By Lambert Strether of Corrente.
Readers, I’m sorry this is later than I planned for; I ran into some unexpected logistics difficulties.
With ObamaCare as presently constituted appearing to enter a death spiral, its advocates, just as they did in 2009, have deployed the so-called “public option” as a line of defense against single payer. The chorus of opinion-makers and thought leaders is suspiciously unanimous.
I’ll start with Russia Today, just to make it clear this is all Putin’s fauit: “Millions of uninsured Americans yearn for public option as insurance giants bail on Obamacare.”
Then there’s Obama himself, in his JAMA article (dissected here): “Policy makers should build on progress made by the Affordable Care Act by continuing to implement the Health Insurance Marketplaces and delivery system reform, increasing federal financial assistance for Marketplace enrollees, , and taking actions to reduce prescription drug costs.”
And then there’s Hillary Clinton herself, who will (as part of her deal with Sanders) “pursue efforts to .”
And then of course there’s Jacob Hacker, author of all the mischief, who weighs with a Times Op-Ed: “[ObamaCare] could use improvements — and right now, the most critical of them is to add a ‘public option,’ available in all parts of the country, that would allow Americans buying coverage through the Obamacare ‘exchanges’ to enroll in a public insurance plan modeled after Medicare.”
Attentive readers will have noticed significant differences in each description: Obama’s “public option” would be available only “in areas lacking individual market competition,” “Clinton’s “in every state in the country,” and Hacker’s would be “modeled after Medicare,” which the other two explicitly do not mention. The slippery, shape-shifting, amorphous character of 2016’s “public option” — why I label it “so-called” — was also characteristic of the 2009 “public option”.
Readers may not be familiar with the history of the “public option”, or its protean and ever-shifting nature, or its structural problems, given that the role played by single payer advocates in the 2009 battle, and their policy critiques, has been generally suppressed by the victors. (And you’ve got to admit, “public option” sounds so good; it’s like a policy earworm. The wee problem is that the “public option” hijacks Medicare’s branding, and plays on the public’s desire for a universal, Medicare-like program, but cannot deliver anything like Medicare; hence the shape-shifting and equivocation. In fact, “well over half of Americans want to replace Obamacare with a single-payer system. That figure, amazingly, includes 41 percent of Republicans and Republican-leaning independents,” showing the combination of timidity and cognitive capture so characteristic of the Democrat establishment (including its “progressive” faction) on health care policy (or indeed any policy). As usual, TINA.
The official history of the publlc option is well-presented in the current issue of the authoritative Health Affairs; I’ll add the underground history as commentary on extracts from that piece. Then I’ll consider structural problems with the “public option”. Finally, I’ll consider the “public option” as just another shopworn neoliberal scam, which is where the Underpants Gnomes come in.
History of the So-Called “Public Option”
Starting, then, with the official history, from Health Affairs, “The Origins And Demise Of The Public Option,” by Helen A. Halpin,* and Peter Harbage. I’m going to start from 2009, when the battle to pass ObamaCare (and suppress single payer) began; I’m going to call Halpin and Harbage HH for short.) Here’s the state of play after the inaugural:
Following President Obama’s inauguration in January 2009, the U.S. Congress began its work on comprehensive health care reform. House Speaker Nancy Pelosi (D-CA) pledged at the time that the House bill would include a public option.15 Indeed, a public option offered through a private insurance exchange was included in all three versions of the bill passed by House committees in the summer of 2009 (House Ways and Means and House Education and Labor on 17 July 2009; House Energy and Commerce on 31 July 2009), as well as in the bill passed by the full House of Representatives on 7 November 2009 (the Affordable Health Care for America Act, HR 3962). A public option was also included in the bill passed by the Senate Health, Education, Labor, and Pensions Committee on 15 July 2009 (the Affordable Health Choices Act, S 1679).
