A "single payer" advocate insists the "public option" proponents have baited-and-switched us into plans that can't and won't work

"Somewhere along the line it became obvious that the Hacker model was too difficult to enact and had to be stripped down to something more mouse-like in order to pass."

-- Kip Sullivan, in "Bait and switch: How the 'public option' was sold," on the PNHP (Physicians for a National Health Program) blog

by Ken

As I keep saying, in different ways, one of the crucial problems with enacting meaningful health care reform is that the subject is by definition so vast and complex. Only liars and sociopaths can reduce it to the size of a sound bit. And so it's with deep regret that I warn you I'm about to dip into a crucial piece on the subject which I'm afraid you have to read in its entirety. I'm really sorry about that, but this is one of those cases where the length of the piece comes not from its author's inability to focus or organize his thoughts but from the complexity of the subject matter addressed.

The piece, as noted above, is called "Bait and switch: How the 'public option' was sold." According to the biographical note, the author, Kip Sullivan, "belongs to the steering committee of the Minnesota chapter of Physicians for a National Health Program." As you'll see in the piece, he makes no bones about or apology for being an unequivocal supporter of a single-payer health insurance system for the U.S. In this piece he attempts to make clear, not just why the plans being talked about now in Washington won't accomplish what single-payer would, but why those plans won't accomplish much of anything useful:

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.

To appreciate what he calls the public-option "bait and switch," Sullivan thinks for starter we ought to know what the hell the public option is. This he describes as "the bait":

“Public option” refers to a proposal, as Timothy Noah put it, “dreamed up” by Jacob Hacker when Hacker was still a graduate student working on a degree in political science. In two papers, one published in 2001 and the second in 2007, Hacker, now a professor of political science at Berkeley, proposed that Congress create an enormous “Medicare-like” program that would sell health insurance to the non-elderly in competition with the 1,000 to 1,500 health insurance companies that sell insurance today.

Hacker claimed the program, which he called “Medicare Plus” in 2001 and “Health Care for America Plan” in 2007, would enjoy the advantages that make Medicare so efficient – large size, low provider payment rates and low overhead. (Medicare is the nation’s largest health insurance program, public or private. It pays doctors and hospitals about 20 percent less than the insurance industry does, and its administrative costs account for only 2 percent of its expenditures compared with 20 percent for the insurance industry.)

Hacker predicted that his proposed public program would so closely resemble Medicare that it would be able to set its premiums far below those of other insurance companies and enroll at least half the non-elderly population. These predictions were confirmed by the Lewin Group, a very mainstream consulting firm. In its report on Hacker’s 2001 paper, Lewin concluded Hacker’s “Medicare Plus” program would enroll 113 million people (46 percent of the non-elderly) and cut the number of uninsured to 5 million. In its report on Hacker’s 2007 paper, Lewin concluded Hacker’s “Health Care for America Plan” would enroll 129 million people (50 percent of the nonelderly population) and cut the uninsured to 2 million.

Sullivan points out, "Until last year, Hacker and his allies were not the least bit shy about highlighting the enormous size of Hacker’s proposed public program," and notes that the Lewin Group's favorable 2008 analysis prompted the Campaign for America's Future's Roger HIckey to celebrate on Huffington Post that Hacker's Health Care for America (HCFA) plan --

would cover everyone in America, while saving the US economy over a trillion dollars over the next decade. And the efficiencies achievable primarily through Hacker's public health insurance plan would save enough money that, after modest premiums from employers and individuals, the new system would cost the US government only $50 billion more than what we are paying now for a system that leaves millions uninsured or badly insured.

But none of that, Sullivan explains, figures in the draft proposals released last month by the Senate HELP Committee and, acting jointly, the three relevant House committee chairmen. "Obviously," he writes, "the 'public option' in the Senate HELP committee bill (zero enrollees; 34 million people left uninsured) and the 'public option' in the House bill (10 million enrollees (maybe!); 17 million people left uninsured) are a far cry from the 'public option' originally proposed by Professor Hacker (129 million enrollees; 2 million people left uninsured)."

