Conrad's state-based co-ops idea was once seen as the great “compromise” for health care reform and the public option issue. It is an idea which never really picked up broad support, and recently seems to be on the outs. The latest CBO report on the Baucus bill might just be the nail in the coffin for Conrad's co-ops:
The proposed co-ops had very little effect on the estimates of total enrollment in the exchanges or federal costs because, as they are described in the specifications, they seem unlikely to establish a significant market presence in many areas of the country or to noticeably affect federal subsidy payments. As a result, CBO estimates that of the $6 billion in federal funds that would be made available, about $3 billion would be spent over the 2010–2019 period.
Now that is some harsh analysis. Conrad has a history of ignoring the CBO when they disagree with him about his co-ops idea, but this is still really brutal.
The CBO predicts that only $3 billion of the $6 billion, set aside as seed money for people/groups trying to set up health insurance co-ops would be spent. To translate, the CBO thinks the co-ops are such a bad idea that there aren't enough people out there willing to take free money from the government to try to set them up. I hope this CBO report finally takes the silly co-ops idea off the table once and for all.
A few days ago, I wrote that the CBO screwed up Ron Wyden's amendment by failing to fully score it, after telling Wyden that they had. As a result, Max Baucus wouldn't let it come up for a vote on the Senate Finance Committee. Wyden is now threatening to vote against the entire bill, which could keep the Senate Finance Committee from reporting one.
So what actually happened?
FDL has obtained the two CBO letters that were sent to Wyden, one on September 22 (PDF) and another on September 29 (PDF), which indicate that Baucus was not correct when he told Wyden that the amendment had not been scored. It had. There was a "proposal variant," as the CBO calls it in the September 29 letter, that they indicated they could not score. But that wasn't the amendment Wyden submitted, which was supposed to be voted on that night.
Here's what happened:
Sept 16: Baucus introduces his America's Health Future Act. Wyden submits his “free choice” amendment shortly thereafter, something he had be working on for several months.
Sept 22: The CBO sends Wyden an email, saying they have fully scored amendment. As had been previously reported, they score the amendment as saving $1 billion:
From [deleted] cbo.gov] Sent: Tuesday, September 22, 2009 9:03 AM To: [deleted] (Wyden) Cc: Sandy Davis Subject: free choice amendment
[deleted]
Below is our analysis of amendment #C1. As I mentioned, we modeled this as giving all employers access to the exchange starting in 2015 The savings were a little smaller than Ihad anticipated but it is still a net saver.
Wyden # C1
Relative to the Chairman’s mark, the amendment as modeled would reduce the net impact on federal deficits by about $1 billion over 10 years. There would not be substantial effects on the total number of people with insurance coverage or the sources of that coverage, relative to the Chairman’s mark.
According to sources familiar with the exchanges between Wyden and Baucus, an attempt was then made to create a modified compromise version of the amendment which could have a better chance of passing the committee, and it was submitted to the CBO.
September 29: The CBO sent a another letter to Wyden. They indicated they were unable to fully analyze this new modified version of the amendment, which they called the "free -choice proposal variant":
From [deleted] Sent: Tuesday, September 29, 2009 4:22 AM To: [deleted] Cc: [deleted] Subject: Wyden free choice proposal variant
Unfortunately we will not be able to estimate the impact of the full-blown version of this proposal -- involving vouchers -- in the near term. The complexities of working out how the voucher amounts would be determined, who would keep the savings, the tax treatment of those savings, the potential for favorable or adverse selection -- and how individuals and firms would resopnd to the resulting incentives -- would take some time to work out.
As we indicated to Senator Wyden's staff, amendment # C as drafted -- which involved setting up combined reinsurance pools for employer plans and exchange plans -- seemed most similar to us to allowing firms to purchase coverage through the exchange; that is, to let all of their workers choose among the exchange plans. Thus, we modeled the effect as allowing all firms to do so starting in 2015 (which is sooner than under the mark). We assumed that there would be resulting reductions in tax-preferred health care spending that would be translated into taxable wages as a result of market forces -- without involving specific provisions for vouchers -- and that effect was factored into the $1 billion reduction in net federal costs that CBO and JCT estimated for the amendment.
So Wyden never introduced the "variant."
