Why The Trigger Is So Dangerous

It appears that Obama is trying to convince Republican senator Olympia Snowe to support health care reform by offering to support a trigger for a public option instead of a public option available from day one. The trigger option is incredibly dangerous and should make progressives very nervous. It is theoretically possible to get a “good” trigger that might help control cost, but even the smallest modifications could make it worse than useless. A bad trigger could actually do more harm than having nothing at all.

I have previously explained the many variables involved in a public option and will explain how a very small change could make a trigger useless.

What
A good (or one that might at least do something positive) trigger would need to trigger a public option based directly on Medicare. It would need to be either a Medicare buy in public option or Medicare rates plus public option. (a public option which pays providers Medicare rates plus some percentage.) Anything short of that would not work. A Medicare buy in public option would also save a lot of money and could be scored by the CBO. The CBO should be able to score a robust public option that could be triggered as saving money.

How to ruin it - Allowing Medicare providers to opt out or creating a “level playing field” plan cannot work with a trigger. Less robust public options could work only because they would be large national plans able to use their market share to keep rates low. Since the trigger might create a public option only in states where the private insurance companies failed it must piggyback on Medicare to be effective.

When
The trigger would not be able to be pulled very soon. It would not be able to be triggered, at most, until 2-3 years after the reform system goes into effect.

How to ruin it – If the time line for the trigger is too long it could result in higher, not lower, premiums. If the public option could only be triggered, say, eight years after reform started, it would create a strong incentive to dramatically raise premiums in the years leading up to the possible trigger date. Dramatically raising premiums before the trigger could be pulled would give the insurance industry large profit margins/cash reserves/waste/fat to whittle down for years while they keep premiums just below the level that could trigger the public option

Why
The public option must be a growth in premiums trigger. My preferred trigger mechanism would be if average insurance premiums for any insurance grade, in any area, for any year, grow at a rate faster than rate of growth in Medicare or 140% faster than the rate of increase in the consumer price index.

How to ruin it – Setting the growth in premium rates too high would make the trigger worthless. Making the trigger a lack of competition trigger would make it counterproductive. By triggering a public option if an area had too few companies, it would create strong incentive for insurers to not reduce premiums in an attempt to drive less efficient companies out of business.

Where
The insurance market should be monitored nationwide, state wide, region wide, or city wide to see if premiums grow too fast in any area that has more than 100,000 people. If premiums grow too fast in any area the public option must be triggered for that market.

How to ruin it – By making the size of the areas being monitored too large it could result in millions of Americans being ruined with out of control premiums. If the public option was only triggered if premiums grow too fast on a state wide average, people in Los Angeles could still face no relief from out of control cost if premiums in northern California were being held steady.

How
The trigger must be automatic. If conditions are met the robust public option must be available right away.

How to ruin it – One of the easiest ways to make trigger useless is by requiring an up or down congressional vote or a vote by the effected state legislature if the trigger is pulled before starting the public option. This congressional pre-approval provision would ensure the public option would never go into effect. It would also create a strong incentive to increase premiums dramatically while Republicans control one chamber in Congress.


Is it possible to create a useful trigger? Technically, yes. It would need to be a two year automatic trigger for a Medicare buy in public option if premiums grow faster than Medicare in any area for any one year.

What is so dangerous is that it is incredibly easy to make the trigger worthless or even harmful. Changing a few words in the legislation could strip the trigger of all its power. Understanding the difference between a good trigger and a terrible trigger is not easy. Don't expect the mainstream media ever acknowledge or even notice the difference.

The trigger would become the target of a quiet multi-million dollar all out lobbying assault and could be ruined at the last minute behind closed door with almost zero media coverage. Explaining how the smallest last minute change to the trigger had ruined the whole health care bill would be nearly impossible for progressives.

The trigger is so dangerous because it is so malleable. Progressive would need to guard it like a hawk and there would still be no guarantee that they would not be stabbed in the back at the last minute without media fanfare. If the Congressional progressives embrace a well designed trigger they are setting themselves up for a swift, subtle, and complete betrayal. The trigger could quickly go from a real tool to control cost to a fig leaf, or even a leaf poison ivy.

The Progressive Way To Make Health Care Reform Cheap

The greatest irony of the entire health care reform battle is that it is the left wing progressives that are the ones pushing for reforms that would save the government huge amounts of money. The “centrist” and “fiscal conservative” Democrats are doing everything to make reform more expensive for the federal government. It is the Blue Dogs in the House and conservative Democrats like Baucus and Conrad who are killing almost every cost saving idea.

If the left hopes to take back the health care debate, I recommend that over the August recess they put together a series of amendments that would slash the cost of reform in half. Show that progressive reform is the only true fiscally conservative reform.

Public Option Savings

The Blue Dogs in the House have tried to water down the public option until it becomes useless. Baucus and Conrad are working closely with Republicans to kill the idea. A robust public plan or a Medicare buy in option could reduce the cost of health care reform by around 20%.

The Blue Dogs want the public plan to not be able to pay rates based on Medicare's payment structure and allow doctors accepting Medicare patients to opt out of the public plan. We know from a letter written by the Congressional Progressive Caucus that the CBO projected the effect of allowing Medicare doctors to opt out would increase the cost of reform by roughly $91 billion.

The original House public plan would pay Medicare rates plus 5%. The Blue Dogs want to not allow the public plan to take advantage of Medicare's payment structure. According to Politico:

allowing doctors and other health care providers to negotiate rates with the government under a public option would cost the government about $60 billion, according to a preliminary CBO estimate.

