Health Care Reform: The Public Option

This is another installment in our continuing series examining H.R. 3200, the actual bill -- or "primary source" for what is really being proposed -- pending in Congress. Other installments addressed "Health Insurance Lies,"... "Preexisting Conditions," ... and "Essential Benefits."

The "public option" that dominates the news these days arises principally from Sections 221-224 of the bill. These would created a "public option," or government-administered health insurance plan, to compete with private plans in an "insurance exchange" marketplace. Essentially, under the bill nearly everyone in America could keep what they have or take advantage of the added choice, once a year, of buying health insurance from a government-administered insurance plan similar to Medicare, V.A. benefits, or a private plan.

As we have been repeatedly emphasizing, you should read the entire bill so you can think for yourself. If you do, you won't be dependent on intermediaries who may have a hidden agenda or other biases. And, you shouldn't feel the need to act like the impotent, deeply disturbed people who attend town hall meetings armed with guns, knives, and automatic weapons.

Yes, it's a long bill. But, no, anyone with a brain can understand it if they apply themselves.

The "public option" portion of the bill essentially creates a "health insurance exchange" in which both private plans and public plans would compete. It would work not unlike the way we, here in Florida, buy home owner's insurance against the possibility of flood or wind damage.

The bill in pertinent part provides:

Section 221. *** Public Health Insurance Option.

(a) Establishment- For years beginning with Y1, the Secretary of Health and Human Services (in this subtitle referred to as the `Secretary') shall provide for the offering of an Exchange-participating health benefits plan (in this division referred to as the `public health insurance option') that ensures choice, competition, and stability of affordable, high quality coverage throughout the United States in accordance with this subtitle. In designing the option, the Secretary's primary responsibility is to create a low-cost plan without compromising quality or access to care.
* * *
(b) Offering as an Exchange-participating Health Benefits Plan - (1) EXCLUSIVE TO THE EXCHANGE- The public health insurance option shall only be made available through the Health Insurance Exchange.
(2) ENSURING A LEVEL PLAYING FIELD- Consistent with this subtitle, the public health insurance option shall comply with requirements that are applicable under this title to an Exchange-participating [private insurance company] health benefits plan, including requirements related to benefits, benefit levels, provider networks, notices, consumer protections, and cost sharing.
(3) PROVISION OF BENEFIT LEVELS - The public health insurance option--

(A) shall offer basic, enhanced, and premium plans; and
(B) may offer premium-plus plans.

(c) Administrative Contracting - The Secretary may enter into contracts for the purpose of performing administrative functions (including functions described in subsection (a)(4) of section 1874A of the Social Security Act) with respect to the public health insurance option in the same manner as the Secretary may enter into contracts under subsection (a)(1) of such section. The Secretary has the same authority with respect to the public health insurance option as the Secretary has under subsections (a)(1) and (b) of section 1874A of the Social Security Act with respect to title XVIII of such Act. Contracts under this subsection shall not involve the transfer of insurance risk to such entity.
* * *
SEC. 222. PREMIUMS AND FINANCING.

(a) Establishment of Premiums - (1) IN GENERAL- The Secretary shall establish geographically-adjusted premium rates for the public health insurance option in a manner--
(A) that complies with the premium rules established by the Commissioner under section 113 for Exchange-participating health benefit plans; and
(B) at a level sufficient to fully finance the costs of--
(i) health benefits provided by the public health insurance option; and
(ii) administrative costs related to operating the public health insurance option.
* * *
(2) START-UP FUNDING-
(A) IN GENERAL- In order to provide for the establishment of the public health insurance option there is hereby appropriated to the Secretary, out of any funds in the Treasury not otherwise appropriated, $2,000,000,000. In order to provide for initial claims reserves before the collection of premiums, there is hereby appropriated to the Secretary, out of any funds in the Treasury not otherwise appropriated, such sums as necessary to cover 90 days worth of claims reserves based on projected enrollment.
* * *
SEC. 223. PAYMENT RATES FOR ITEMS AND SERVICES.
(a) Rates Established by Secretary-

(1) IN GENERAL- The Secretary shall establish payment rates for the public health insurance option for services and health care providers consistent with this section and may change such payment rates in accordance with section 224.
(2) INITIAL PAYMENT RULES-
(A) IN GENERAL- Except as provided in subparagraph (B) and subsection (b)(1), during Y1, Y2, and Y3, the Secretary shall base the payment rates under this section for services and providers described in paragraph (1) on the payment rates for similar services and providers under parts A and B of Medicare.

SEC. 224. MODERNIZED PAYMENT INITIATIVES AND DELIVERY SYSTEM REFORM.
(a) In General- For plan years beginning with Y1, the Secretary may utilize innovative payment mechanisms and policies to determine payments for items and services under the public health insurance option. The payment mechanisms and policies under this section may include patient-centered medical home and other care management payments, accountable care organizations, value-based purchasing, bundling of services, differential payment rates, performance or utilization based payments, partial capitation, and direct contracting with providers.
(b) Requirements for Innovative Payments- The Secretary shall design and implement the payment mechanisms and policies under this section in a manner that--

(1) seeks to--
(A) improve health outcomes;
(B) reduce health disparities (including racial, ethnic, and other disparities);
(C) provide efficent and affordable care;
(D) address geographic variation in the provision of health services; or
(E) prevent or manage chronic illness; and
(2) promotes care that is integrated, patient-centered, quality, and efficient.

There is more, particularly about how the "exchange," or health insurance market, would work. For now, we will defer to a later day analysis of the "insurance exchange" portion of the bill.