October 2: Shortly after midnight, Wyden introduces his original, fully scored version of the amendment -- not the modified version which the CBO had not analyzed. Baucus let Wyden bring it up as the last amendment on the last day of mark up. Debate started at approx. 1:00 am. Roughly half an hour into it, Baucus surprised Wyden by declaring that he would rule it out of order (there would not be a vote on the amendment):
BAUCUS: Now, the fact is CBO has not scored this amendment. CBO has not analyzed this amendment. I justs checked a few minutes ago with CBO.
A late night text message sent to Kent Conrad by someone at the CBO supposedly backed up Baucus's claim.
According to sources familiar with what transpired, the CBO never withdrew its score for the Wyden amendment before Wyden introduced it. They confirmed this to Wyden the next day.
The big issue is that Baucus blindsided Sen. Wyden at 1:45 in the morning on the very last day of mark up. For reasons of protocol and simple good manners, Chairman Baucus had the duty to inform Wyden that he would be ruling his amendment out of order before doing it publicly at 1:45 am. Given the proper warning, Wyden would have had the chance to confirm with CBO director Elmendorf that his amendment was fully scored and should not be ruled out of order. Wyden did try to argue that he was indeed correct, but to no avail (I guess late night text messages sent to Conrad trumps logic). There was no one from CBO present at the hearing to settle the matter.
You can watch the whole debate unfold at the C-Span Video Library, it starts at the 76:30 mark in the video. Baucus's blindsiding of Wyden beings roughly 30 minutes into the debate and is captured below:
Since it was to be the last amendment on last day of mark up, Wyden was left with no recourse, and was forced, unfairly, to withdraw his amendment. He was denied a vote on the amendment some policy writers considered the single most important possible change to health care reform.
Jane Hamsher reports that Wyden was asked to not criticize Baucus's terrible bill in exchange for getting a vote on his prized amendment. To promise Wyden a vote, only to declare the amendment out of order (when it should not have been) is a powerful slight to Wyden. If there was indeed such a deal, it makes the Baucus blindsiding a serious violation of trust.
This is the quintessential ending to Baucus's handling of the health care reform bill. It was defined by extreme secrecy, zero transparency, endless delays, back room sweetheart deals to industry, and a complete disdain towards other Democratic senators on the committee. It is the perfectly undignified end to a shameful committee process.Why is all this imporant? Well, Wyden's amendment would have provided everyone with the ability choose their own plan on the new exchange -- and that means a public option, if one is available. Which is why, even though it was supported by policy wonks, it was opposed by the Chamber of Commerce.
Yesterday, I wrote about the terrible idea Sen. Carper has been trying to sell as an “alternative” to the public option. Thanks to a report from Politico it appears that the idea is even worse than I first thought.
Carper’s proposal would leave decisions and solutions up to the states. While Snowe’s amendment sets only an affordability test for the trigger, Carper would allow states to opt-in if affordable insurance is not widely available or the insurance market is dominated by only one or two players.
It sounds like Carper's plan is a trigger, but a trigger that once pulled requires each state legislator to than act. If the state legislator act it must than choose from three basically worthless options, a state based public option, co-ops, or some kind of managed government partnership with private insurance companies.
If this is the case than Carper has the dubious distinction of coming up with the worst “alternative” to the public option so far. A trigger for co-ops. This idea is so bad, it makes Conrad's worthless state based co-ops look robust.
FYI Politico: I understand Carper or one of his aide probably fed you this line of BS.
the Delaware Democrat never staked out a public position on the government insurance option, solidifying his status as the model of an undecided moderate in need of persuading
But it is not true. Back on July 6th Carper said told MSNBC that he was against a national public option that is available on day one. He said he is with Sen. Snowe and thinks there should be a trigger like the trigger in Medicare Part D. Carper has repeatedly said he supports the trigger idea.
Sen. Enzi introduced an amendment to lower the actuarial value of the lowest quality plans (bronze level) that could be sold on the exchange from 65% to 60%. His amendment will allow insurance companies to offer plans that cover even less of the cost of medical treatment than Baucus originally proposed. The amendment would mean that people buying “health insurance” could end up shocked how little their policy really covers.