What particularly upsets Sullivan, and prompts his charge of "bait and switch," is that he doesn't hear any of the "public option" proponents making any mention of the gap between the promise of Hacker's HCFA and what's on the table now. Hacker himself --

testified before the House Education and Labor Committee that “the draft legislation prepared by [the] special tri-committee promises enormous progress.” He went on to enumerate all the benefits of a “public option.” Yet the House tri-committee proposal bore no resemblance to the public plan he described in his papers and that the Lewin Group analyzed.

Now comes a big but crucial chunk. Instead of whomping on the discouraging forecasts of the Congressional Budget Office (CBO), as most "health care reform" proponents have been doing, Sullivan finds them quite believable. And now he sets out the heart of the differences betwen the "bait" and the "switch" proposals:

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);
• The 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. As a result, the “public option” would be able to set its premiums below those of the insurance industry and seize nearly half the non-elderly market from the insurance industry. According to the Lewin Group’s 2008 report, Hacker’s version of the “public option” would, as of 2007:

• Enroll 129 million enrollees (or 50 percent of the non-elderly);
• Have overhead costs equal to 3 percent of expenditures;
• Pay hospitals 26 percent less and doctors 17 percent less than the insurance industry (but these discounts would be offset to some degree by increases in payments to providers treating former Medicaid enrollees); and,
• Set its premiums 23 below those of the average insurance company. . . .

Now let us compare Hacker’s original model with the mousey “public options” proposed by the Senate HELP Committee and the House. Of Hacker’s five criteria, only one is met by these bills! Both proposals require the insurance industry to cover the same benefits the “public option” must cover. None of the other four criteria are met.

Sullivan then takes a close look at what would confront the executive director of the "public option" (as envisaged by the "not quite as weak" House version) on "your first day on the job." Unlike Medicare, which started with "a ready-made pool of seniors," you start with zero enrollees. After looking at the problem from all angles, he concludes, "You find that the 'public option' is at the mercy of the private insurance market, not the other way around."

Sullivan discusses, and has sympathy for, the various paths by which the original HCFA supporters (including its inventor) scaled their vision down to this "mouse" of a program they're now defending so vehemently. The result, though, is a mess for advocates of meaningful health care reform, who, he says--

must continue to educate Congress and the public on the need for a single-payer system. We must also convince advocates of the “public option” that they have made two serious mistakes and, if they learn quickly from these mistakes, that real reform is still possible.

The first mistake, he says, was believing that any meaningful economies could be achieved by a system "that merely took over a large chunk of the non-elderly market," because the very competition so beloved of all our "free market" apostles "imposes[s] unnecessarily large overhead costs on providers." He notes, "It is precisely because Medicare is a single-payer program that its overhead costs are low."

The second mistake -- and here he squarely addresses the practical politics of the subject -- "was to think the insurance industry and the right wing would treat a 'public option' more gently than a single-payer."

Conservatives have a long history of treating small incremental proposals such as “comparative effectiveness research” as the equivalent of “a government takeover of the health care system.” It should have been no surprise to anyone that conservatives would shriek “socialism!” at the sight of the “public option,” even the mouse model proposed by the Democrats.

So is there any hope?

It is conceivable the “public option” movement could decide the bait-and-switch strategy was wrong and that their only error was not to stick with Hacker’s original model. It should be obvious now that that would also be a tactical blunder. We have plenty of evidence now that conservatives will react to the mousey version of the “public option” as if it were “a stalking horse for single-payer.” We can predict with complete certainty they will treat Hacker’s original version as something even closer to single-payer. If a proposal is going to be abused as if it were single-payer, why not actually propose a single-payer? At least then, when a particular session of Congress comes and goes and we haven’t enacted a single-payer system, we will have educated the public about the benefits of a single-payer and have further strengthened the single-payer movement.

Sullivan finally suggests that we don't have to accept the conventional wisdom that if no bill is passed by December, there will be no opportunity for health care reform until 2013: "If the 'public option' wing and the single-payer wing join together to demand that Congress enact a single-payer system, December 2009 need not constitute a deadline."

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