What does the “public” in “public option” really mean?

16 Jul 2009 By 8 Comments

What does the “public” in “public option” really mean?

A carefully constructed “public option” to private insurance would provide an antidote to the market consolidation that has propelled premium increases and administrative inefficiencies, shrunk coverage and degraded quality. However, it can only succeed if it:

  • Provides all Americans access to the largest risk pool possible. Universal access to Medicare provides the best option.
  • Includes new regulation of private insurers to level the playing field with the new public option–namely guaranteed issue, community rating, and a guaranteed base benefit.

The option to join Medicare, regardless of age, would be beneficial to Americans because by almost every measure, Medicare is cheaper and more effective than private plans, according to government and academic research. For example, Medicare spends 2% of revenue on overhead; private insurers typically spend 25% to 27% for overhead and profit.

Medicare also comes with established relationships with health care providers which, though undercut by low reimbursement rates and a prescription drug program hamstrung by drug manufacturers, provide a solid base for expansion. Competition with a low-overhead health insurance alternative provided by Medicare will force private insurers to prove that they can be cost-effective while offering similarly comprehensive coverage. Leveling the playing field between private insurers and the public option by requiring all players to guarantee access at a fair price would significantly reduce costs and increase access to health care.

So that ability to bargain — which is why Medicare Part D is ridiculous, because there’s no bargaining allowed — is the critical factor. And it should be noted, in case you weren’t sure, that under the current proposal you could still keep your private health insurance if you wanted to. While I personally think it wouldn’t be a bad thing for health insurance companies to go away entirely, this plan wouldn’t result in that.

I, for one, think it would be a good thing to take the burden responsibility for health care off of companies. You know how you get that “total compensation” report every year and it’s always way more than your actual salary? A big chunk of that is your health insurance. Wouldn’t you rather have that money in your pocket, even if it went back out the door to pay the government for your health care instead (I’m okay with that, too)?

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Bonus Link: Wikipedia – Health care reform in the United States

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  • jacksmith

    THIS IS IT!

    The healthcare reform bill released by the House Of Representatives is an excellent bill as I understand it. It’s a bill with a strong, robust, government-run public option, and an intelligent, reasonable initial funding plan to cover almost all of the American people. It is carefully written, and thoughtfully constructed, informed, prudent and wise. This bill will save trillions of dollars, and millions of your lives.

    This is the type of bill that all Americans can feel good about. And this is the type of bill that has the potential to dramatically improve the quality of healthcare for all Americans. Rich, middle class and poor a like. Democrats, Republicans, Independents, and all other party affiliations. This bill has the potential to dramatically improve the quality of life of every American.

    The house healthcare bill should be viewed as the minimum GOLD STANDARD by which all other proposed healthcare legislation should be judged. All supporters of true high quality healthcare reform should now place all your support behind this healthcare reform bill released by the United States House Of Representatives, as the minimum Gold standard for healthcare reform in America.

    You should all now support this bill with all your might, and all of your unrelenting tenacity. This healthcare bill is a VERY, VERY GOOD! bill for all of the American people. Fight tooth, and nail for every bit of this bill if you have too. Be aggressive, creative, and relentless for this bill.

    From this time forward, go BIGGER and DEEPER with the American people every day until passage of healthcare reform with a robust, government-run public option.

    FIGHT!! like your life and the lives of your loved ones depends on it. BECAUSE IT DOES!

    SPREAD THE WORD

    (http://www.youtube.com/watch?v=RSM8t_cLZgk&feature=player_embedded)

    God Bless You

    Jack Smith — Working Class

  • http://swirlspice.com Erica

    That was kind of spam, but okay.

  • http://connermccall.com Connner

    I reread the comment that Medicare only spends 2% of revenue on overhead several times. I can’t believe that but if multiple sources say so I guess it must be true. I deal with Medicare often at work and they are by far my least favorite insurer to call. You always wait on hold, and you almost always get directed to another number to get your question answered.
    A public option would be great and if it’s cheaper than private insurers that’s fine, it will force them to compete on some level other than being the first to exclude a form of treatment, instead they will have to compete in the customer service arena.

  • http://swirlspice.com Erica

    That 2% number seems incredible, but I absolutely believe whatever that number is it’s lower than private insurers.

    Another distinction that should be made clear is that health care providers will still be available as they were before. You should actually have more options than you do now because, all service providers should accept public health insurance whereas not all service providers currently accept all private health insurance.

    I’m not generally one to blow the “let the free market take care of it” horn — not that this is a free market solution — but I don’t see how requiring competition can be a bad thing.

  • http://pithytitle.blogspot.com Kat

    I wonder if the 2% came to be because of the fact that Medicare contracts out its claims process to other insurance companies. Sure, it pays the contractors, but then it’s up to the contractors to worry about silly things like IT, supplies, payroll, benefits, facilities maintenance, etc. Claims submissions, Appeals, etc., all fall to the contractor (I used to work for a Medicare contractor, taking calls from providers’ offices, explaining why their claims were denied, giving advice on how they can fill out the form to maximize the possibility of a claim being approved, etc.). In essence, what I imagine would be the most laborious part of the claims process isn’t handled by Medicare employees at Federally-controlled buildings anyway. And believe me, the pay and benefits offered by the contractor for whom I worked came nowhere near that of a Federal employee.

    So, I am completely unsurprised by the 2% figure.

  • http://swirlspice.com Erica

    Wow, that’s a really important and valuable point, Kat.

  • http://None Molly Smith

    From the internet …. in response to the promotional statement about Medicare coming in with a 2% overhead cost.

    Government health-care entitlements invariably cost more than promised. That’s buttressed by a recent commentary in the July 30 and 31 (2009) editions of Investors Business Daily by former Rep. Tim Penny (D-MN) and Sen. Rudy Boschwitz (R-MN), “Gov’t-Run Care Is A Study In Soaring Costs.”
    They note that Medicare costs 10.7 times as much today as its sponsors predicted it would, and more than 85 times as much as when the Medicare entitlement was first created.
    State universal-health-care mandates, such as in Massachusetts, have invariably ended up covering fewer uninsured people, at a far higher cost, than their sponsors predicted.

  • James Roberts

    This health care will destroy the U.S. economy, which seems to be the goal of everyone but people who actually work for their money. The U.S. already has 3 health care systems, incase everyone has forgotten. Hell just ask the illegal imigrants, they are packed in every ER on the U.S. southern border. Any person can be seen and treated in an ER, anyone! Revolution is the only answer to cleaning up this country. If there is no revolution then there is no U.S. The government has sold the working class down the river with a slap in our faces and spit in the eyes. What do you health care fanatics think is going to happen. A democratic system will only last about 200 years before the corruption kills the system and its people. Then a revolution happens and blue collar people get into office and things start all over again. Can you actually say you trust your government. The down fall of the United States will be the direct cause of weak, Godless leadership.