All ten Republicans on the committee voted in support of the Amendment. Sen. Kent Conrad was the only Democrat on the committee to also vote in support of Enzi's amendment. The amendment failed 11-12
According to the Las Vegas Sun, Senate Majority Leader Harry Reid said that he thought Snowe's trigger proposal was, a “pretty doggone good idea.”
I think the whole idea of a trigger is inherently flawed. Former Labor Secretary Robert Reich did a good job explaining that Washington is full of lobbyist whos job it is to make sure things like triggers never get pulled. Snowe's trigger specifically is worthless trigger that is designed never to be pulled. Even if pulled the single state based public options it would create are likely to lack the size or power to have an effect.
Reid do have some rather unkind words for the idea of co-ops which he thinks is worse than Snowe's trigger proposal. Reid said about co-ops,
It would be better than nothing but it’s nothing I’m going to jump for joy with.
I think that all signs point to the fact that the idea of co-ops are starting to lose favor (A very critical report from the CBO might have something to do with that). Even the father of the co-ops idea, Sen. Kent Conrad, is now admitting that they are as currently written too restricted and would not have the full ability to compete with private insurance.
Ezra Klein made an excellent catch the other day. Sen. Kent Conrad's said during the Senate Finance Committee hearing:
They're not government-run systems in Germany, in Japan, in Switzerland, in France, in Belgium -- all of them contain costs, have universal coverage, have very high quality care and yet are not government-run systems.
The problem is that France does have a government-run health care system with some supplement private insurance coverage. In fact the French system is very similar to the Medicare-for-All plan advocated by many in the progressive community.
Either Conrad is lying or his truly ignorant how arguably the best health care system in the world is managed. I do not know which of these two possibilities is more frightening. If one of the three Democratic senators who were tasked with writing the Senate Finance Committee health care reform bill is completely ignorant of how other countries run better health care systems, that could go a long way towards explaining how they produced such a terrible bill. On the other hand, I can't believe that anyone so involved in health care reform could be so dramatically uninformed.
In an interview with Bloomberg.com, White House Budget Director Peter Orszag talked about his support for Co-ops and Triggers.
Orszag signaled the administration doesn’t consider a government-run insurance program essential to the legislation. He suggested it would be sufficient to either create nonprofit insurance-purchasing cooperatives or set “triggers” to activate a public option if needed to cut costs...“The goal here is just to introduce more competition where competition is inadequate,” Orszag said. “Either one could work.”
Orszag's statement directly contradicts a CBO report that says,
[The co-ops] seem unlikely to establish a significant market presence in many areas of the country or to noticeably affect federal subsidy payments.
I guess former CBO director Peter Orszag now also backs the new Conrad CBO Standard. He must share the belief that whatever the CBO determines is incredibly important unless they disagree with Senator Kent Conrad.
I highly recommend read this new Reuters story on how useless Conrad's idea of small statewide co-ops would be. The story quotes several experts who all agree with what most of the progressive community has been saying for months. The co-ops would be so legally restricted by Baucus' bill that they would have little to no impact on health insurance in this country.
Analysts said the proposal sets the stage for multiple regional co-ops that would likely lack the leverage in negotiating rates to strongly compete against established players.
The co-ops would enroll individuals and small groups, rather than large businesses, also limiting their sway. The bill further appears to avoid giving the co-ops any special pricing power for their plans, analysts said.
Small legally restricted statewide co-ops are in no way a substitute for a real national public option.
Ross used most of the letter to strongly endorse Conrad's small state-based co-ops idea. This should surprise no one given the overwhelming evidence that Ross has being working directly and/or indirectly with Conrad to get the co-ops idea included in the House bill.
Last week, the Senate Finance Committee unveiled its health care reform bill – the fifth version of health care reform presented on Capitol Hill. The controversial government-run public option is not included. In its place is a uniquely (and familiar) American proposal - a co-op. Co-ops have been around for years and not just in health care. Many of you are probably familiar with electrical co-ops and farmers’ co-ops. As a nonprofit, member-owned group, a health care co-op would operate similarly in that they are controlled by their members, who actively participate in setting policies and making decisions, and a member-elected governance board. And, unlike private companies where voting power is based on the number of shares you own, each member gets one equal vote.
