The Public Plan: A Discussion

Several scholars discuss and debate the pros and cons of a public plan option at The American Prospect.   Here is a brief excerpt:

In "The Perils of the Public Plan," Paul Starr warns that a public-insurance option could turn into exactly the opposite of what progressives want. Here he discusses the problems with the Prospect's two other co-founders, Robert Kuttner and Robert Reich.

Paul Starr:
The far bigger question is how those exchanges work:

Are they open to all employers and individuals -- required, in fact, for employers below a given size -- or open only to the individual and small-group market?

Do the exchanges have the power to risk-adjust the premiums paid to health plans?

Can they regulate the marketing strategies and benefit designs of private insurers?

The public plan will likely end up as a dumping ground for high-cost, mostly low-income people if the exchanges are open only to the individual and small-group market and have inadequate power to risk-adjust premiums or to regulate private insurers' marketing and benefit design. In other words, we could get a public plan that instead of "disciplining" private insurers, as the president said last week, actually buttresses their dominance of the system. Watch what you wish for.

Robert Kuttner:
The public option, as it is evolving, is even more dubious than Paul Starr's apt critique suggests. Under the House leadership bill, people who have coverage through their employers are ineligible. So the proposed, head-to-head competition between the public plan and private competitors is left to employers, not individuals.

What's distressing is that progressives have put all their eggs in this leaky basket. It's clear that Jacob Hacker's original inspiration -- that over time the superior efficiencies of a true public plan would crowd out private alternatives -- is being undermined by the politics of compromise. Even Sen. Max Baucus, not exactly a lefty, remarked the other day that he wished that single-payer hadn't been taken off the table, if only for tactical reasons.

In public opinion polls and in liberal advocacy, the badly flawed public option has become a kind of proxy for what most Americans really want -- national health insurance. . . .

Robert Reich:
Paul Starr worries that the public plan would end up a dumping ground for the sicker and more expensive. If that were the likely outcome, private insurers, the pharmaceutical lobby, and the American Medical Association would be all in favor of it. But they're apoplectic about a public option because they fear exactly the opposite, which also seems to me more likely: By virtue of its scale and scope, a public plan would have the bargaining power to get lower drug prices and better deals with health providers, thereby eating into their profits. And they worry that the lower administrative costs of a public plan that doesn't have to show a profit, or spend on marketing and advertising, will further erode their margins. Of course we need to pay attention to the precise organization of the risk exchanges, but that's mainly to make sure the public plan is allowed to exert full competitive pressure on the private plans. . .      .