Here’s the underground history (or, I should say, the history; the HH timeline is truncated). PNHP’s Kip Sullivan writes:
There have been three cycles of health care reform in the last half century – 1970-73, 1992-1994, and 2007 to date. At the dawn of each cycle, single-payer legislation had already been introduced. But early in the cycle, single-payer legislation was ‘taken off the table’ (to quote a statement Sen. Max Baucus now wishes he had never made). Each time the Democratic leadership chose instead market-based proposals that had no track record and no evidence to support them. Each time they favored reform deemed more ‘politically feasible’ than single-payer because it left the insurance industry in place. In all three cycles, the alternative, market-based proposal was promoted by one or two policy entrepreneurs (that is to say, it wasn’t an idea that bubbled up from the grassroots).
In the 1970-73 the neoliberal proposal was HMOs; in 1992-94 the neoliberal proposal was HillaryCare (her first real debacle); and in the 2007 cycle we got ObamaCare.
HH go on to write:
The public option was the darling of the progressive wing of the Democratic Party. It also proved to be surprisingly resilient and popular among the public, as measured in opinion polls. The strongest supporters included progressive interest groups led by labor unions—most notably the AFL-CIO and SEIU—consumer groups, and civil rights organizations. The strongest opponents were the health care and health insurance industries, conservative interest groups, and small businesses represented by the Chamber of Commerce and the National Federation of Independent Businesses.
More underground history: As far as popularity among the public, I would urge that was due to successful brand confusion between Medicare for All (at that time, and still, more popular). Second, the “public option” was by no means “the darling of the progressive wing of the Democratic Party,” if single payer advocates — who HH suppress from their narrative — be included. And as far as the progressive role of unions, I remember very well how the SEIU funded a daily health care post at a now-defunct progressive blog, that never mentioned single payer once. A summary of what single payer advocates were up against; I hate to keep quoting myself on this, but the history is important and has been systematically erased:
I suggest the real constraints came from three sources, as indicated by their behavior from 2009, when battle for health reform was joined: (1) The Democratic nomenklatura, which censored single payer stories and banned single payer advocates from its sites, and refused even to cover single payer advances in Congress, while simultaneously running a “bait and switch” operation with the so-called “public option,” thereby sucking all the oxygen away from single payer;1 (2) Democratic office holders like Max Baucus, the putative author of ObamaCare — Liz Fowler, a Wellpoint VP, was the actual author — who refused to include single payer advocates in hearings and had protesters arrested and charged; (3) and Obama himself, who set the tone for the entire Democratic food chain by openly mocking single payer advocates (“got the little single payer advocates up here”), and whose White House operation blocked email from single payer advocates, and went so far as to suppress a single payer advocate’s question from the White House live blog of a “Forum on Health Care.” (Granted, the forums were all kayfabe, but even so.) As Jane Hamsher wrote, summing of the debacle: “The problems in the current health care debate became apparent early on, when single payer advocates were excluded [note, again, lack of agency] from participation.”
In short, if single payer was “politically infeasible” — the catchphrase of that time — that’s because Democrats set out to make it so, and succeeded.
Oddly, HH omit all this material. In fact, there’s a single mention of single payer, in note 5: A 2003 article by Halpin. Of course, I’m not saying that all public option advocates are intellectually dishonest; I am saying that you, readers, should be aware of history and look for priors (especially from policy entrepreneurs like Hacker). HH continue:
A public option offered through a private insurance exchange was included in all three versions of the bill passed by House committees in the summer of 2009….
Senate Democrats were engaged in a highly contentious debate throughout the fall of 2009, and the political life of the public option changed almost daily. The debate reached a critical impasse in November 2009, when Sen. Joseph Lieberman (I-CT), who usually caucuses with the Democrats, threatened to filibuster the Senate bill if it included a public option…
During this period, several alternatives were considered. One compromise proposal included a Medicare buy-in for people age fifty-five and older. However, both Senator Lieberman and Sen. Olympia Snowe (R-ME) opposed the Medicare buy-in, which evoked concerns similar to those raised about the public option. Sen. Kent Conrad (D-ND) proposed using nonprofit health care cooperatives to compete with for-profit plans, but this concept also sparked little enthusiasm..
Debate over the public option continued as additional proposals were made to narrow eligibility for the public option and to raise the rates paid to providers above Medicare levels. When those, too, failed to garner enough support, the public option was eliminated from the Senate bill.
(Oddly, HH omit the role Obama played in removing the public option; note the lack of agency in “was eliminated.”)