Membership would be completely voluntary and open to any individual or family interested. The co-ops could operate on state or regional levels and startup money would most likely come from the federal government through grants or loans.
(emphasis mine)
It is too bad that Congressman Ross used his letter to mislead his constituents about the co-ops idea. Membership with in fact not be open to “any individual or family interested.” According to Baucus's Mark “CO-OP grantees would compete in the reformed individual and small group insurance markets.” Therefore the co-ops would not be an option for “any individual or family interested,” but would be restricted to only accepting memberships from a very small segment of the population.
Ross Admits experts believe a “co-op would need at least 500,000 members in order to succeed.” Given that Arkansas has just under 3 million people and the strong restricts placed on co-op membership, it would be nearly impossible for an Arkansas statewide co-op to ever get enough members to be viable.
A vast majority of Democrats in Congress want health care reform to include a robust public option. As I have discussedConrad/Ross' co-ops and Snowe's trigger are not in any way compromises. They are fig leaves. The vast majority of Conrad's state based co-ops have too many restrictions and would be too small (by Conrad's definition) to ever work except in a handful of states. A trigger can too easily be made useless. As Robert Reich pointed out, the whole reason Washington DC is filled with lobbyists is to slowly and quietly kill things like a trigger. They would do nothing except make it look like Democrats had not given up on the key promise of a public option. They are not compromises; they are surrender and capitulation. Real compromise would at least try to address all or some of the reason why progressives want a public option.
Overhead, Waste, and Cost
Health care is too important and too expensive. To the extent possible, every dollar spent on premiums should be used for treatments and not for CEO bonuses or excessive corporate profits. Progressives believe that if the government is going to spend hundreds of billions expanding coverage and force individuals to pay hundreds of billions more, the nation needs assurances that their money will be well spent. A public option would provide a strong alternative with very little overhead. This issue can be partly addressed by setting a minimum medical loss ratio of 92%. Any insurer who wants to use the exchange must spend at least 92 cents of every premium dollar on medical treatments.
Another option that could be used instead of or in addition to a minimum medical loss ratio is to only allow not-for-profit insurance to be sold on the exchange. This is very similar to how health insurance is done is Switzerland. It would have the added benefit of possibly making at least a few new non-profit insurance co-ops viable.
Guarantee for Vulnerable Groups
Progressives are not convinced that insurance companies will ever work for the needs of groups that tend to have the highest medical bills. Even if the new exchange as a whole works well there is still a great fear that traditionally vulnerable groups will continue to fall through the cracks. Two groups, individuals close to the poverty line and individuals very close to retirement should at minimum be guaranteed access to at least one decent insurance option structured for their needs. If it is not a public option it should be existing government programs.
This could be improved with two ideas from Senator Baucus. Baucus originally proposed the idea of allowing older Americans (55-64) currently without insurance the option of buying into Medicare by paying full price premiums. This is a good idea progressives could support. Senator Baucus has also proposed allowing individuals on the exchange making between 100%-133% of the federal poverty line the option of Medicaid or equal value tax credits to buy private insurance. This idea should be expanded to individuals making between 100%-230% of the FPL. People between 133%-230% would need to pay a sliding scale premium for Medicaid.
Benchmark
The public option is meant to be a benchmark. A transparent public option would give individuals, politicians, and policy experts something to compare the effectiveness of private insurers against. Allowing people who don't have insurance and are over 50 years old the option of buying into Medicare would at least provide some form of a benchmark. Giving a small segment of people using the exchange the option of buying Medicare or Medicaid will let us see if private insurers are able or not to more effectively provide them with coverage.
Setting a minimum floor for medical loss ratios on the exchange of 92% would be a good idea. Only allowing non-profit insurance companies to sell policies on the exchange should eliminate some of the pressure to adopt anti-consumer practices. Providing a small group of uninsured Americans close to retirement the option to buy into Medicare early by paying full premiums is smart policy. Giving individuals without insurance making between 100%-230% of the FPL the choice of private insurance on the exchange or the option to use their tax credits to buy into Medicaid would provide continuity of insurance and a guarantee of decent coverage for an often vulnerable group of Americans.
