Some worried questions about the public option “compromise”

We don’t yet know much about what’s in the compromise the Senate 10 has come up with.

But what I’m hearing does not leave me enthused. Rather it leaves me worried.

First, the idea of national non-profits vetted by the office of personal management leaves me cold. There is little reason to think that these non-profits will provide the same kind of competition that the public option would. The fact is that non-profits today, such as the Independence Blue Cross rack up huge and actuarially unnecessary surpluses that are as substantial as the profits of the for-profit insurance companies. They pay their officers salaries that are almost as high as those of for-profits. They offer very little to the public in the form of contributions to the common good. And, if the Pennsylvania Blues are an indication, these contributions tend to go to the districts of powerful legislators and in support of other powerful people. And they pay reimbursement rates to Doctors that are far higher than Medicae.

A public health insurance plan, on the other hand, will have no profits or huge surpluses, pay lower salaries, and—as I’ve argued before—were likely to pay reimbursement rates close to Medicare rates.

Second, allowing people 55-66 to buy into Medicare sounds good. It’s what some single payer supporters, like Marcia Angell, were recommending a few weeks ago. And the single payer group I met with tonight loved the idea because to them Medicare expansion means a step toward single payer.

But while the atmospherics are good, the details are worrisome. Allowing people 55-65 to buy into Medicare will do nothing to cover their families. Non-working spouses and children will have to get insurance elsewhere. But one of the ways in which insurance for kids is kept low is to have family plans. And leaving aside the non-profits I discussed above, there will be no public option for non-working spouses and kids.

In addition, the Medicare buy-in will only cover the oldest and thus least healthy people not covered by Medicare. So it’s not clear that the Medicare buy-in will be cheaper than private insurance even though Medicare reimbursement rates are lower than that of private insurance. For the private plans in the Exchange will insure a wider age range and thus a healthier population. And under the Exchange, there is a limit on price differentials based on age. We will have to see how this all works out but, at the moment, it’s not obvious that the Medicare buy-in will have the same competitive effect as a public option.

One good thing about the Medicare buy-in is that it would go into effect before the Exchange is set up. However there will be no subidies until the Exchange is created, which would make insurance expensive.

I’ll revisit this when we find out the details. But right now, I think we’ve taken a step back. And I hope we can fix this in conference.