach cedes too much ground and does very little to improve the actual policy in the bill.

Of course, all of this is based on the premise that the public option is subject to change. Some observers believe that Reid won’t have enough votes to amend the public plan during floor debate. They think that whatever he inserts into the bill will stay there. Then the question becomes: will the national opt-out sink the entire effort?

The policy is still up in the air, but so far, the opt-out is winning mixed reviews from moderate Republicans and centrist Democrats: More »« Less

What Will The Blue Dogs Offer To Achieve The Savings Of A Robust Public Option?

The Hill reports that “Pelosi made it clear in a leadership meeting Tuesday night that she intends for the Medicare-based public option to be included in the final House bill. But she acknowledged in a meeting of the full caucus later that she doesn’t yet have the 218 votes among Democrats that she needs to guarantee its passage.”

Over at The Treatment, Jonathan Cohn asks (and answers) ‘What is Nancy Pelosi Doing?.” It’s a good question, but reformers should also ask, ‘What is Nancy Pelosi Getting?’ Blue Dogs and some moderate lawmakers believe (wrongly, in my opinion) that a public option that reimburses at Medicare rates for the first 2 to 3 years would devastate rural providers (they’ll all go down in three years, you see).

But if Blue Dogs reject the public plan, then Pelosi must ask them to offer policy solutions that can meet the objectives of a robust public option:

- If you reject the public option, how will they make up for its estimated $100 billion in savings?

- The public option will lower premiums by about 10%, so how should we make coverage more affordable within the Exchange?

- How will you hold insurers’ feet to the fire to ensure that they don’t game the new rules and your constituents?

Reformers don’t have $100 billion to waste. They don’t have the extra dollars to increase affordability subsidies. In other words, they don’t have the luxury to dispose of a policy that can help make coverage more affordable.

If the Blue Dogs want to gut the plan, they must propose reforms that achieve the same objectives: a compromise public option that triggers market rates if they devastate providers, increase affordability subsidies, institute new regulatory and accountability entities to hold insurers accountable, expand Medicaid even further. The list is long, and Blue Dogs should start pitching some ideas. They shouldn’t get something for nothing.

Public Plan Founder Jacob Hacker Responds To Ross’ Open Up Medicare Compromise

Early last week, Rep. Mike Ross (D-AR) — who led a group of seven centrist Blue Dogs who objected to a public option that reimbursed providers based on Medicare rates — floated a proposal to replace the public option with a proposal that would allow Americans under 65 to buy into the Medicare program. Medicare would reimburse the newly enrolled population “at a reimbursement rate much greater than current Medicare rates.”

On Friday, the Wonk Room sat down with public option godfather Jack Hacker and asked him to respond to Ross’ proposal. “Mike Ross is saying that the better alternative to having a new public health insurance plan that’s distinct from Medicare and competes on a level playing field, is actually to just open up Medicare on some new basis to people younger than 65. It’s a pretty remarkable development”:

What I would say is, I’ll take that and raise you. Okay, great! Let’s open up Medicare. If you think that’s a good idea, why don’t we open up Medicare more generally, in the sense that we use the basic Medicare model. And the Medicare model is build on the idea that people who are covered by Medicare have the ability to go to all the providers who contract with Medicare and be assured that in a transparent process that those providers will agree to be paid the rates that Medicare pays….What Ross is really saying, to my mind, is that Medicare is a good model. And the essential part of the Medicare model is that it contracts directly with providers, who agree to accept rates that are based on very careful thinking about what’s the proper amount to pay for different kinds of services.

Watch it:

During the interview, Hacker rejected Ross’ contention that hospitals would close if they were reimbursed at Medicare rates, pointing to research which found that Medicare reimbursement rates lead to greater efficiencies.

Hacker also predicted that seniors would oppose opening the program to younger Americans and explained that Medicare was not designed “to provide health security to a younger than 65 population.” “There are a lot of holes in the Medicare program that should be fixed but which aren’t going to be fixed immediately. One of the important reasons to have a separate insurance plan is to make sure you’re providing the kind of good coverage that you know younger Americans need,” Hacker said.

“Ultimately though, we should understand the public health insurance plan idea, and Medicare as being very much interrelated. That over time, we should see this public health insurance plan and Medicare as a way of improving the cost effectiveness and the quality of care delivered to both younger Americans and to those over 65.”