A combination of all of these ideas would fulfill at least some of the goals of a public option. This is what compromise looks like. It is finding different ways to achieve some of your goals. Unfortunately, you will not hear this ideas discussed. Most politicians who oppose the public option are really opposing any efforts to stop private insurance companies from overcharging the American people. It does not matter if it is a public option or some new pricing regulations. If it hurts the bottom line of private insurance companies they will oppose it. Triggers and small state based co-ops are useless face saving measures. They will not discipline private insurance companies or bring down cost. They are not a compromises; they are surrender.
The problem with Conrad/Ross' state based co-ops idea is not just that co-ops have proven to be a mostly unsuccessful model for health insurance. The real problem is that they are purposely designed to fail. Conrad wants there to be 51 co-ops (50 states plus DC), and he would restrict the co-ops to only offering plans to the individuals and small businesses using the new health care exchange (roughly 10% of the population). According to Conrad's own admission a health insurance co-op needs a minimum of 500,000 members to be able to negotiate competitive rates.
Using Conrad's own 500,000 member threshold, even if every single person using the new exchange joined a new state based co-op, over half the states in the country would not have a sufficient population to create a competitive co-op. Using a more reasonable assumption that as many as one fourth of individuals on the new exchange would choose to join a new state based co-op, only four states (CA, TX, NY, FL) might have enough people sign up for their state's co-op to barely reach the important 500,000 membership mark.
The restrictions placed on the new health insurance co-ops would make it financially impossible to create 51 new co-ops. With the restrictions, it seems that creating even 15 viable co-ops nationwide would probably be impossible. From what information I have, I suspect that between 4-8 is the maximum number of viable competitive co-ops that could be created nationwide. That would only be possible with a massive capital investment, focus on creating national not state based co-ops, and serious start up help from the government.
If the legislative restrictions were not bad enough to kill the co-ops, the absurd way they are set up should. According to Baucus' framework,
Grants and loans will be awarded by the Secretary of HHS based on recommendations made by an advisory board. The advisory board will be chaired by the Secretary (or a delegate) with other members appointed by the Majority Leader of the Senate (4 members), the Minority Leader of the Senate (3 members), the Speaker of the House of Representatives (4 members) and the Minority Leader of the House of Representatives (3 members).
This means that Senator Mitch McConnell and Congressman John Boehner would likely appoint half the board who decides which groups receive help establishing co-ops. Both have been highly skeptical of the whole idea of co-ops and health care reform. They have a strong political reason to make sure the co-ops fail. Giving them this power is like hiring a butcher to start a vegan restaurant.
I've previously explained how the trigger idea can very easily be made worthless with only a minor change. Robert Reich has done a great job explaining how Washington is filled with highly paid lobbyists whose job is to make sure things like a trigger are never pulled.
Neither Conrad's co-ops or Snowe's trigger are a compromise on the issue of a public option. They are fig leaves designed to fail. Their only purpose is to be a face saving measure to pretend that Obama did not break another campaign promise. A real “compromise” would be something (or group of things) that could fulfill the many goals of a public option in another manner. Small state based co-ops and triggers are not compromises, they are surrender.
Note: None of the Gang of Six represent a state large enough to support a state based co-op. In fact even if there was only one co-op for all six states it would still lack sufficient membership to be able to be competitive.
When the House Energy and Commerce Committee was marking up the health care bill Rep. Mike Ross submitted an amendment that gutted the public option and include legislative language to create small non-profit health insurance cooperatives. It is now clear comparing the language in Baucus' framework dealing with co-ops to Ross' amendment, that either Conrad directly or through some third party (Rahm Emanuel, Baucus, etc...) provided Ross with his legislative language for co-ops. The two documents are almost identical and and sometimes use the exact same wording:
The governing documents of the cooperatives incorporate ethical and conflict of interest standards designed to protect against insurance industry involvement and interference in the governance of the cooperative.
Its governing documents must incorporate ethics and conflict of interest standards protecting against insurance industry involvement and interference.
At the time Ross' amendment was submitted many Democratic senators and congressmen were both concerned and confused by Conrad's co-ops idea. It seemed that Conrad was not sharing with most of his own party what his idea of co-ops would really be, but some how Rep. Ross was provided the document.
