Is the Public Option Negotiable?

This is the question of the moment in the health care debate, though everywhere I look the people in Congress seem to have it all wrong.

Speaker Nancy Pelosi addressed it thusly: the bills coming from Committee have it; Obama wants it; we can pass a bill with it. Blue Dogs notwithstanding, she's probably right about that, though all would view her position as being the bluster that it was.
CNN's Jon King pressed her on it, and she basically said, "No."

Senate Minority Leader Mitch McConnell took it on forcefully. It seemed to him to be a genuine bipartisan moment.

As a parable, I suppose, he trotted out the Ford plant in his home base of Louisville.* They unfairly have to compete with reorganized GM, he said, because GMAC is subsidized by the government and Ford's finance arm is not. Not only that, he harnessed the trotter with "well, most Americans are satisfied with their health insurance coverage". So, "No."

Blue Dogs are worried that their blue Democrat constituents manning the phones for the insurance companies are going to lose their jobs as the result of unfair competition with a Federal public option "takeover". So, they're leaning hard toward "No Way!"

Finally, in Sunday's New York Times (link in title) there is very thorough editorial review of what we can expect from health care reform. In the entire length of the article, though, there is no mention of "public option". Their analysis comes directly from the meetings of a bipartisan Gang of Six (three Dems, three Republicans) who are meeting daily to come up with a legislative proposal which can get through the Senate. They have already looked at the question of the moment and come to the conclusion, "Not this Time", and the Times bought into that enough that they didn't even mention it. Shame on them for the duck.


I have to say that each group has it all wrong.

First, with regard to the guy who's Really Blue and Really a Dog, McConnell, and leaving aside the question of why Ford doesn't try to take advantage of that banking opportunity on behalf of its shareholders, I'd have to point out that many of those satisfied folks in the poll are benefitting from public offerings from Medicare, Medicaid, and the Veterans Administration. Take those folks out from the poll and the favorability rating for people's current health insurance is probably worse than 50-50 (or 40-40, if you will).

Pelosi is wrong if she really thinks that an unfair competition can be imposed on the public by the government. Such an attempt would end up getting slammed in the courts, as with "busing to achieve racial balance" if we remember that disaster. She can lead the House to the public pool, but she can't make Congress drink this initial version of the option coming from House committees--it will have to be watered down.

The Blue Dogs are going to have to accept a change to the status quo; even the insurance companies are very aware of that. They seem to be willing to go as far as giving up that wonderful question, "Have you ever been denied coverage?" which saves them so much money.

Unfortunately, their clients (the real ones--the big health care conglomerates) have spent the last 15 years, the ones since ClintonCare failed to come to a vote, competing on cherry-picking and on finding ways to repeatedly raise premiums and deductibles. There is a popular support for the attempt to "Keep Them Honest" that will emerge as we go deeper into the effort to discern the popular will during the legislative break month coming up.

The Correct Answer: "Yes"

There has to be a public option--it is one of the key promises of the Obama campaign, it will be a critical measure of his success, and it will be absolutely required by his core support group. No plan can be acceptable without it, though one that fudges a bit on the requirement--like Kent Conrad's Cooperative approach--may be tempting. (But Blue Cross/Blue Shield has been tried and found wanting.)

The terms of competition between the public and the privates are not fixed in stone, though. The minimum expectation is that the public route will break even after set-up costs and excluding assistance to poor applicants who can prove they can only afford part of the cost.

One could require a higher standard, such that the public plan produces a Return on Equity (ROE) of 8-10%, adjusting the capital and fees for the program to meet targets, which would become the health care policy equivalent of M2 money growth.

Also, though, the terms of competition should be structured so that the private insurers have an equal or better shot at getting public health insurance assistance dollars, which should not been given preferentially to the public option program.


*Mine, too! I should look into the Chinese character set that would exactly replicate the locals' "Lu-i-vl" pronunciation. It would give them (the Chinese reader preparing for a trade mission) so much cachet when they come to Ford, bringing capital, if they had the pronunciation down just so.