Obama’s Radio Address: A Missed Opportunity To Press For A Public Option

In Saturday’s radio address, President Obama condemned the insurance industry for “filling the airwaves with deceptive and dishonest ads” and “flooding Capitol Hill with lobbyists and campaign contributions” “designed to mislead the American people.” Obama called out the industry for “making this last-ditch effort to stop reform” and criticized cable news and so-called experts for buying into the latest false industry reports. “It’s smoke and mirrors. It’s bogus. And it’s all too familiar,” he said.

But that’s where the fiery speech ended. Obama’s response to the insurance industry reports provided him the perfect opportunity to press for a public option, only he let the moment slip. The address was long on rhetoric but short on policies that could keep the industry in check. Obama sanctioned Democratic efforts to remove the industry’s anti-trust exemption, but fell short of endorsing a robust public option that could lower health care costs, lower the costs of the bill, and keep insurance companies accountable. The following day, White House Officials took to the airwaves to explain that the administration would not demand a public plan. In fact, despite the Democrats’ super majority in Congress, and the overwhelming support of the American people, the administration wouldn’t be demanding much of anything:

- Valarie Jarrett: He’s not demanding that it’s in there. He thinks it’s the best possible choice. But I think, David, let’s not underestimate how much progress we’ve made. [MTP, 10/18/2009]

- David Axelrod: I think the final bill will achieve those goals, and a public option would help in that regard….There will be compromise. There will be legislation, and it will achieve our goals.” [This Week, 10/18/2009]

- Rahm Emanuel: And so the president believes in it as a source of competition. He also believes that it’s not the defining piece of health care. It’s whether we achieve both cost control, coverage, as well as the choice that…The president of the United States will obviously weigh in when it’s important to weigh in on that. [State of The Union, 10/18/2009]

The address was a missed opportunity. Obama could have responded to the industry’s self-serving report by arguing that reform must inject significant competition into health insurance markets. He could have used their new-found tone to argue that reform must hold the industry accountable. The American people, in other words, should not be compelled to buy private coverage from an industry that has just admitted that it would increase premiums by some 111% if reform passes.

But rest assured that Obama still believes the public option is “the best possible choice” to restore competition and improve affordability. He just refuses to fight for it. Why? The public option is not a liberal ideological baton, it’s a sensible compromise that builds on free market principles. According to the Congressional Budget Office, the option would attract some 10-15 million new applicants, hardly a threat to private insurers who have spent years building brand loyalty and today boast hundreds of millions of applicants. It would add a sliver of competition into the market — and, judging by the industry’s reaction, that’s threatening enough. It would save the government some $150 billion dollars, lower the cost of the bill, lower premiums by some 10%, and help bring about the kind of delivery system reforms that could lower the rate of growth in health care spending.

What’s more, 77% of the American people and the majority of Democrats in the House and Senate support it. So why not pressure reluctant Democrats to support the policy? Why not push Reid on the option? What does the White House have to lose?

The President may not have the votes for a public plan today, but he’ll never get them if he doesn’t publicly pressure the Congress to stand up to the health insurance industry and help make insurance more affordable for millions of Americans.

If Medicaid Experience Is Any Indicator, Public Option Opt-Out Compromise May Be Good Idea

Senate Democrats are “very seriously considering” “a compromise approach to health care reform that would establish a robust, national public option for insurance coverage but give individual states the right to opt out of the program“:

The proposal is envisioned as a means of getting the necessary support from progressive members of the Democratic Caucus — who have insisted that a government-run insurance option remain in the bill — and conservative Democrats who are worried about what a public plan would mean for insurers in their states….In conversations with the Huffington Post, sources have said that while the opt-out approach to the public plan is in its nascent stages it has been discussed with leadership in the Senate. It was pulled out of an alternative idea, put forth by Sen. Tom Carper (D-Del.) and, prior to him, former Senate Majority Leader Tom Daschle, to give states the power to determine whether they want to implement a public insurance option.

But instead of starting with no national public option and giving state governments the right to develop their own, the newest compromise approaches the issue from the opposite direction: beginning with a national public option and giving state governments the right not to have one.

The Huffington Post’s Sam Stein explains that “the ‘opt-out’ approach would start with everyone having access to a public plan. What kind of public plan isn’t yet clear. States would then have the right to vote — either by referendum, legislature, or simply a gubernatorial decree — to make the option unavailable in their health care exchanges.”

At first glance, the compromise preserves the original advantage of the public plan: it allows the plan to use its inherent efficiencies and market power to lower health care costs, promote delivery system reforms, and inject competition into concentrated health insurance markets. Red states, for all their political posturing, may weaken the reach of the national plan by opting out. But if the public option proves itself in states where it’s functional, then forgoing the public plan would be tantamount to imposing a tax hike on state residents. After all, why reject a program that offers lower premiums and saves the state billions in health care costs? Hot rhetoric about a ‘government-takeover’ of health care may sound hot on television, but it loses its fever when you’re trying to balance your books.

In fact, after complaining that Medicare/Medicaid would lead to socialism in America during the 1960s, all 50 states have chosen to participate in the Medicaid program — a jointly funded venture between the states and the federal government, which gives states the option to opt out. “Every state has been in Medicaid since 1982. None have ever dropped out,” Turtle Bay writes on Daily Kos. “True, Arizona wasn’t in until 1982, but that’s partly because for a state to get in, they had to actually set up a program.” The stimulus is another example:

And the stimulus — probably the best example of all, even though it isn’t clear that the states had any actual authority to opt-out. We saw the usual gang of idiots saying they were going to reject the stimulus, or in one case, actually attempt to do so over the objections of his state legislature. And what happened? We’ve got Bobby Jindal carting around oversized stealth stimulus checks to promote himself…

“The public option will be no different,” Turtle Bay concludes. “Once the die is cast, and this ’socialist’ system is in place, no state legislator is going to want to tell their constituents that they voted to take away something that would save them money, and that everyone else in the country is getting.”

All that may be true, but a real national public option is unlikely to come out of the Senate. If it fails, states would have to resort to state-based public options and they would have to establish a simple process for opting back into the plan (by requiring states to vote on the opt-out every year, for instance).

Why Cutting A Public Option 50 Different Ways Won’t Lower Health Care Costs

The Wall Street Journal reports that Sen. Tom Carper’s (D-DE) state-based public option compromise is gaining steam among moderate Sens. Ben Nelson (D-NE) and Kent Conrad (D-ND):

The Delaware Democrat’s plan won praise from some in his party Tuesday as a way of bridging differences among them. “Conceptually, having the states take responsibility makes a great deal of sense,” said Nebraska Sen. Ben Nelson, a key voice for moderate Democrats. “It is important that we really take a close look at this.” He noted that states are already in the health-insurance business because they administer Medicaid and other federal-state programs. Mr. Nelson said state health plans could compete alongside the nonprofit cooperatives. Another Democratic centrist, Sen. Kent Conrad of North Dakota, said the Carper proposal was “very constructive.”

The compromise may make “constructive” short term political “sense”, but cutting a public option 50 different ways won’t lower health care premiums or change delivery patterns. Carper’s proposal would “allow states to individually decide whether to create a private-insurance competitor such as a government plan and a nonprofit insurance cooperative, or to open up state-based insurance pools for government workers to every resident.” But in the 30 states that already provide their employees with coverage through so-called mini public options or co-operative options, health care costs have not decreased. They’ve increased. The coverage may be good, but the price is still unaffordable.

The problem is, when you slice a robust Medicare-like public option 50 different ways, you rob the plan of any real ability (i.e. market clout) to lower health care spending or change the way care is delivered. For instance, if you replaced the national Home Depot corporation with a network of 50 loosely connected stores and then forced those individual businesses to negotiate independently with suppliers and develop their own delivery systems, costs would only increase. It’s by banding together as a single entity that large corporations are able to deliver services more efficiently and pass on the savings to their consumers. The same is true of Medicare and the national public option: its national structure is essential to delivering quality care more efficiently and streamlining delivery-system reforms.

Stripping the national public option of its national structure establishes a mere shadow of a public plan. Replacing a national public plan with a network of state-based options isn’t a compromise that sacrifices the means to achieve the same ends. It’s a compromise that sacrifices the ends.

Rep. Weiner Takes On Betsy McCaughey: You Would ‘Take Away 100% Of Medicare For People 65 To 70′

This morning, Rep. Anthony Weiner (D-NY) and health care provocateur Betsy McCaughey took their health care debate to Dylan Ratigan’s ‘Morning Meeting.’ In a heated exchange that lasted almost 15 minutes, the two sparred over Medicare cuts, the public option, and health care spending. Weiner insisted that a robust public plan could restore competition to concentrated health care markets and reduce health care costs by an estimated $150 billion. McCaughey, the architect of the false “death panels” myth, continued her scare-mongering campaign against seniors: “The elephant in the room here is that all these bills are devastating care for seniors and the Baucus bill is the deadliest of all!”