Ross reached a “deal” to support the bill in committee if he could cripple the cost savings of the House's robust public option and insert the co-ops into the House bill. Now that the legislative language for the co-ops is included in the bill, surprise Ross no longer supports the public option.
It appears that some group of House blue dogs and conservative Democratic senators likely conspired against Speaker Pelosi and are trying to force her to accept the co-ops idea.
Obama would like, but doesn't need, Republican votes to achieve his goal. But seven conservative Democratic senators -- led by Max Baucus (Mont.) and including Blanche Lincoln (Ark.), Kent Conrad (N.D.), Jeff Bingaman (N.M.), Ben Nelson (Neb.), Mary Landrieu (La.) and Arlen Specter (Pa.) -- oppose the public option as well. So by shilling for the insurance industry, they've made it thus far impossible for Obama to take advantage of the Democrats' majority in the Senate.
This statement is simply false. It is true that Mary Landrieu and Ben Nelson have said they are likely to oppose a public option (although Nelson is technically open to the idea). Reporting also indicates that Kent Conrad does not like the idea. But Max Baucus, Jeff Bingaman, and Arlen Specter have all publicly and repeatedly stated that they support a public option.
Max Baucus's original health care reform proposal that he wrote earlier this year included a robust public option. Even a few weeks ago he told Montanan Democrats that he supported a public option.
Jeff Bingaman has repeatedlysaid that he supports a public option. He even voted for Senate HELP committee bill which includes a public option.
Arlen Specter has been promoting his support for a public optionevery chance he can get now that he faces a Democratic primary challenger.
Baucus, Bingaman, and Specter have not drawn a line in the sand on the issue of the public option. All three would not vote against health care reform simply because it doesn't include public option. They would all being willing to negotiate on the issue of a public option in exchange for the broad support needed to pass health care reform through regular order.
Being willing to vote for reform without a public option is completely different than opposing a public option. Either the three senators told the Washington Post that they have been repeatedly lying to their constituents, or the Washington Post should print a retraction.
Senator Majority Leader Harry Reid has just let his preference be known about the public option. He claims wants a public option that is not government-run like Medicare but instead, a “private entity that has direction from the federal government so people that don't fall within the parameters of being able to get insurance from their employers, they would have a place to go.”
Harry Reid could mean a few different things with his statement. The first is that he really does mean something very similar to Medicare but is only trying to muddle the debate. Very few people seem to really understand how Medicare is run on a day to day basis. Only part of Medicare is really "run by the government." Like many government programs, most of its functions are contracted out to private companies. Medicare does not directly collect claims from providers but contracts out many of the administrative functions to private companies.
Progressives should not be very bothered if a public option contracted out the most of the administrative functions to a private company. As long as the government is the ultimate insurer, payer, and decider on the issue of claims, that is what is really important. What is most important is that the private entity contracted by the government has no financial stake in whether a claim is or is not denied.
I suspect what Harry Reid really wants is what I labeled the “national semi-independent non-profit” public option. I think this has less to do with a political philosophy and more to do with budgetary optics. Having the government collect premiums and pay out claims would appear to be an expensive expansion of government (even if it is budget neutral). To make the public option appear off the federal government's budget you can create a new non-profit trust or company from which all claims are paid. You can also mandate that this new non-profit entity is run by a government appointed board and is directly regulated by some part of the department of HHS.
With a “national semi-independent non-profit” public option, the devil is always in the detail. It is possible to set it up so that it would behave in a manner that is almost indistinguishable from a government run program. It is also possible to set it up so that it ends up completely failing or acting indistinguishably from current private insurance companies.
What I think Reid is advocating is much closer to (and probably to the left of) Schumer's single national cooperative compromise. The health insurance equivalent of the Corporation for Public Broadcasting, Federal Reserve, Amtrak, FDIC, etc... It does not sound anything like Conrad's worthless idea of small independent regional cooperatives. Reid seems to want a single national plan with direct government oversight; both are critical ingredients missing from Conrad's proposal.
In the heated debate over the public option what is often overlooked is that there is not any one “public option.” There are in fact several different public options being proposed. They run the gambit from the very robust to the weak and nearly useless. I'm going to try and explain the different configurations of the public option proposals and place them on a rough robust-to-weak continuum. The continuum does not just represent a left/right divide on the issue, but also a divide on their potential cost savings. The more robust public option the more money it will save the government and the consumer.