It is sufficient to say that the bill guarantees almost every individual the choice of what (if anything) they have now, or a "basic" and "affordable" health insurance plan purchased through the "exchange". (Sec. 241 et seq.) Contrary to right-wing disinformation, illegal aliens explicitly are not eligible to participate. (Sec. 242) Medicaid-eligible poor people will be retained in that program, as before. (Sec. 241 [b][3]). And, individuals can always keep any insurance they have, rather than switch.

The careful reader will notice frequent reference to, and application of, Medicare standards in H.R. 3200 and associated sections of the bill. Essentially, the "public option," in practice, is intended to produce a health insurance policy that will work much as Medicare does, although with more room for private insurance companies to offer policies with other benefits so long as they meet minimum requirements and do not defraud purchasers.

Our Broken Health Care System

A fundamental premise underlying the "public option" section, and indeed all of section H.R. 3200, is that the private health insurance market in the United States is broken. Private, individual health insurance policies are affordable only to the richest, healthiest, and youngest among us. The for-profit health insurance corporations reject the sick, those unlucky enough to have the wrong genetic family history, and the unemployed. And, it cruelly limits benefits to the rest, just when they need them the most.

As the Center on Budget and Policy Priorities points out, "The percentage of Americans [under 65] with private health insurance declined to 67.7 percent in 2005, marking a pattern of erosion for the past several years." But -- get this -- only 9.1 percent of that number are covered by individually-purchased private health insurance policies. The vast majority are insured through group policies made available as a job benefit.

Of these, the great majority of group insurance members are employees of federal, state, and local governments. (Just like your senators and congressmen). If current trends continue, they may be the only ones left with group policies. Everyone else, except a sliver of the richest among us, will go uninsured or be dependent on existing programs for the elderly or poor.

As a neurosugeons' web site explains, the history behind tying health insurance to employment has nothing much to do with logic. It is largely the accidental product of history:

Wartime (1939-1945) wage freezes imposed by the government actually accelerated the spread of group health care. Unable by law to attract workers by paying more, employers instead improved their benefit packages, adding health care.

Times and circumstances have dramatically changed. As of 2006, 47 million Americans had no health insurance at all. This is nearly 16% of the total population. Today, after the meteoric rise in unemployment, those numbers undoubtedly are growing much worse.

Current "Public Option" Programs

On the other hand, we know the "public option" does work. In Canada and Britain, contrary to the disinformation from the lunatic fringe, it works extremely well. Even the Brits, from across the water, are getting fighting mad about how badly right-wingers have been misrepresenting their National Health Service. Just this morning, NPR covered the story and quoted British Conservative Party leader David Cameron as saying:

The fact is that in this country you can go to a hospital, you can go to a family physician, and they don't ask you how much money is in your bank account or who you are -- I think we've got the right system and we should build on it.

Of course, in Great Britain, conservative party politicians are grounded in reality, unlike the U.S. where prominent conservative voices have slipped into dementia.

But you don't have to move to Great Britain to enjoy the benefits of a "public option." Right here in the U.S., some 36 million Americans receive Medicare, a government-administered "public option" program for those sixty-five and over. Furthermore, about twenty-five million Americans are eligible for Veterans Administration benefits. And, approximately 53 million receive some level of Medicaid benefits, a program designed to provide the poor with a minimum acceptable level of medical care.

While there is some overlap among the population subgroups of elderly, veterans, and Medicaid recipients, a very substantial part of the general population that has some sort of access to health care gets their medical care via government-sponsored programs.

We were reminded of this just the other day when we overheard a conversation with a very well-off, conservative Republican acquaintance of ours who lives right here in Northwest Florida. He mentioned to a fellow golf club member that he wouldn't be able to play in some prearranged outing this week because he had to oversee the transfer of his 80-something mother-in-law from his home, where she has been living, to a nursing home.

"She's been approved for Medicaid," he added. "Now we don't have to keep her in the house."

So, you see, even wealthier Americans turn for help to Medicaid when their parents or other relatives need long term medical care that would otherwise be ruinously expensive. In fact, nearly half the total U.S. population already participates to one extent or another in a "public option" government-sponsored medical care program. They're so popular that many of the deeply disturbed "town hall" cranks keep shouting "keep your hands off my Medicare."

Experts expect the number of Medicare, Medicaid, and V.A. beneficiaries will continue to rise in the coming decades. They also expect health cost increases to continue outstripping inflation. If so, unless we enact some form of "public option" insurance with, say Medicare's ability to bargain for more reasonable rates, just about the only Americans who will be left with private health insurance will be those lucky enough to work for employers who voluntarily offer insurance coverage as a job benefit (a fast-disappearing group), and the wealthiest one or two percent of all Americans.

Beach Analogy

To analogize to something familiar to Pensacola Beach residents, today it is as if the whole nation were headed for a property insurance system where there is no FEMA, no Citizens Property Insurance, and where only home owners who live on Colorado mountain tops can afford flood and wind insurance. Everyone else is being priced out of the market.

The analogy isn't perfect, of course, but it's instructive. Citizens Property Insurance and FEMA are the equivalent of what, in the health insurance field, is known as a "public option"system of insurance. In other words, each is a government-administered program that spreads the cost of a vitally needed service across the whole population so as to fill the hole left by a broken private market system.

We essentially do this, now, when we create public police departments, fire departments, public water and sewer services, federal, state, and local highway building programs, public libraries, military defense programs, port customs inspections, airport construction, and a vast array of other other critically-needed goods and services which the private enterprise system cannot, or will not, fulfill at an affordable price.

In Florida, we also do it to insure against catastrophic hurricane disasters to our property. Odd, isn't it, that without much quarrel about 'socialism' and other ideologies, we take such steps to guarantee injured property will be fixed -- but not injured or ill people?