Throughout the interview, McCaughey verbally attacked Ratigan and Weiner, complaining that she was being shut out of the debate. “Anthony, you are ignorant about health insurance,” she said, before insisting that “this will go down in history as one of the most browbeating interviews in television history.” “I hope that it does,” Ratigan replied. “And maybe you’ll learn at that point then to answer questions as opposed to go on television and cast accusations.” Watch a compilation:

After repeatedly refusing to explain how she would reduce health care spending, McCaughey proposed “inching up the eligibility age [for Medicare] one month a year until 2043 when the eligibility age reaches 70.” That could “put Medicare on a firm footing without cutting care for Medicare recipients.”

“That was a solid answer to your question,” Weiner exclaimed facetiously. “Take away 100% of Medicare for people 65 to 70.” According to the Congressional Budget Office, which McCaughey credited with the idea, eliminating “younger beneficiaries” from the Medicare program would do little to control costs. “Outlays for Medicare would [still] rise to 7.7 percent of GDP by 2050,” the CBO concluded.

Weiner pounced on McCaughey’s solution, which could cut as many as 11.3 million seniors from Medicare. “You want to gut Medicare,” Weiner told McCaughey. “That is exactly right. Now, I’m the one you’re accused of scaring seniors? You just said on this show you wanted to cut Medicare for everyone 65 to 70, isn’t that right?” “I will get it at 70 under the CBO proposal…and you will too.”

Why Reid Shouldn’t Include The Public Option In The Merged Senate Bill

Lawrence O’Donnell — who served as Senate Finance Committee staff director during the debate over President Clinton’s failed health care reforms — tells Politico’s Live Pulse that Majority Leader Harry Reid (D-NV) shouldn’t merge the Senate Finance Committee’s health bill with the HELP Committee’s far more progressive alternative. Sen. George Mitchell tried that in 1994 and Republicans went line-by-line successfully defeating the bill:

“The basic lesson of ’94 is don’t bother trying to merge those bills,” said Lawrence O’Donnell, who served as Senate Finance Committee staff director during the debate over President Clinton’s failed health care reforms. After Senate Majority Leader George Mitchell merged the finance and labor committee bills, Republicans successfully targeted the more liberal labor committee provisions for deletion and won their removal with 100-0 votes. After about a week of watching the GOP dismantle the bill line-by-line, Mitchell was forced to take it off the floor, essentially killing reform. This go ’round, O’Donnell told Pulse, Reid would be wise to largely ignore the HELP bill and push forward with the more moderate Baucus bill, which includes provisions that President Obama has endorsed.

The most controversial element of this health care reform fight is, of course, the public option and Reid has flip-flopped on his willingness to include the provision in the merged Senate legislation. On Thursday, Reid promised, “We are going to have a public option before this bill goes to the President’s desk,” suggesting that the bill will move to the floor of the Senate with the public plan. Meanwhile, “senior administration officials have been holding private meetings almost daily at the Capitol with senior Democratic staff to discuss ways to include a version of the public plan in the healthcare bill that Senate Majority Leader Harry Reid (D-NV) plans to bring to the Senate floor this month.”

But is O’Donnell right? Does it make more sense to exclude the public plan from the Senate bill and add it during Conference? I think it does. The public plan has become a political wedge issue. Republicans have staked their entire opposition to reform on the public plan, effectively shutting out any meaningful discussion about affordability or insurance regulations.

Excluding the public option from the Senate bill could broaden the health care debate. Republicans will complain that they need assurances that a public option won’t be added in during conference. They’ll spend more energy questioning the constitutionality of the individual mandate, the wisdom of eliminating the overpayments to private insurers participating in Medicare Advantage, rationing abortions to women, and ensuring that legal immigrants don’t have access to care.

But these issues lack the broad appeal of the party’s government take-over theme; they force the party to play to its right wing base. By voting against the final bill, conservatives will register their opposition to a very sensible, moderate, package of reforms. Democrats will preserve the integrity of the public option. It will remain intact, away from reformers who seek to transform it into a co-op or a “network” of state-based public plans.

