In a panel at ITUP earlier this year, the question was asked of a panel of stakeholder representatives what they thought of a public health coverage option. None of them, including those representing providers, labor, employers, insurers, and consumers, rejected it out-of-hand. Even the California Association of Health Plans acknowledged that had members that were public (largely county-run), and they, and others, said they would want such a public health insurance plan to be on a “level playing field” with the private coverage.
For skeptics, it meant that the public health coverage plan should not have special advantages in competiting with private plans. For proponents of a public health insurance option, like myself, we sought a “level playing field” to ensure that private insurers should have to play by the same rules (not deny people for pre-existing conditions, maintain a similar minimum benefit standard, etc.), and not undermine the public plan. Yet both skeptics and proponents used the term “level playing field.”
This week, UC-Berkeley Professor Jacob Hacker put out a new report called “Healthy Competition”, sponsored by the Institute for America’s Future. He lays out how a public health insurance option could compete fairly with private insurance, still achieve the benefits that proponents seek: to 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 is advantaged 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.
As my colleagues at Health Care for America Now indicate, these rules, while leveling the playing field, would still result in the immense savings and the true choice that Americans need.
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.
The debate will continue…