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HEALTH REFORM: Moving Past the Impasse on the Public Plan

The issue of whether to include a public plan option as part of a reformed American health care system has already become quite polarizing. In hopes of avoiding an impasse and instead fostering a broad discussion of how to move ahead, John Bertko and I have written a paper outlining a way of structuring such a public plan that may help lead us to compromise and consensus. Here's the executive summary, and you can read the whole paper here and a brief summary here. We'll have more to say on this topic soon.

Many comprehensive reform proposals reflect the fundamental need to control health care costs and create a marketplace wherein insurers compete on value and customer satisfaction, rather than risk selection and marketing. Several leading proposals promote competition between private health plans and a "public" health insurance option. Unfortunately, the debate over this issue has become polarized unnecessarily.

It is possible to structure a new insurance marketplace so that public and private health plans compete on a level playing field. This will require separating the oversight of the public plan from that of the managers of the marketplace or exchange(s). It will also require that all rules of the marketplace-benefit package requirements, insurance regulations, and risk adjustment processes-apply to all plans equally, whether public or private. Finally, this model requires that we address cost growth containment systemically and avoid relying heavily on the public plan's potential market power. In turn, this will require a commitment on the part of policymakers to acquire a health information infrastructure, develop best practice information, and encourage re-aligned incentives that promote high-quality, efficient care for all.

Moving Past The Answer on the Public Plan

"Finally, this model requires that we address cost growth containment systemically and avoid relying heavily on the public plan's potential market power."

I'm confused. Is your goal to prop up the failing private health insurance industry (like Chrysler: only able to offer consumers overpriced, poor quality products) OR to make sure every American has quality, affordable health care? If it's the latter, then why on earth would you suggest we "avoid relying heavily on the public plan's potential marketing power?" That is the POINT of reform - that is the REASON for the public plan.

You appear to want to keep prices for drugs, procedures, tests, etc. (and, by extension, premiums and co-pays) artificially high. This is, I suppose, a strategy to keep the insurance industry lobbyists at bay and away from weak-willed, drug-money-dependent politicians (which would likely fail, as all such strategies have done in the past). Heck, why not just triple every insurance company CEO's annual bonus and be done with it?

If a public plan makes any sense at all, then it will - by definition - be cheaper and better than the private insurance industry, and that industry will go the way of horse-and-buggy manufacturers of yesteryear. Personally, I have never been ever to figure out what value the insurance industry adds to my health care dollars anyway (unless it's "protection" value, like pay-offs to the mob to keep them from busting-in your storefront.)

If you - like so many other so-called "health care reformers" - fear the might of that industry so much, and have such little faith in the officials you helped elect, then perhaps it might be wise to move on to another campaign.


"In addition, there is widespread agreement that the main
source of health care cost growth in the long run is not
provider price inflation, but rather inappropriate use of new

Is there wide agreement? I am seeing more frequently that it is the high prices we pay in US relative to elsewhere. See Oberlander's most recent Annals of IM piece (online: early posting), as well as Uwe Reinhardt's recent postings in NYT's Economix. Would you respond?

A Competitively "Fair" Public Plan Option Won't Help

Expanding on the first comment above, the proposal by Len Nichols and John Bertko to level the playing field for a public plan option to compete with various insurance plan options may indeed be "fair" to the insurance companies. But it largely neutralize the potential to take out significant costs in the current system.

One of the advantages of the single payer proposal is the potential ability (supported by numerous studies by Lewin and others) to drastically reduce the administrative overhead associated with annual elections, marketing, insurance company profits, and large provider administrative departments having to deal with the thousands of variations of negotiated fee schedules, precertification rules, plan designs, and carriers themselves.

Further, the single payer approach allows for more easily changing the provider payment arrangements en masse to incent more efficient care and to better set community budgets and investments in facilities and equipment. A public option as only one along side of many others, limits its ability to reduce nonvalue-added costs and high annual cost trends. There would still be a lot of duplicated effort, such as data collection and identification of best practices. Ideally, all should share and benefit from experience gained on what works, but it a competitive market health care system, much of this valuable information will be hoarded as proprietary.

Further, the current system has shown no ability to control excessive utilization and reduce the wide variation across the country in practice patterns (with no correlation to outcomes).

Finally, the competitive market system focuses on competition among plans, as opposed to among providers. Most providers are in multiple plans, or in many geographic areas only one or two carriers (e.g., Blue Cross) rule the situation.

From a practical standpoint of getting Republicans even to vote for a reform bill, some of the recommendations put forth may be necessary, but we need to allow enough latitude to allow the public plan option to show its strengths. Perhaps this could be accomplished by allowing states to override the federal program with a state-based single payer public program.

Is there already a model for a public plan that holds promise?

Good news! We need not search far for a model "public plan" proposal built around expansion of an employee insurance pool – the “latest” proposition that seems quite promising.

In Connecticut, HB6600, or "SustiNet," just got a favorable report from the state legislature's Public Health Committee and is gaining momentum. SustiNet ensures that the state wisely uses the dollars it is already spending on state employees, HUSKY (for low-income children) and SAGA by uniting them into a large self-insured health plan. It uses this critical mass of insured residents to improve how health care is delivered in our state and to phase in the enrollment of more residents of Connecticut, including: the uninsured; people with unaffordable or inadequate insurance; sole proprietors and other self-employed people; small businesses, municipalities, and non-profit employers; and businesses of any size.

SustiNet was developed with extensive input from all health care stakeholders and with the expertise of Stan Dorn of the Urban Institute and Jonathan Gruber of MIT. They estimate that, when fully operational, SustiNet could save Connectictuy employers and employees some $1.7 billion/years (over the status-quo expenditures). It has the support of, among others: the Connecticut Realtor’s Association; the Connecticut State Medical Society; the Connecticut Public Health Association; and Small Businesses for Health Care Reform.

For more information about the bill, you can go to: