(Untitled)

[silentclarity]

I wrote some good (at least I think so) posts on another forum about why I don't think a public option should be a mandatory feature of a healthcare reform bill.  I figured some people who read my journal might be interested in them, so here they are!

Post The First (in which Jeff sells out on the public option)

A lot of people are missing the forest

Comments

[pseudonoise]

Thanks for posting this.

I'm not sure if you've addressed what I see the main need for a public option, which is that insurance must be mandatory in order to solve the problem of adverse selection. Without a public option, this turns into a give-away to health insurance co.s, with the only cost control mechanism being extra competition within the Exchange. I haven't paid enough attention to how the exchange will work so I don't know if this will be enough.

The public option isn't supposed to be cheaper solely due to its bargaining power, although that will happen if it gets big enough. It's also non-profit, and I expect would spend less on advertising and compensation compared with similar-sized insurance agencies.

[silentclarity]

The adverse selection problem is solved by an individual mandate. If you can afford insurance, you must purchase it. If you don't, you're going to get hit by some fines.

Regarding how the public option being cheaper and squeezing private insurance: Health insurance companies aren't particularly profitable - the industry posts a 3% profit. Presumedly a not-for-profit public option would save that 3%.

We do have a good model for what a strong public option would look like - Medicare. And while Medicare is definitely cheaper and more efficient than private insurance, it's not enough. Medicare cost growth is unsustainable; it just so happens that it's slightly less unsustainable than private healthcare costs.

[pseudonoise]

Sorry, I meant the mandate itself was the problem without the public option -- IMO the two (mandate & public option) really need to go hand-in-hand for this to be anything but a give-away to private insurance. I don't see how we can mandate unaffordable insurance -- we have to find a way to make at least one of the options for insurance affordable. If the gov't gets stuck with the bill through subsidies, again this is a give-away because private insurance has no incentive to control costs, but we've given them a larger customer base

[silentclarity]

Medicare part D is forbidden to use its bargaining power on prescription drugs. That sucks, and is straight up a giveaway to pharmaceutical companies. Other than that though? Medicare pays less for medical goods & services than private insurers. It's a good deal less, but it's not enough. The cost growth curve still points at 100% US GDP for healthcare on a long enough time horizon