Based on previous CBO estimates, I can conclude that if the public plan paid straight Medicare rates it should save around an additional $30 billion. That means allowing people on the Exchange to buy into Medicare or a public plan directly modeled off of Medicare would reduce the cost of reform by about $180 billion.

The progressives would also like a robust pubic option to be available to all individuals and businesses. Currently it is purposely restricted to only the Exchange. We know that opening a robust public option to all would increase workers' wages and federal tax revenue. The CBO wrote:

if more employers … purchased somewhat less expensive insurance via the public plan, the principal effect on federal deficits is that those employers would end up increasing their workers’ taxable compensation and thereby would generate slightly higher tax revenues.

Without a full CBO analysis I can't properly predict how much new tax revenue would be generated by allowing all businesses and individuals the choice of a robust public plan or having the ability to buy into Medicare. My extremely rough calculations is that it would generate around $50 billion in new taxes over the ten year window.

Drug Savings

The House bill would fix one of the greatest taxpayer rip offs in the past decade. When Medicare Part D passed it took away the Medicaid drug benefits for the elderly poor who are duel eligible for Medicare and Medicaid. As the result, the government now pays 20% more to provide those individuals with drug benefits. Fixing that give away to the drug industry would save as much as $86 billion. Last Friday the House Energy and Commerce Committee also passed an amendment which would allow the government to directly negotiate drug prices. (I have not yet seen a CBO analysis of the potential savings from this change) Not surprisingly Senator Baucus made a “deal” with the drug lobby and refuses to adopt either of these cost saving proposals.

Another progressive idea to reduce the cost of health care would be to eliminate the tax free status of direct-to-consumer pharmaceutical advertising. Not only did the drug industry spend $4.8 billion on advertising direct-to-consumer, many experts believe that the practices drive up the cost of health care by encouraging unneeded and expensive medication. Taxing these ads at the corporate tax rate (35%) should net around $20 billion in taxes to help pay for reform. It should have an even greater effect by reducing the overall cost of our health care system.

Drug reimportation is a progressive idea which is also likely to be left out of health care reform. Although the idea received a lot of attention in the past. A 2004 CBO report projected that it would reduce total drug spending by $40 billion over ten years.

These ideas are only a few of the progressive proposals to reduce the cost of health care reform and none of them will be considered by Senator Baucus' bipartisan “coalition of the willing.” If you added a robust public plan (and/or Medicare buy in) open to all, it should reduce the price of his reform bill by around $230 billion. The drug reforms I outlined should score as saving at least an additional $100 billion. (I suspect that they CBO would score them as saving substantially more.) If the congressional progressives dedicated their staffs to finding cost cutting solutions they should be able to find at least another hundred billion in savings.

The progressive solutions I described should reduce the cost of Baucus' plan by a third. That would allow the bill the be paid for almost exclusively through savings in current programs and nearly eliminate the need for new taxes.

If the congressional progressives want to bring health care reform back to the left, they should spend August coming up with progressive reforms to save money. Publicly present these reforms to the “conservatives” in the party along with the CBO scoring. Force them to public defend their desire to protect the health industries at a massive cost to the taxpayers.

Progressives Begin To Push Back Against Conard's Plan

The supporters of a public health insurance option have began to push back against Senator Conard's “alternative”. Health Care for America Now (HCAN), one of the largest health care reform advocacy groups, has rejected Conrad's idea of eliminating the public option and only offering private cooperatives instead.

More importantly, the Congressional Progressive Caucus today reaffirmed that they will vote against any health care bill which does not contain a public plan. Their statement is a powerful rebuke of Senator Conrad's proposal. The House Progressive Caucus is the largest Democratic caucus in the House.

While most of the media coverage has been focused on efforts to gain the support of Republican senators, the Progressive Caucus is arguably more powerful. It is possible to pass health care legislation against united Senate Republican opposition, but it would be impossible to get legislation through the House if the majority of the Progressive Caucus votes against it.

The big question mark is just how determined the Progressive Caucus is. Will they abandon their principles for some moderate improvements to our health care system? Or will they keep their promise and reject health care reform without a public option? If they remain resolute they have the power to shape the debate to their goals.

Public Plan: The Progressive Caucus' Power In the Balance

The fight over including a public plan in this year's health care reform bill will be a critical test of the Progressive Caucus' power. While the Progressive Caucus, with its 78 members, is currently the largest caucus in the House, it has failed to exert leverage in proportion to its numbers. The need to get bipartisan support in the Senate limits the Progressive Caucus' ability to move legislation leftward.

The ability to use reconciliation to pass health care reform changes everything. The Democrats can pass a bill without any Republican support and afford to lose several moderate Democrats. If the Progressive Caucus manages to hold together, they can effectively dictate the terms of health care reform.

On April 2nd, the Progressive Caucus sent a letter Nancy Pelosi and Harry Reid claiming that the majority of the caucus would not support health care legislation which did not contain a public plan option. Now that the Democrats can pass health care reform with simple majority in the Senate, there is no excuse for compromising on the public plan.

Senator Max Baucus has made statements that he might abandon the public plan (which Obama campaigned on) in order to get Republicans to sign on to health care reform. If the Progressive Caucus wants to be taken seriously, they must vote against and kill any “bi-partisan” health care bill if it does not contain a public plan. By voting against an insufficiently progressive health care bill, they can force health care reform to be passed through reconciliation, where they would have more influence.

Wisely or not, the Progressive Caucus drew a line in the sand. Since health care reform can be passed without Republican support, there is no excuse for compromising on one of their (and Obama's) core principles. If a health care bill passes without a public plan option, it will prove that the Progressive Caucus is nothing more than a paper tiger. In politics, if you make a threat you must be prepared to carry it out or lose all credibility.