The Incredible Shrinking Public Health Insurance Option

[Time for change]

The story of how our previously promised public health insurance option shrunk from an option that was originally supposed to be offered to ALL Americans, to one in which “less than 5 percent of Americans would sign up”, as our President said in his September 9th address to Congress, is an incredible one. In this post I’ll discuss how that happened, possible reasons why “less than 5 percent of Americans would sign up”, and what it is likely to mean to the American people if we are unable to pressure Congress and our President to expand the public health insurance option to its original form.


A brief recent history of the public health insurance option

The unveiling of the public health insurance option by the major 2008 Democratic Presidential candidates
In February of 2007, with the unveiling of John Edwards’ health plan, Nobel Prize winning economist Paul Krugman wrote an editorial about it, titled “Edwards Gets it Right”. He began by saying that promises of universal health insurance don’t mean much unless accompanied by specific details. He likened rhetoric without details to George Bush’s promises of “compassionate conservatism”. Then he went on to describe the Edwards plan, singling out the public health insurance option (without using those words) as the crucially important and unique aspect of the plan:

People who don't get insurance from their employers wouldn't have to deal individually with insurance companies: they'd purchase insurance through "Health Markets": government-run bodies negotiating with insurance companies on the public's behalf. People would, in effect, be buying insurance from the government…

Why is this such a good idea? … "Health Markets will offer a choice between private insurers and a public insurance plan modeled after Medicare." This would offer a crucial degree of competition. The public insurance plan would almost certainly be cheaper than anything the private sector offers right now – after all, Medicare has very low overhead. Private insurers would either have to match the public plan's low premiums, or lose the competition.

And Mr. Edwards is O.K. with that. Over time the system may evolve toward a single-payer approach if individuals and businesses prefer the public plan. So this is a smart, serious proposal. It addresses both the problem of the uninsured and the waste and inefficiency of our fragmented insurance system.

Then in May of 2007, Barack Obama came out with a similar plan, which Krugman characterized as a “comprehensive health care plan” that had “a lot to commend” it, though he said it was a little weaker than the Edwards plan. This later became the Obama-Biden plan (no longer available on-line), which I described in a 2008 post:

The Obama-Biden plan will create a National Health Insurance Exchange to help individuals purchase new affordable health care options if they are uninsured or want new health insurance. Through the Exchange, any American will have the opportunity to enroll in the new public plan or an approved private plan, and income-based sliding scale tax credits will be provided for people and families who need it.

Then in September, Senator Clinton came out with her plan, which Krugman characterized as almost identical to the Edwards plan. He prophetically summed up the situation as follows:

Even if the Democrats take the White House and expand their Congressional majorities, the insurance and drug lobbies will try to bully them into backing down on their campaign promises…. It’s good to know that whoever gets the Democratic nomination will run on a very good health care plan. What remains is the question of whether he or she will have the determination to turn that plan into reality.

Attack on the public health insurance option
No sooner did President Obama begin to push for his public health insurance option plan than he and his plan were met with a barrage of incredible propaganda and lies, emanating from the private health insurance industry, and distributed by their bought-and-paid-for politicians, along with their incredibly ignorant right wing followers.

The public health insurance option was a plan to provide Americans an alternative choice to their private health insurance plans, or for those who currently lacked health insurance, to provide them with the means to purchase it. In other words, they would be given the option of replacing a private system whose primary purpose was the accumulation of profits with a public one whose primary purpose was to make affordable health care available to all Americans.

But the insurance industry propaganda machine simply turned reality upside down. Instead of a choice, the public option became “government run health care” that would be forced on the American people. Instead of making health care affordable to the American people, the public option became a plan to “ration health care” and kill old people. Somehow the insurance industry propaganda machine successfully caused millions of Americans to forget that private health insurance companies ration health care routinely, even when it means denying coverage to customers who paid premiums to them for years without reaping any benefit. Consequently, the private health insurance industry, their politician-whores, and their crazy right wing ideologue followers ranted and raved about the SOCIALISM, DEATH PANELS, and TYRANNY that would plague our nation if the Obama plan to make health care affordable to the American people ever became a reality.

President Obama’s reaction
One would hope that the lies and propaganda would be met with a full scale effort to counter them. Instead, when President Obama gave his long awaited televised speech to Congress on September 9th, he backed almost completely away from the public health insurance option, while attempting to maintain an aura of continuing to back it:

An additional step we can take to keep insurance companies honest is by making a not-for-profit public option available in the insurance exchange. (Applause.) Now, let me be clear. Let me be clear. It would only be an option for those who don't have insurance. No one would be forced to choose it, and it would not impact those of you who already have insurance. In fact, based on Congressional Budget Office estimates, we believe that less than 5 percent of Americans would sign up.

Gone was the health care plan that candidate Obama offered during his run for the presidency. The plan that was touted as being available to EVERYONE is now available only to those who currently don’t have health insurance. And just as bad, only 5% of the American people are expected to sign up for it.

To sum up what happened: In order to allay the fears of the extreme right wing that a public health insurance option would tyrannize the American people by taking away their choice to have the health care they want, we’re now told that the choice of a public health insurance option will be available to less than 5% of the American people. Wow!


Why are only 5% of Americans expected to sign up for a public option?

Obama did not explain why only 5% of Americans would sign up for the plan. But in order to evaluate what he is offering we would do well to consider why only 5% of Americans would be expected to sign up for this plan that was previously promised to all Americans.