The underground history: Reading between the lines here, you see the Protean, shape-shifting nature of the so-called “public option”; it’s almost as if there was never a real proposal at all (as compared to single payer, for which legislation had been drafted: HR 676 from John Conyers, and SB 703 from Bernie Sanders). Looking back on the role of previous market-based derailments of single payer, Kip Sullivan labels the “public option” a bait and switch operation, and looking at outcomes, it’s hard to disagree:
The people who brought us the “public option” began their campaign promising one thing but now promote something entirely different. To make matters worse, they have not told the public they have backpedalled. The campaign for the “public option” resembles the classic bait-and-switch scam: tell your customers you’ve got one thing for sale when in fact you’re selling something very different.
When the “public option” campaign began, its leaders promoted a huge “Medicare-like” program that would enroll about 130 million people. Such a program would dwarf even Medicare, which, with its 45 million enrollees, is the nation’s largest health insurer, public or private. But today “public option” advocates sing the praises of tiny “public options” contained in congressional legislation sponsored by leading Democrats that bear no resemblance to the original model.
According to the Congressional Budget Office, the “public options” described in the Democrats’ legislation might enroll 10 million people and will have virtually no effect on health care costs, which means the “public options” cannot, by themselves, have any effect on the number of uninsured. But the leaders of the “public option” movement haven’t told the public they have abandoned their original vision. It’s high time they did.
I could give more detail — 2009 was a feisty year — but I hope this material is enough to persuade you that “The Origins And Demise Of The Public Option” is, as it were, a case of “Hamlet without the Prince”; a principal actor is gone. I hope you are also persuaded to apply a hermeneutic of suspicion to the “public option,” and to its advocates, based on these fragments of underground history.
Structural Problems with the So-Called “Public Option”
It’s impossible to tell — once again, given the slippery and amorphouse nature of the “public option” as an actual, concrete policy proposal — what the real problems with this year’s model are going to be. But we can hazard some guesses, based on what its advocates themselves said in 2009, and on issues posed by the Physicians for a National Health Care program, the premier research source for single payer material
Here’s what Hacker said it would take to make the “public option” work in 2009:
Hacker’s papers laid out these five criteria that he and the Lewin Group said were critical to the success of the “public option”:
- The PO had to be pre-populated with tens of millions of people, that is, it had to begin like Medicare did representing a large pool of people the day it commenced operations (Hacker proposed shifting all or most uninsured people as well as Medicaid and SCHIP enrollees into his public program);
- Subsidies to individuals to buy insurance would be substantial, and only PO enrollees could get subsidies (people who chose to buy insurance from insurance companies could not get subsidies);
- SThe PO and its subsidies had to be available to all nonelderly Americans (not just the uninsured and employees of small employers);
- The PO had to be given authority to use Medicare’s provider reimbursement rates; and
- The insurance industry had to be required to offer the same minimum level of benefits the PO had to offer.
Hacker predicted, and both of the Lewin Group reports concluded, that if these specifications were met Hacker’s plan would enjoy all three of Medicare’s advantages – it would be huge, it would have low overhead costs, and it would pay providers less than the insurance industry did.
Of course, none of that happened, which did not prevent the “public option” advocates for continuing to push it. It also seems unlikely that whatever the “public option” turns out to be in 2016, that it will not meet these criteria either.
And here are the issues posed by PNHP:
Myth: A public option will force private health insurers to compete on a level-playing field, especially in limited markets. Fact: The Medicare HMO experience shows private plans undermine fair competition despite regulations. They avoid the expensively ill (called “cherry-picking”) and use their marketing power to attract the healthiest patients. Private HMO Medicare also costs 12 to 19% more than traditional Medicare despite having a healthier population. The current Medicare experience combined with experience in many different states that have tried this type of reform shows that public plans are left with the sickest patients and fail due to rising costs while the private insurers continue to collect premiums from the healthiest patients and maintain their high profits.
