Public option’ and its role in the health care debate

PHILADELPHIA — So what is the “public option”?

And why has it become such a threat to an overall health care overhaul that on Sunday, the administration suggested President Barack Obama would settle for a compromise — nonprofit insurance cooperatives?

The public option would be a government-run insurance plan, and co-ops in theory would be owned and operated by millions of policyholders.

But first, a little perspective.

Both parties in Congress agree on about 80 percent of the health care agenda — such as getting rid of exclusions for pre-existing conditions and requiring individuals to buy insurance while offering subsidies to people who can’t afford it.

Another proposal both parties support is creating an insurance exchange.

This would be a place (likely a Web site) where millions of individuals and members of small groups — who can’t get coverage through their jobs — could come and buy health insurance at reasonable rates.

In theory, Americans would find good coverage options and more affordable premiums on the exchange. Insurers would be drawn there, willing to sell competitive plans, because of so many new customers.

What Obama and so many Democrats have been proposing — and what is so controversial — is creating a “public option” to compete on the exchange against these commercial plans.

People who can’t get insurance through the workplace — a growing percentage of Americans — could pick insurer A, B or C or the new government-run plan.

Obama has pitched this as a way to control costs, to give consumers more choice and to keep the insurers honest, forcing them to keep their premium prices low, especially in areas where the number of commercial insurers offering plans is one or none.

Critics say this would be unfair competition, aimed at putting insurance companies out of business. It also would expand government control and influence.

From the beginning, liberals in the health care debate have trumpeted the public option as an indispensable element to keep insurers honest.

Said Mark Pauly, a health care economist at Penn’s Wharton School: “I do think the strong advocacy of a public option by the left wing has done the most to help out the right-wing extremists. By pushing for that so aggressively and explicitly, that has scared everybody in the middle.”

In effect, the public option has become a symbol, a lightning rod, elevating its importance in the overall health care overhaul.

“It finally hit me a week ago,” said Len Nichols, who has spent four years working closely with Congress to develop bipartisan solutions. “This is not about health policy at all. This is about the role of government in society. Health policy is a metaphor.”

Nichols, a health care economist with the New America Foundation, is convinced that workable solutions for either a public option or a cooperative have been on the table in Congress for months. The holdup is politics.

Cooperatives may win bipartisan support for change, but White House press secretary Robert Gibbs said Tuesday that Obama’s position on the public option “is unchanged; that we have a goal of fostering choice and competition in a private health insurance market. The president prefers the public option as a way of doing that.”

Cooperatives would not be run by the government, but would be operated by and responsive to people who buy their insurance from it.

Pauly says the issue is not whether Congress creates a public option or co-ops, but how much power it gives to the new creation.

“If we create one that we don’t give you any advantage, no up-front money, no prepackaged enrollment, and you have to go out and sign up people, I don’t think that will make much difference, public or private,” Pauly said. “The real issue is how much power does it have.”

Nichols says a co-op, to get up and running, would still need an infusion of public dollars. If it wanted to compete just like a private insurance company, it would need by law to keep cash reserves to cover claims in case it went out of business.

This could easily be billions of dollars.

“Easiest way is for the federal government to inject the capital,” Nichols said. “You could make that into a loan, and require policyholders to pay it back over time.”

But this could still be a deal-breaker for conservatives, he said, who “don’t want a single federal dollar going to this venture.”

Nichols said he believed that Iowa Sen. Charles E. Grassley, the leading Republican on the Senate Finance Committee and Senate Republicans’ most influential voice on health care, was the “linchpin.”

If he supports the cooperatives as proposed by Obama and Montana Democratic Sen. Max Baucus — the Finance Committee chairman, with whom Grassley has been working for a bipartisan bill — criticism from the far right will lose much of its power and a bipartisan bill will likely pass, Nichols said.

But if Grassley sides with the most conservative members of his party, who want no government expansion over health care, this could make bipartisan support, and passage of a health care overhaul itself, almost impossible, Nichols said.

“This struggle is going on in the soul of Chuck Grassley,” Nichols said. “If he decides to go make a deal work, then it becomes legitimate. If he stands with Baucus, then it makes it much harder for all those accusations to stick. The right desperately wants him on their side, for the same reason. So he’s got to ask himself: Which side is he on?”

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