Democrats could then add the public option to the final health care bill during conference, when they reconcile the House and Senate bills. Reid may not have 60 Senate votes for a public plan, but then again, he doesn’t need them. The Senate requires 60 votes to break a filibuster and 50+ votes to pass a bill. During the negotiations, Pelosi will likely argue that she needs a public plan to pass a health care bill in the House and the White House will lean on Reid to include some kind of public option.

With zero chance of securing Republican support, Democrats may find the chutzpah to take advantage of their super majority and pass substantial health care legislation.

Considering Carper’s Public Option Compromise

Politico is reporting that Sen. Tom Carper (D-DE) is floating a new public option compromise that would “allow states to individually decide whether to create a private-insurance competitor such as a government plan and a nonprofit insurance cooperative, or to open up state-based insurance pools for government workers to every resident.” The option won’t come up during the Senate Finance Committee’s mark-up but may end up in the merged Senate bill or in an amendment offered on the Senate floor.

The idea mirrors Len Nichol’s proposal to establish a series of public options based on already existing state-employer health plans (currently offered in 30 states). The government would offer states start-up funds to establish a program that would compete on a completely level playing field .The public plan would have to be actuarially sound, would not leverage Medicare to force providers to participate or use Medicare payment rates, and would likely adhere to the same rules regarding reserve funds. Patients who are weary of private providers would likely enroll in the public option.

Large progressive states like New York and California will likely embrace this proposal; more conservatives states may wait to see if these public plans save money.

And it’s not clear that they will. State-based public options would enter concentrated markets (already dominated by one or two private insurers) and lack the market clout to negotiate significantly cheaper rates or institute reforms that change the way care is paid for. Existing state-run employer plans (and Medicaid in many states) have already given up on the ‘public’ aspect of their plans and outsourced the work to private insurers. As a result, they have failed to significantly lower health care costs or bring any real change to the market place. In other words, like Carper’s proposal, they are ‘public plans’ in name only.

This compromise may appeal to Blue Dogs or conservative Democrats who aren’t terribly interested in expanding government programs or using the government to lower health care costs; some moderate Republicans may also jump on board. After all, they believe that cost control and delivery reform are best left to a marketplace of private insurers and that’s exactly what Carper does. He creates “public options” that operate like a private plans.

Grassley Flustered When Challenged By Schumer On Public Option

During this morning’s debate over Sen. Jay Rockefeller’s (D-WV) public plan amendment, Sen. Debbie Stabenow (D-MI) reminded senators that “if you go back and look at the debate on Medicare, the very same arguments were used, in the 60s. That we couldn’t have Medicare for seniors because it would destroy the private markets. It would destroy the private insurance system and that’s not what happened.” “Replay to today, same arguments again.”

Indeed, at one particularly contentious moment, Sen. Chuck Schumer (D-NY) challenged Sen. Chuck Grassley’s (R-IA) claim that the public option would lead to single payer health care. The exchange flustered Grassley. He admitted that Medicare is part of the “social fabric” of America and praised the competition between traditional Medicare and Medicare Advantage. He could not explain why younger Americans should be afforded the same choice of coverage. Watch it:

According to a Congressional Budget Office analysis of Rockefeller’s amendment — which establishes a plan that reimburses providers at 5% above Medicare rates for the first two years — the public option would save the government an estimated $50 billion. Only eight million Americans would sign-up for the program, leaving the overwhelming majority of Americans to private coverage.

For Grassley, choice is a one-way street: he wants Americans to move from public to private coverage, but would deny Americans in private coverage the right to choose a public plan. Grassley fought to preserve access to Medicare Advantage and argued that Medicaid recipients should be able to enroll in private coverage. A shift from private to public coverage, however, is unacceptable.

During the debate, several senators reminded Grassley that under Rockefeller’s amendment, the public option would be self-sustaining and charge competitive rates after the first two years. “What are we afraid of,” Sen. John Kerry (D-MA) asked, “that Americans would like a plan that pays for itself and provides a good service?” As Schumer pointed out, Republicans are against government health care, but they have introduced numerous amendments to preserve Medicare. “That’s not fair, and it does not add up,” he said.

Rep. Jan Schakowsky: ‘There Will Be A Public Option In The Bill,’ Will Be Added In Conference

“At the end of the day, there will be a public option in the bill,” Rep. Jan Schakowsky (D-IL) told reporters at an early morning briefing hosted by the Democratic Women’s Working Group and attended by The Wonk Room. Schakowsky predicted that the House would pass a public option and integrate the provision into the the final bill during conference. “I see momentum building,” she said.