Myth: A public option will reduce health care costs. Fact: The public option will not reduce health care costs for several reasons: there are no savings on physician office bureaucracy ($85 billion annually would be saved annually with single payer), no savings on hospitals’ billing or internal cost tracking ($90 billion annually would be saved with single payer, hospitals already use computerized uniform bill UB-82), no savings on NH/home care bureaucracy ($24 billion annually would be saved with single payer), inadequate insurance overhead reduction ($93 billion annually would be saved with single payer). In summary, studies show that even if more than 50% of patients switch to a public plan, this will only result in 1/7 of the savings that could be achieved under a national health care system ($47 billion v $363 billion annually savings). Adding a public option to the array of private insurance companies in existence will only exacerbate the waste and inefficiency inherent in a patchwork system of health care finance. In their drive to fight claims, issue denials and screen out the sick, insurance companies generate more than $350 billion in administrative paperwork waste. The proposed insurance industry regulator entity will only add another layer of needless bureaucracy to this already bloat-heavy system. Maintaining this system means that no effective cost control is possible and the system will rapidly deteriorate as costs increase. Only single payer can expand and improve coverage to everyone without spending more than we are now.
In short, the so-called “public option” will kick the can down the road, at great expense in dollars, lives, and human suffering.
A Neoliberal Project
This is the where the Underpants Ghomes come in! From the famous South Park skit:
We just covered Step 2 (“?”) above, with “Structural Problems with the So-Called “Public Option.” But it’s Step 3 (“Profit”) that’s the real issue; it’s as if the “public option” crowd treat the Underpants Gnome business plan as a requirements document; there must be Step 3 — “Profit!”, and therefore there must be a Step 2, even if they don’t quite know (“?”) what it is (which accounts for the public option’s shapeshifting character; new question marks get swapped in as old ones fail. But of course, it’s the requirement for profit that’s the problem. The intercept:
[W]at’s happening with Aetna is the consequence of a flaw built into Obamacare from the start: It permits insurance companies to make a profit on the basic healthcare package Americans are now legally required to purchase.
This makes Obamacare fundamentally different from essentially all systems of universal healthcare on earth. (There is one tiny exception, the Netherlands, but of the four insurance companies that cover 90 percent of Dutch citizens, just one is for profit.)
In The Healing of America, probably the best book ever written about how different countries provide universal healthcare, T.R. Reid explains that functioning systems have a huge variety of characteristics but several “standard building blocks” — and one is that “financing healthcare must be a nonprofit endeavor.”
As Reid writes, other countries have made it work with many different kinds of healthcare providers — doctors can work directly for the government, as in the U.K., or not, as in most other rich countries. Hospitals can be for-profit or not. But no one has been able to create a viable system of universal healthcare based on citizens being forced to help insurance companies make a profit.
But why? Why do “public option” advocates keep pushing for a market-based solution that hasn’t worked in the past, doesn’t work now, and which nobody else has been able to make work? The most charitable explanation is that they are enraptured and captured by neoliberal mythology: “Rule #1: Because markets. Rule #2: Go die.”
No doubt there will be a great battle over the “public option” in the Congress to come, and perhaps even a famous victory: The Democrats may succeed in kicking the can down the road and preserving the role of for-profit health insurance companies in our health care system for another couple of election cycles. At some point, however, ObamaCare will collapse of its own weight and complexity again, and one can only hope that the combination of a loss of legitimacy for neoliberalsim and a resurgent left will be strong enough to force the adoption of the simple, rugged, and proven single payer.
 The Clinton quote is taken from her campaign site, and reads: “Third, consistent with her previous proposals on “public options”, Hillary will pursue efforts to give Americans in every state in the country the choice of a public-option insurance plan, and to expand Medicare by allowing people 55 years or older to opt in while protecting the traditional Medicare program.” The “public options” and Medicare are separate.
 Edwards, Clinton, and Obama all had public option proposals in their campaign 2008 platforms. HH omit that Obama’s plan didn’t have a mandate, rendering it utterly dysfunctional, which so ticked off Krugman he called out Obama on it.
Medicare for All could have been enacted with budget reconciliation if the Democrats were serious. Of course they weren’t. One contentious issue was people with generous employer provided health insurance who were, supposedly, leery of switching to single payer. Could Medicare for All have been designed to allow those people to keep their insurance plans?
