Accidentally making the case for the public option

Today’s Lincoln Journal Star contains an editorial criticizing Harry Reid’s decision to move forward on a Senate healthcare bill with an opt-out public option. Aside from a puzzling analogy (the board claims an opt-out “would be akin to consciously deciding to stuff E. coli into the sausage links”), the editorial also relies on some contradictory logic.

While some of the board’s opposition comes from broader complaints about a public option in general, much of the criticism stems from what they call a potential “patchwork system” — they are concerned with problems that could arise from a scenario in which some states are participating in the public option and others aren’t.

“Opt-out decisions from Arizona and Texas alone would remove more than 30 million people from the public system,” the board argues.¹ “Would people with serious medical problems be tempted to move from opt-out states to those that offer the public option?” they ask.

Nevermind that they are simultaneously arguing against a public option while also acknowledging its necessity for people with “serious medical problems” — the editorial’s whole argument against the opt-out is a setup for the board to proclaim the superiority of a “trigger” system, favored by Olympia Snowe and Ben Nelson, which the LJS also endorsed in a July editorial.

For those unfamiliar with Snowe’s trigger, you can find it on page 207 of the Senate Finance Committee’s amendments (PDF):

This amendment establishes a non-profit government corporation through which a ―safety net plan would be provided in any state in which affordable coverage was not available in the Exchange to at least 95% of state residents. An individual would be deemed to have affordable access if either of two conditions is met. First, two or more plans are offered with premiums – the cost of which does not exceed a specified percentage of the individual‘s adjusted gross income (AGI), after deducting any available tax credit or employer subsidy from the cost of such premium. The percentage contribution shall range from 3 percent of AGI at 133 percent of the Federal Poverty Level, to 13 percent at 300 percent and above.

Assessment of affordability shall follow submission of plan premiums filed one year in advance of the first day of each policy year, and should a state be found to not meet the 95% threshold, plans would be permitted to submit of any revised premium filings, after which a second assessment of affordability shall be performed. If, after that second assessment, a state still be deemed as not meeting the affordability standard, the safety net plan shall be offered within that state, and shall be available at the pending open season enrollment.

In other words, Snowe’s trigger would create a “patchwork system” in which some states had a public option, some didn’t, and tens of millions of people would be denied access to its benefits.

The only difference between Snowe’s trigger and the opt-out clause would be that a trigger makes people suffer under the current broken system for several more years before providing them with relief. That is, if you’re willing to assume that the trigger would ever be pulled.

In the July editorial that the board refers to, they claim one need only look to Medicare Advantage to see an example of triggers done right. “The trigger has not gone into effect because competition among private companies has remained sufficient,” they say.

Medicare Advantage actually quite clearly demonstrates how wasteful and inefficient a program can be without activating the trigger. Medicare Advantage payments have skyrocketed since 2004. A 2008 study (PDF) from Austin Frakt, Steve Pizer and Roger Feldman shows that for each additional dollar spent on Medicare Advantage plans by taxpayers, only $0.14 went to beneficiaries. The other $0.86 per taxpayer dollar went straight to the insurance companies.

This is the type of efficiency they want to emulate.

Trigger advocates know that a public option is superior — that assumption is at the core of their argument. Advocating triggers relies on confidence that a government option would do a better job of delivering quality, affordable care; it’s what we would turn to in the event that private insurance continues to fail Americans. Yet they insist on withholding it, and the only ones who benefit are private insurers.

So put into more straightforward terms, arguing for triggers is an argument to consciously withhold superior healthcare from Americans so that private insurance companies can continue to skim money off the top of our premiums for quality that will range from inferior at worst to roughly equivalent at best.

Opponents can’t have it both ways. If you don’t believe a public option would provide superior care at a lower cost, you don’t use it as the problem solver in the event of private insurance failure. If you believe a public option would provide superior care at lower cost, it’s inhumane to withhold it.

And so it’s easy to see why nobody but committed public option opponents is impressed by a trigger. The logic behind it just doesn’t hold up.