Schakowsky pointed to a recent poll commissioned by Health Care for America Now of 91 conservative House swing districts — including many Blue Dog and rural ones — “which concluded that the public option has solid majority support among those voters.” According to the poll, “including a public option is essential to implementing an individual mandate. Voters also already prefer the implementation of a public option, and do not see a need for a trigger.” Greg Sargent has the details:

There’s over-whelming opposition to an individual mandate when the only choices are private insur-ance, but there’s net support for a mandate when people have the choice of a public option. And swing district voters are convinced private sector healthcare has failed to make health care affordable, and prefer the public option now rather than waiting on a trigger option.

Schakowsky said that she supported a ‘robust’ public plan that reimbursed providers a set percentage above Medicare rates, but could not guarantee that this reimbursement formula will be preserved in the final bill. According to the Congressional Budget Office, “a public plan based on Medicare rates would save $110 billion over 10 years,” $85 million more than a plan that independently negotiated with providers.

Conservatives argue that Medicare, which pays providers approximately 14 percent lower than private insurers, underpays providers and shifts costs to Americans with private coverage. The bills before Congress would provide bonus payments to primary care doctors and institute payment reforms that will begin rewarding medical providers for the quality of care they deliver rather than quantity.

The Final Battlegrounds For The Public Option

UPDATE: The Finance Committee announced that the public option debate will not take place today. Instead, it is scheduled to occur on Tuesday.

Today, the Senate Finance Committee will consider replacing the health bill’s network of cooperatives with a strong robust public health insurance option. As. Sen. Chuck Schumer (D-NY) explained yesterday, “tomorrow is the opening day in our big fight, but it is going to be a fight that goes down all the way to the wire. And I’d like to make a prediction. The health care bill that is signed into law by the President will have a good, strong, robust public option.”

As Ryan Grim points out, “the Senate and the conference committee between the two chambers” are now “the final battlegrounds for the public option. While several Senate Democrats have said they oppose it, no Senate Democrat has yet said publicly that he or she would oppose any bill that included a public option.” Here is the latest on the debate:

- White House Chief of Staff Rahm Emmanuel doesn’t think the public option can pass the Senate:

ROSE: And it will not have a public option feature? EMANUEL: I’m not — that should be what the conference has to negotiate. But I don think — you know. ROSE: Can it pass with a public option feature? EMANUEL: I think the Senate’s been clear about what — the prospects there. That doesn’t mean in the House that they’re not going to come to the table and demand that…”

- Pelosi may push for a more robust public option in the House:

“Pelosi is planning to include a government-run “public option” in the House version of the healthcare bill. She wants to model it on Medicare, with providers getting reimbursed on a scale pegged to Medicare rates,” the Hill’s Mike Soraghan writes. The original House bill allowed the public option to reimburse providers at five percent above Medicare rates.

- A Medicare-like public option saves the most money:

In a bid to wrangle concessions from the Blue Dog Coalition on healthcare reform, House leaders Thursday released CBO estimates for liberals’ preferred version of the public option that show $85 billion more in savings than for the version the Blue Dogs prefer. Rep. Stephanie Herseth Sandlin (D-S.D.) a Blue Dog co-chair, said any possible new momentum toward a public option tethered to Medicare rates is, in part, ‘because of the cost issue’ and the updated CBO score.

- Blue Dogs don’t consider blocking public option a top priority:

The Blue Dogs have been surveying their membership over the last several days; coalition co-chair Stephanie Herseth Sandlin (D-S.D.) has been collecting the responses. She listed the four top priorities that have emerged: Keeping the cost under $900 billion, not moving at a faster pace than the Senate, getting a 20-year cost estimate from the Congressional Budget Office and addressing regional disparities in Medicare reimbursement rates. So, the Huffington Post asked, the public option is not a top priority? “Right, the group is somewhat split,” she said.

- The public still doesn’t understand the complexities of health reform, but they support the public option:

President Obama is confronting … an electorate confused and anxious about a health care overhaul as he prepares for pivotal battles … according to the latest New York Times/CBS News poll. … The poll found that an intense campaign by Mr. Obama to rally support behind his health care plan — including an address to Congress, a run of television interviews and rallies across the country — appears to have done little to allay concerns. Majorities of respondents said that they were confused about the health care argument and that Mr. Obama had not done a good job in explaining what he was trying to accomplish. … On one of the most contentious issues in the health care debate — whether to establish a government-run health insurance plan as an alternative to private insurers — nearly two-thirds of the country continues to favor the proposal, which is backed by Mr. Obama but has drawn intense fire from most Republicans and some moderate Democrats.”