Or they could have invoked the nuclear option and abolished the filibuster (which the pathetic Harry Reid actually did in 2013, to get some judges on the bench).
Never miss an opportunity to miss an opportunity.
Or just not renew the filibuster. We aren’t discussing sins of omission.
The ways of accomplishing this are well known by both parties.
Or they could’ve done what LBJ did when the Dixiecrats filibustered the Civil Rights Act of 1957. Bring in cots, have the Sergeant at Arms lock the Senators in chamber, let them filibuster their little hearts out, and then pass it when they ran out of steam. Nobody can talk forever – not even Strom Thurmond – and this time they’d have to do in front of the whole country on CSPAN.
Speaking as someone with “generous” Fortune 500 company health insurance, Medicare for All would be awesome! Our “generous” coverage gets worse every year, with this renewal period showing huge spikes in EE deductions and deductibles, along with Obamacare metal terms. ugh!! I’d gladly pay taxes totaling my ridiculous out of pockets amount to get peace of mind and coverage for everyone.
I’m in a similar boat and feel exactly the same as you. My “generous” benefits – and they are by comparison – are getting worse and worse. Premiums, deductibles, everything has skyrocketed, and the health insurance company finds every little way to stick it to the consumer.
As we all know here at NC, there are several huge issues, not the least of which is the fact that there’s little to no control over what doctors and hospitals charge for various services rendered. If you search around, you can a wide variance in charges. Often you don’t even know what the charges mean.
This is a ridiculous state of affairs that solely benefits the rich fat cats at the top of the Bigs in the health care INDUSTRY. Then there’s the issue of insane gouging going on for pharmaceuticals, as we witnessed this week with the EPI pen, and people talk about price gouging for diabetes medicine.
Best health care system on the planet?? Yeah, really – if you’re a health care industry CEO raking in profits from people’s pain and illnesses.
I’m VERY willing to pay higher taxes to have some sanity prevail. I don’t mind if some of my taxes help to underwrite medical expenses for a poor person. I’m not a sociopath, so there’s that.
I won’t hold my breath. Both parties are run by greedy sociopathic parasites out for themselves.
Lois Lane, I’ve tried on my own but I’m out of guesses as to what you intended. “Obamacare metal terms”
Bronze plans. With higher cost to employees as you get higher. They were pushing Bronze hard but the out of pocket risk was huge.
@Steve C – As I understand it, the answer to your last question is No. One of the main features of Medicare-for-All is to eliminate the insurance company financing of health care, which increases the cost of health care by 35-40%. This would be a big savings for those employers now providing health insurance as they would no longer be responsible for that cost. I often wonder why this point is rarely included in the list of reasons why Medicare-for-All would be the best solution.
thanks so much for writing this, it is great to have the history in one place
It does however describe the Public Option as something difficult, arcane, complicated, and mythical though. It’s not, it’s the approach used by every other G-20 country with the sensible view that taking care of people’s health should be a core activity of the State and not just a killing field for grifter insurance and pharma billionaires.
Ditto. I saw “public option” being pitched in the WP this Sunday and my immediate question was, “what are they not telling me?”. Thanks for equipping us!
Bush used budget reconciliation three times to get tax cuts for the rich with little or no Democrat support. Democrats acted like they never heard of it. It contradicts their pet narrative of helplessness.
My point, without discussing the relative merits of abolishing the filibuster, is they had the tools they needed without taking extraordinary measures. They left them lying on the ground and pretended they didn’t exist.
they are both funded by the same people (well the same class anyway) and those people get what they want. The narrative is for the rubes.
This article is an awesome overview. I worked as a low-level, know nothing volunteer for Colorado Coalition for Single Payer in, oh, about 1994 and I remember that there was a super amount of enthusiasm for activism and, because I was young and green, I had a lot of respect and faith in government. Then Hillary and Co said that single payer was off the table and it was game over because of the impossibility of getting anything done without the support of the party elites. That was my last attempt at being active in anything “public”… I was so naive! I realized that any Democratic-aligned activism is just a sham unless the Party elites can’t turn a buck off of it. NAFTA was the beginning of the realization. I can see a lot of Bernie supporters feeling the same betrayal of their enthusiasm today. My question is, why do people vote for Democrats when they are only interested in banking their profits from their legislation? Sheesh, at least the GOP is candid about their allegiances!