Ineligibility of large numbers of Americans
We know at least part of the reason why so few Americans would sign up for the plan. Obama made it clear in his speech that “It would only be an option for those who don’t have insurance.” But that can’t be the whole reason. There are 46 million Americans who currently have no health insurance. That’s about 15% of the U.S. population. Obama said in his speech that he expects less than 5% to sign up. The difference is 10% of the U.S. population – or 30 million Americans.

Why is it that those 30 million Americans won’t sign up? Could it be that the plan will not be available to many of those people? Will there be restrictions on eligibility in addition to the current possession of private health insurance? Or….

An inferior plan
Common sense tells us that a public health insurance option should be far less expensive and of much better quality (that is, better coverage and less denial of claims) than private for-profit health insurance. Much of the premiums collected by private health insurance companies go towards advertising and marketing costs, lobbying costs, profits for their investors, multimillion dollar salaries for their CEOs, and administrative and legislative costs aimed at enabling them to deny claims. After all that, how much is left to cover the health care claims of their customers? A government health insurance plan would not be burdened by all that. It would therefore have much more money available for health care – which is the purpose of health insurance. So why on earth would less than 15 million Americans out of 46 million who currently have no health insurance choose a private plan over a presumably superior quality public plan?

Well, the fact that government has the potential to offer an inexpensive and high quality plan doesn’t mean that it will. Perhaps the plan that Obama spoke of would be much more expensive and of worse quality than it could be. An analysis by Kip Sullivan of two bills that are currently under consideration in Congress supports that theory:

The “option” in both bills will be a balkanized program…. The “options” in both bills will be administered by private-sector corporations, some or all of which will be insurance companies. The “option” in neither bill resembles Medicare.

What will be the consequences of a public option that covers only 5% of us?

Greater expense and less coverage
Since private health insurance is much more expensive than government health insurance, that means that the shrinking of the public option to 5% will of necessity result in one of three very serious problems, or more likely by a combination of those three problems: Either it will: 1) be far more expensive; 2) cover far fewer people; or 3) cover far less health care for those who have insurance than a plan that contains a strong public option would.

There is no getting around this. It is simple arithmetic. Those who complain about the expense of a public option are woefully ignorant or they are hypocrites. Private health insurance is far more expensive than public insurance needs to be, for reasons I mentioned above.

And let’s be clear about this. The value of a strong public option plan pertains to far more Americans than just those who are currently uninsured. There are many tens of millions of Americans who are under-insured. The bottom line is that, in addition to 46 million Americans who have no health insurance at all, many tens of millions of additional Americans have health insurance that fails to cover them when they most desperately need health care. And lest this is not obvious, consider the following:

Researchers from the California Nurses Association/National Nurses Organizing Committee analyzed data reported by the insurers to the California Department of Managed Care. From 2002 through June 30, 2009, the six insurers rejected 45.7 million claims – 22 percent of all claims.

The end result is that private health insurance is much more expensive and of lower quality than it needs to be. For example, a survey of insured Americans in 2002 demonstrated the following problems in their family due to a family member’s inability to get the health care they needed:

Long term disability: 14%
Significant loss of time at important activities: 21%
Painful temporary disability: 36%
Seriously increased stress: 58%

Subsidizing the private insurance industry
It should be obvious that a public health insurance option that only 5% of Americans sign up for will not provide the competition to the private insurance industry that candidate Obama promised his plan would. And not only would this new plan relieve the private insurance industry of the competition they were threatened with.

In addition, the new plan would mandate that many tens of millions of Americans purchase health insurance from private health insurance companies. Many Americans who purchase private health insurance under this plan would receive subsidies from the U.S. government to do so – in which case our government would be subsidizing the insurance industry at taxpayer expense. That could add greatly to the wealth of the private health insurance industry – which would further increase their power to influence legislation, perhaps resulting in a vicious cycle.


The bottom line

I don’t see how an option that covers only 5% of Americans will be of much help, and as I discussed above, it has the potential to do much harm. Why the need for all this compromise with the private insurance industry, the Republican Party, and crazy right wing ideologues? Why should they be allowed to benefit from all their lies and propaganda? I’ll finish this post with excerpts from a recent editorial in The Nation, which speaks of the folly of trying to appease those who won’t be appeased:

We hope the president, his Congressional allies and millions of Americans will be inspired to honor and do battle for Kennedy's lifelong cause. Surely Obama knows that the Senate's fighting liberal would not have put the fate of the nation's healthcare into the hands of private insurance companies, which increase their quarterly earnings by denying people care. Reform is not possible without a public alternative to the private companies, one based on coverage for all and quality care rather than profit…

Obama often speaks of his desire to get beyond the partisan divide, but what good is bipartisanship at this moment? The Republican Party… does not simply want to criticize or modify Democratic healthcare proposals. It is determined to cripple or kill reform, and with it Obama's presidency… It's high time for Obama to part ways with the Party of No, which has been stoking outlandish fears about government "death panels" and "socialism" …

If the Dems put forth a watered-down "bipartisan" bill with no public option, they will be justly blamed for its inevitable failure – and will see ugly results in the 2010 midterm elections. If, on the other hand, Republicans manage to defeat a good bill, let them try to explain themselves to midterm voters, who will still be at the mercy of Big Insurance and Big Pharma.