Pelosi To Allow Public Option To Use Medicare-Like Reimbursement Rates In Final House Bill

The Hill newspaper is reporting that Speaker Nancy Pelosi (D-CA) is scrapping an agreement with Blue Dog Democrats that decoupled the public option from Medicare and required the plan to directly negotiate its reimbursement rates with providers.

“Pelosi is planning to include a government-run “public option” in the House version of the healthcare bill. She wants to model it on Medicare, with providers getting reimbursed on a scale pegged to Medicare rates,” Mike Soraghan writes. The original House bill allowed the public option to reimburse providers at five percent above Medicare rates:

Pelosi’s decision to abandon the agreement that was made with a group of Blue Dogs to get the bill out of committee would steer the healthcare legislation back to the left as she prepares for a floor vote. Pelosi is planning to include a government-run “public option” in the House version of the healthcare bill. She wants to model it on Medicare, with providers getting reimbursed on a scale pegged to Medicare rates….Blue Dog Democrats, many of whom represent rural districts where Medicare reimbursement rates are low, vehemently oppose tying the public option to Medicare.

The compromise initially “drew howls of protest from liberal members” who argued that a small just-established public option would be unable to negotiate lower reimbursement rates without relying on Medicare’s existing size and leverage. By reimbursing providers some percentage above Medicare rates, however, the public option could benefit from Medicare’s ability to negotiate with providers and pass on the savings to consumers, these critics argued.

Indeed, according to the Congressional Budget Office, a public option that reimburses providers at market rates would not lower premiums. In its analysis of the HELP committee bill the CBO concluded that “the public plan would pay providers of health care at rates comparable to privately negotiated rates—and thus was not projected to have premiums lower than those charged by private insurance plans in the exchanges.” As a result, that kind of public option does not “have a substantial effect on the cost or enrollment projections.”

Conversely, the House bill’s original public option “would be about 10 percent cheaper than a typical private plan offered in the exchanges,” the Congressional Budget Office concluded.

During a recent hearing before the Democratic Steering and Policy Committee Forum on Health Insurance Reform, Pelosi insisted that a robust public option would lower private premiums and hold insurers accountable. “[If reform does not include a public option], we will be passing the ‘Private Insurance Profit Perpetuation Act,’” Pelosi said. “We have no intention of doing that…We want the private sector to thrive — we don’t want our members to go into an exchange where they only have one choice, where there’s sole sourcing. But that the public option provides that competition.”

Pelosi Stands By Public Option: We Won’t Pass The ‘Private Insurance Profit Perpetuation Act’

Today, in testimony before the Democratic Steering and Policy Committee Forum on Health Insurance Reform, health care whistle blower Wendell Potter reminded Congress why a public option is essential to reform. If Congress fails to create “a public health insurance option to compete with private insurers, the bill it sends to the President might as well be called, ‘The Insurance Industry Profit Protection And Enhancement Act,’” Potter said.

At the end of the hearing, House Speaker Nancy Pelosi (D-CA) agreed with Potter. “You cited a public option as one way for it to reach its achieve its goal,” she told him. “We will be passing the ‘Private Insurance Profit Perpetuation Act.’ We have no intention of doing that”:

Mr. Potter, you said it well when you said if we do a plan that doesn’t really achieve its goal, and you cited a public option as one way for it to reach its goal, we will be passing the ‘Private Insurance Profit Perpetuation Act.’ We have no intention of doing that. We want the private sector to thrive — we don’t want our members to go into an exchange where they only have one choice, where there’s sole sourcing. But that the public option provides that competition.

Watch it:

Potter has harshly criticized Sen. Max Buacus’ (D-MT) proposed framework for reform, calling the bill “an absolute gift to the industry.”

“A public option must be created to provide true choice to consumers or reform will fail to fix the root of the severe problems that have been caused in large part by the greedy demands of Wall Street. By creating a strong public option and restricting the insurance companies’ ability to enrich executives and investors at the expense of taxpayers and consumers, HR 3200 [the House health bill] will truly benefit Americans,” Potter said in his opening statement. “The Baucus plan, on the other hand, would create a government subsidized monopoly for the purchase of bare bones high deductible policies that would truly benefit big insurance. In other words, insurers would win, your constituents would lose.”