The public option "trigger" is receiving attention again. David Rogers of The Politico reports on a new policy paper issued by the Urban Institute recommending that health care reform not adopt a public option immediately, but rather allow the government health insurance plan to become effective only if health care costs contine to climb. There are both practical and political advantages to such a plan.
Referring to the Urban Institute study, Rogers states:
Democrats searching for a compromise on health care reform may find a little Thanksgiving light in a new policy paper out Wednesday: Skip a “weak” public option now in favor of a much stronger one that would kick in automatically if the health industry doesn’t meet its promises to slow the growth in medical costs.
The Urban Institute report was authored by Robert Berenson, John Holahan and Stephen Zuckerman, and was released on November 25. Here is a summary of the Urban Institute report, and here is the full report.
The Urban Institute favors a strong role for the government in providing health insurance for two simple reasons. First, due to consolidation in the insurance industry, insurance companies have far more bargaining power than individuals and employers – even large employers are at the mercy of health insurers. Second, due to consolidation in the provider community, health insurers lack the ability to negotiate reasonable rates with doctors and hospitals. Essentially, the Urban Institute concludes that only the government – society as a whole – has the economic clout to negotiate lower health care costs. The summary states that other cost containment measures are not likely to be effective:
We argue that a strong version is necessary because there is little else in health reform that can be counted on to contribute significantly to cost containment in the short term. Capping tax-exempt employer contributions to health insurance has great support among many analysts (including us), but it faces considerable political opposition. Proposals such as comparative effectiveness research, new payment approaches, medical homes and accountable care organizations, all offer promise but could take years to provide savings. Thus, the use of a strong public option to reduce government subsidy costs and as a cost containment device should be an essential part of the health reform debate.
The Urban Institute recognizes, however, that a strong public option is not politically attainable at this time. Accordingly, it recommends that instead of enacting a weak public option at this time, that a strong public option ld be developed to come into play if health care costs continue to accelerate upward:
The other alternative is to establish a strong public option but not implement it unless a triggering event occurred. The goal would be to allow the private insurance system to prove that it can control costs with a new set of insurance rules and state exchanges. The triggering events could be the level of premiums exceeding a certain percentage of family incomes or the growth in health care spending exceeding certain benchmarks. Since the public option would only be triggered because of excessive costs, however measured, we assume that a relatively strong version of a public option would come into play.
The Urban Institute predicts that without a strong public option health care costs are likely to continue their upward trend. This is, in fact, the prediction of virtually every study on the subject. See for example, the June 29, 2009 CMS Report on Projected Health Expenditure Projections 2010-2019, showing that spending on health care in the United States will double over the next ten years; and the 2008 AHIP Report on The Factors Feuling Rising Health Care Costs, an insurance industry study showing that health care expenditures have doubled over the past decade, rising at a rate approximately double that of inflation.
The alternative to a strong public option, warns the Institute, is massive government intervention in the health care industry – in essence, price controls and rationing:
We recognize that taking a strong public option off the table may be necessary to enact reform legislation. But this will mean,at a minimum, higher government subsidy costs by not permitting a payer with substantial market power to bring cost containment pressure on the system. The outcome is likely to be that costs will continue to spiral upward. In effect, the nation would be relying on the range of promising pilot approaches to cost containment that would take some time to be successful. If they are not, we may be left with increasingly regulatory approaches, such as rate setting or utilization controls that apply to all payers. This would mean much more government involvement than giving people a choice of a low-cost public option that would be required to compete with private insurers.
I think that there is a great deal of merit to the Urban Institute's recommendation . There have been news reports (here and here) that President Obama favors the "trigger" option, and this report may strengthen his hand in this regard. Senator Olympia Snowe has signaled her preference for this approach, and such a plan might gain the support of other moderate Republicans. Few people will be content to sit idly by if health care costs continue to escalate. Finally, in a country as dedicated to free enterprise as ours, the public option should be a last resort.
Visit Professor Huhn's website on health care financing reform for links to information about proposed legislation, studies and reports, public agencies, and private organizations concerned with this issue.
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The public option trigger would be ok if it ever got pulled. I think that it will get passed though and the benefits could really help a lot of people, just like it is in Ohio. http://cli.gs/z3AtaY/