Isn’t the public option just another way to allow continued rent extraction from what ought to be a public function?
According to this, the market cap for managed health care providers is $76.5B. http://markets.on.nytimes.com/research/markets/usmarkets/sectors.asp?sector=56 It would be a drop in the bucket for the Fed Gov to buy their businesses.
Yeah you want a solution just buy the dam insurance companies off.
And what do they give us? Single player in many states instead of Single Payer that we want.
I say abolish the health insurance companies, go to medicare for all, put hospitals, pharma on a diet and let them compete.
“showing the combination of timidity and cognitive capture so characteristic of the Democrat establishment (including its “progressive” faction) on health care policy (or indeed any policy). ”
Is timidity and “cognitive capture” really the explanation? Isn’t current policy exactly what most Democrats want, reflecting the power of the insurance industry — both campaign contributions and advertising — and the hostility of the medical establishment to cost controls like those seen under Medicare? Either constituency has veto power over the desires of the public or the public good. Together, these industries are invincible. If health care as a % of GDP dropped to the level of Germany or France, these players would be a lot less rich, the losses to them would be huge.
Single Payer will never be feasible, as long as insurance industry financial support to politicians trumps the general public support.
Simple as that.
I mean come on, it is really late in the game to tell a massive industry like health insurance they are going to be obsoleted in the largest market in the world. You don’t have to be a banana republic to have a hard go of it.
Excellent article. It is always important in prefacing our healthcare woes by categorizing our problems as follows:
Method of Payment: Insurance/single payer discussion of this article
Cost for actual services provided: Regulation of Health Care System (ex. epipen type issues, where regulation enforces monopoly)
We need to fix both issues, pull out both of Dracula’s fangs so to speak, or else we will be bled dry with our aging population.
Your reporting on this through the years is invaluable. It calls out the duplicity of career “progressives” thoroughly.
I still remember being asked to sign a petition for the ACA by an OFA volunteer. This was probably in June or July 2009. It lacked any mention of a public option even! (Must have been after Obama silently traded it away.) I refused to sign and the volunteer gave me puzzled look.
The lives lost in service of the Market are certainly incalculable in this and other neoliberal ventures.
One correction, the double negative in this sentence says the opposite of what you clearly meant to write:
“It also seems unlikely that whatever the “public option” turns out to be in 2016, that it will not meet these criteria either.”
The profit maximization model of health care (“”) in America is and has long been the problem, predating Obamacare by decades. The fact is our rulers are too beholden to the profit maximizers to do anything that would interfere with their money making. ACA is deliberately designed to enhance the profits of certain sectors of the HC industry, and it seems to do it pretty well. Where profits falter, the industry rejiggers its participation or withdraws completely. Prior to ACA, for example, finding rural health care was a severe problem in many parts of the country. It still is despite promises of improvement under ACA. The problem being lack of profit.
“Public option” of course was never defined because it was never a real thing. “Single payer” has its own problems in the public’s mind, because throughout its history, it’s been seen largely as a meaningless term used by insiders to refer to something only they are cognizant of. “Medicare for All” works better because at least people know what Medicare is — even if they confuse it with Medicaid and its variants.
The withdrawal of insurers from various markets (“not enough profit!”) looks to me like an engineered opening for “experiments” in a public option, should the situation require it. A single remaining insurer in these markets may not require an alternative, however, and watch out, the single insurer may morph into “single payer.” Making terminologies meaningless is part of the neoliberal game plan, after all.
Profit maximization is a policy decision, not an act of God. Policies can change, but policies like this one will only change under extreme public pressure and economic/political duress. So far, nothing like that has been applied to this particular problem. The current outrage over drug profit maximization (widespread, not simply EpiPen) may be a catalyst for the kind of pressure necessary for significant health care policy changes, but it will still take too long and be inadequate.
It’s the American Way.
Just ran across this book that covers some of the history of ObamaCare. There’s a brief audio interview with the author on the page also. In case you are interested.
Single payer probly should read single prayer…because…well, you know…