Medicare Buy In
The strongest and most robust public option proposed is the straight “Medicare buy in.” It would simply allow individuals under the age of 65 to buy Medicare at an actuarially sound premium level. The option would provide the greatest cost savings to the government and the consumer. Senator Rockefeller's “Consumers Choice Health Plan” would be a Medicare buy in for the first few years. After that establishment period, the plan would progressively become weaker in several ways.
Medicare Rates Plus
A slightly less robust way to construct a public option is some form of a “Medicare rates plus” option. Doctors who accept Medicare would need to accept the public option, but it would pay Medicare rates plus anywhere between an additional 1%-20%. The higher the additional reimbursement rates, the less robust (and more expensive to consumers) the option would be.
Medicare Rates Plus With Opt Out
The next step down is a “Medicare rates plus with opt out” configuration. This is very similar to a “Medicare rates plus” option but providers who accept Medicare would not need to accept the public option. This configuration becomes less robust depending on the additional reimbursements and how easy it is for doctors to opt out. The original public option in the House bill which passed the House Ways and Means Committee and the House Education and Labor Committee include this style of public option. It would pay Medicare rates plus 5% and allow doctors who accept Medicare to opt out of the program.
Level Playing Field
A “level playing field” option was first proposed by Chuck Schumer in an attempt to win over moderates. The government would create a new government run insurance company. It would behave like private insurers and directly negotiate payments with providers. It would not be allowed to piggy back on Medicare's rates. Depending on the details, it would either allow providers accepting Medicare to opt out or require the plan to create a new network from scratch. The public option compromise in the House Energy and Commerce Committee and the public option in the Senate HELP Committee bill are both “level playing field” style public plans.
National Semi-Independent Non-Profit
The absolute minimum that I would classify as a public option is a national semi-independent non-profit. The government would provide money and expertise to establish a new national non-profit health insurance company. It would not be a government entity and its employees would not be federal employees. It would be highly regulated and have direct government oversight. The top level of the organization (top management, CEO, and/or board members) would be appointed by the federal government. They would be appointed by either Congress, the president, the secretary of HHS or some combination of all three. The single national cooperative compromise Schumer offered Grassley and Conrad would be an example.
I left off the continuum Conrad's idea of small regional co-ops. In no way, shape, or form are they a public option or would they fulfill the goals of a public option. Not only would they fail to fulfill the goals of a public option, but the severe restrictions placed on them means they would be unlikely to ever even get off the ground. An issue I did not deal with is whether the public option would be open to all businesses or only offered on the new exchange. Opening the public option to all would make it more robust, but it seems the overwhelming political consensus is to make it only available on the new exchange.
There is currently no one public option. There is not even one robust public option and one weak public option. There dozens of ways to configure a public option in discussion. Each change effects a plan's relative “robustness.” Some options would even start off robust then become weak. Beyond the buzzwords of “public option” and “robust” there is an ocean of nuance.
For months the only Democrat who ever talked about reconciliation was Kent Conrad. He only spoke of reconciliation to talk about what a terrible and unworkable option it would be. I have seen him repeatedly say it would leave the bill looking like "Swiss cheese."
The media has often uncritically quoted Conrad on using reconciliation to pass health care reform. But Conrad is not some impartial expert. He has a strong, vested and personal interest against using reconciliation.
Looking at a variety of issues (public option, size of subsidies, structure of the co-ops, direct Medicare drug price negotiations, employer mandate, etc) Conrad is probably one of the 4 or 5 most conservative Democrats in the Senate. Reporting on the Huffington Post indicates that he might be in fact to the right of even a few of Republicans. If health care reform passed using reconciliation Conrad's vote would not be needed, and what passes could be to the left of what he wants.
For instance, Conrad is against the public plan and says it is does not have the votes. Yet Senator Chuck Schumer seems fairly confident that health care reform will include a public option. Even if the public option must be passed using reconcilation. I think the chairman of the Senate Rules Committee should know how to get around the procedural problems with using reconciliation.
