The Public Health Insurance Option

Debate over a proposed public health insurance option has become the lightening rod in the current debate about health care reform. Last night President Obama made his case for the public health insurance option to the Congress and the nation.

The President’s first point was to tell people who have private insurance that nothing in his proposal forces them or their employers to change their current coverage. The public insurance option, he argued, adds choice and competition to the health insurance system. This is true but it does not address the fear and possibility that companies could choose to reduce or eliminate current health insurance coverage.

The President then offered a new and thought-provoking point about the public option. Look, he said, we have public colleges competing with private colleges and the result is more choice. We know in California that the large and publicly financed UC, CSU and community college systems in California have not put Stanford, USC and other private colleges out of business.

I like the idea of a public health insurance option but I am not sure that it is essential in 2009 and or that a trigger approach isn’t a viable compromise.

But I do think there are additional arguments for a public insurance option that the President only hinted at last night.

First, I think there is a point of clarification that most everyone knows but which rarely gets said out loud. We are talking about a public health insurance option, not public health care provision. In the case of public colleges or the Post Office, the payment is publicly funded but the delivery is also done by public employees. It is public funding and public delivery.

In the health care reform debate, no change is proposed in who delivers the care. The same doctors, nurses and hospitals will deliver care with or without a public health insurance option. It is another insurance choice but not a change in who delivers care.

The Post Office is a more interesting case for thinking about a public health insurance option. The Post Office is heavily subsidized although we are trying to make it pay for itself. No one can argue that the Post Office competition has prevented FedEx or UPS from thriving. As the President said if the public health insurance plan can’t compete well, it will simply die or shrink as the Post Office is doing—although that is affected by the drop in demand for paper transmittals.

The key point about choice that is not said often enough is that the choice of employer based health insurance coverage is diminishing and likely to fall further. And the cost to employers of their company plans is increasing much faster than their wages.

That makes the choice of the status quo not a choice at all. It is there now and uncertain for tomorrow. So this is an especially good time to add a new choice and to focus the spotlight on decreasing health care costs, which I think involves changes in medical practice in some cases and changes in how the fee for service system affects care incentives.

Since 2000 the nation’s population has increased by 25 million and the number of people covered by employer-based insurance plans has increased by—zero. In fact in 2008 the number of people covered by their employer dropped by 1 million and that figure will surely be higher in 2009, 2010 and 2011.

As a people we have a tendency to imagine problems away or think they can be solved without any change in behavior. We think up all sorts of reasons not to deal with public deficits or the impending Medicare funding crisis. And in this case we are on the verge of thinking that the status quo in employer-based health insurance and costs can continue. It can’t so we need to make our choices with that reality in mind.

And, as the President said, our economy and public budgets feel the strain of high and rising health care costs.

I wish there were more attention to rising costs and more attention to being real about how health care insurance reform will be paid for. I am not satisfied with the President’s answers but I am not satisfied with anyone’s answers in Congress at this point.

But, as the President argued, that part of health care reform that involves improving choice and competition through a public insurance option has a sound foundation and should force us to be real about adding it to an employer-based insurance system under great pressure and unlikely to survive without the pressure to change.