¹The LJS editorial suggests that if Arizona and Texas opt out of the public option, that would result in more than 30 million people being removed from the system. For this to be true, every citizen of those two states would have to be enrolled. This would not be the case for several reasons. The public option would only be available on the exchanges, which would only be available to a relatively small part of the population (those currently uninsured, self-employed individuals and very small businesses). And even then, the public option is just one of many to choose from on the exchanges. No one expects everyone on the exchange to choose the public option. The CBO estimates that only 6 million people would choose the House version, and even in its present negotiated-rates form, it is considered the stronger of the two.

None of the bills, including the Senate opt-out version, would require everyone to enroll in the public option.

2 Responses to Accidentally making the case for the public option

  1. nathan says:

    3% of AGI at 133% of Federal Poverty Level (2009) is 432.17 per year. (1 person poverty level is 10,830$, at 133% it’s 14403.90, which equals 432.17 at 3%.) That’s 36.01 per month.
    13% at 300% would be $32,490/$4,223.70/$351.98.

    There is no way that an insurance company can offer health insurance to a person at $36 a month and still survive without raising the rates on others to compensate for it. This trigger really is a trigger… of a gun pointed at these companies saying “give insurance out at these insanely low rates OR we’ll come in and do it for you which will put you out of business. It doesn’t matter that at those rates, we’ll lose money, because we’ll tax the shit out of those dirty rotten bastards, the rich!”

    This requirement will force artificially low premiums into the market for the poor which will require insurance premiums to be higher for those who can afford it. Starting teaching salary in OPS is about $32,000 a year. My insurance premiums (I live overseas now and enjoy the “benefits” of National Health Insurance) were about $130 a month, or $1,560 per year, or 4.9% of a starting teachers salary. Of course, by law, insurers will be able to charge up to $4160 per year to a teacher and have it still classified as “affordable.”

    Congratulations! We’re subsidizing the poor (with no incentive or help for them to improve their lot in life) on the backs of those who still make less than the median income! Good job! If people can’t see that we are already sliding down that slippery slope into the government running our lives…

  2. neal says:

    First, you’re misreading the contribution portion of her amendment. That 3% at 133% and 13% at 300% is defining the maximum individual contribution, which in turn defines the subsidies. So for someone at 133% of the poverty line, a plan wouldn’t need to cost less than $36 / month — it would need to cost less than the sum of $36 / month and the subsidy. And for people above 300% of the FPL who wouldn’t qualify for subsidies, there would need to be two plans available that cost less than 13% of their family’s income. So for that family making $32,000 a year, there just need to be at least two private plans available that will cost them less than $350 / month. That is not nearly the guaranteed trigger-pull you seem to believe it is.

    There is also no definition in the trigger clause as to what the minimum requirements are for a qualifying policy. Snowe has been an advocate of making insurance more affordable, but her vehicle for doing this has been to consistently argue that plans should be less generous. So it becomes pretty easy to imagine a scenario in which insurers offer some high-deductible, bare-bones insurance that is priced just low enough to prevent triggering a public option.

    But let’s say you’re right. Let’s say it’s impossible for insurers to offer such a bare-bones policy that costs less than $350 / month. Boom. A public option is triggered in that state. So what? This trigger does not give the public option any pricing power. It would have 5% of the state’s population with very little bargaining ability. Where’s the incentive for private insurers to even try? If they can’t get their rates that low, a non-profit insurer starting from scratch isn’t going to be any kind of competition.

    But again, for the sake of argument, let’s pretend that a brand new non-profit insurer that provides insurance to the poorest people while relying on their premiums to stay afloat is somehow able to negotiate rates lower than all of the private insurers around. Your argument still depends on a belief in cost-shifting — that somehow we are at the bottom of the barrel in terms of how low we’re going to pay for medical services, and so anyone who goes lower than the status quo is inevitably shifting those costs onto someone else. There is plenty of evidence of price differentials, but the evidence of actual cost shifting is minimal at best.

    So as far as your concerns go, I don’t think you have anything to worry about from a trigger.

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