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The Battle Begins: The Public Insurance Option

Battle BeginsIn yesterday’s post, we looked at how a public insurance option might work.  This initiative has quickly become the cornerstone of President Obama’s healthcare reform plan.  

Remember:

  • We noted that a healthcare reform bill is very likely to pass this year because:

  • Democrats were able to include procedural language in the recently approved budget legislation that requires an up-or-down vote on healthcare reform by October 15, 2009, if no other bipartisan agreement has been reached by that time.

  • This means that only 50 votes would be needed to approve a reform package in October, and that opponents would not be able to filibuster the legislation.

What’s not so certain is whether the public insurance option will be included in the final reform package- or if it will ever see the light of day.

That’s because critics on both the right and the left are worried about the impact that such an initiative might have.

As we noted yesterday, there are those who believe that the public insurance option is crucial to healthcare reform, and that it has the potential to rein in total spending. 

This Commonwealth Fund report estimates that $3.3 trillion could be trimmed from U.S. healthcare expenditures by 2020, if the public plan option were implemented alongside of several other reforms.  The study’s authors argue that inclusion of a public insurance option is essential to realize the maximum potential savings.

Other vocal supporters of the public plan include former Vermont Governor and physician Howard Dean. After stepping down as chairman of the Democratic National Committee (DNC), Dr. Dean has returned to his post at Democracy for America, the grassroots political organizing group that he founded, to advocate on behalf of the public plan.

He has set up a separate website, StandwithDrDean, specifically to work on this issue.

Last week, Dr. Dean and Justin Rubin, the director of MoveOn.org, held a national conference call to update supporters about the status of the public plan and to encourage folks to take action.

You can listen to the call in its entirety here.

Dean and Rubin say that the public insurance option is essential for insuring the roughly 50 million uninsured Americans.

They outline the major problems with the private insurance market, which is where the uninsured (both employed and unemployed) typically turn to obtain coverage.

  • Many folks are denied coverage on the private insurance market due to pre-existing conditions; and

  • The premiums for private insurance plans are exorbitant, and unaffordable, for many middle-income workers.

Rather than advocate for tighter regulation of the private insurance market, Dr. Dean is pushing for a public insurance option that is modeled after the Medicare program and is available to individuals of all ages, and to small businesses.

He argues that the government can provide insurance more efficiently than private providers due to lower administrative costs.

  • Private administrative costs range from 12.5% to 30% of premiums, depending on the size of the insurance group, whereas government-run insurance programs such as Medicare and Medicaid typically spend just 5% on admin.

  • Between 1997 and 2006, health spending per enrollee (for comparable benefits) grew at 4.6% per year under Medicare, compared with 7.3% per year under private health insurance.

  • The federal government has enormous purchasing power, and the ability to negotiate better deals for medical services and drugs as a result.

Dean and Rubin are careful to stress that folks would continue to have a choice in coverage:  People with private insurance could keep their current plan, or they could choose to buy into the public plan option.   

The public plan would help those who are unable to purchase insurance on the private market.  And the federal government would provide subsidies to the low-income uninsured to help them afford the monthly premiums.  

Most importantly, the public plan would provide real competition for private insurers, who will have to cut overhead and other wasteful spending to remain competitive.  

Tomorrow we’ll see what critics on the right have to say about the public plan.

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