Conrad is also part of the gang of six in the Senate Finance Committee trying to write a bipartisan bill. Being part of the gang of six has given Conrad a disproportionately huge amount of control of the health care debate. If attempts to write a bipartisan bill were abandoned, the gang of six would be dissolved. Conrad would lose much of his power to shape the debate.
Conrad doesn't want health care to be passed using reconciliation. It would strip him of much of his power and might end up producing a bill that he votes against. When Conrad talks about the problems with using reconciliation, his words should be taken with a large grain of salt.
Conrad has created a frequently asked questions web page about his co-ops plan. Of course, Conrad does not address any of the important questions about his co-ops plan.
You know he is purposely being incredibly intellectually dishonest because he answers the question, “Have co-ops proven themselves a successful business model in other industries?”
No Conrad, the question isn't have co-ops been successful in other industries. The single most important question about health insurance co-ops (and one he does not answer) is, “Have they been tried in the past, and have they been successful at reducing costs for Americans?”
The answer to that question is that hundreds have been tried in the past and all but a handful have failed, gone out of business, or become for-profit companies. The idea has been tried repeatedly before and has failed.
A few years ago, Iowa tried to encourage health insurance co-ops. Only one was formed and failed within two years. There is every reason to suspect the same pattern will be repeated with Conrad's idea of small state based co-ops.
Conrad's co-ops proposal is worse than an untested, ill-conceived idea. It is an idea that has been tried and tested. It is an idea that we know will fail.
If Conrad wanted to truly address the thousands of unanswered questions about his idea, he should simply release the legislative language for his idea.
In 2000 the General Accounting Office did a study of health insurance purchasing cooperatives. This study should shed important light on the issue of insurance co-ops pushed by Senator Conrad and the problems of health insurance exchanges without a public option. The study found that:
Despite efforts to negotiate lower premiums, cooperatives have only been able to offer premiums that are comparable to those in the general small group market. The cooperatives we reviewed typically did not obtain overall premium reductions because (1) their market share provided insufficient leverage, (2) they could not produce administrative savings for insurers.
These purchasing co-ops may or may not be part of the co-op proposal promoted by Senator Conrad. (Note: Conrad has repeatedly refused to provide any concrete details for his co-ops idea.) The study makes it clear that collective purchasing co-ops will be useless at reducing premiums or controlling the spiraling cost.
The five purchasing co-ops that the GAO investigated work in a manner very similar to the state based health insurance exchanges that are likely to be a part of health care reform. Like the state based exchanges, they pool together health insurance purchases for small employers.
The California and the Florida co-ops at one time were both larger than many of the state based exchanges are projected to be. The CBO calculates that roughly 11% of the Americans will get health insurance from an exchange. The California co-op once had more members than that 11% that state exchanges are expected to enroll. While state based exchanges should give individuals and small businesses greater choice, they are unlikely to do anything to reduce premiums.
Another model of how new health insurance exchanges are likely to work is the Federal Employee Health Benefits Program. The FEHB is a health insurance exchange for federal employees. It does a great job of offering many choices but a terrible job at controlling cost. From 1985-2002 the premiums in the FEHB program grew only 0.1% slower than the rest of the private insurance market. The FEHB does not include a public option.
Finally, there is the example of Massachusetts. They implemented reform that would be similar to what Baucus is proposing. It also created a new health care exchange for small businesses (called the Commonwealth Connector) which did not include a public option. Massachusetts' reform did a good job at reducing the number of uninsured, but failed to control the spiraling cost of health insurance. Now Massachusetts is looking at some massive structural reforms to control cost.
There are only two “successful” health insurance companies which are co-ops, Group Health Cooperative in Washington and HealthPartner, Inc. in Minnesota. Conrad wants to replicate these instead of a public option. Even the National Cooperative Business Association admits that competition drove most of the health insurance co-ops out of business or forced them to abandon the co-op structure. While Group Health Cooperative provides a good quality of care, its premiums are still spiraling out of control.
Whether it is the Federal Employee Exchange, Commonwealth Connector, gateways, or state based purchasing co-ops; efforts to pool individuals and small businesses in a single health insurance marketplace does not help control cost. State based exchanges should help provide individuals and small business employees with greater choice. But without a public plan or massive structural changes, they will do basically nothing to arrest the devastating increase in cost of health insurance.
