Public plan dominates discussion

August 1, 2009
Jill Wechsler

The public plan could be a co-op, or it could be placed under a trigger mechanism that would kick in if the private market doesn't live up to expectations

The debate over reshaping the nation's healthcare system has been mired in disputes about when and whether to establish a government-run health plan that would compete with private insurers. Many Democrats insist that a public plan is needed to ensure broad access to affordable coverage; some hope that a single-payer system ultimately will evolve.

Republicans fear, as do insurers and providers, that a government plan eventually will drive private insurers out of business. In a June letter to Senate Health Committee Chairman Edward Kennedy (D-Mass.), the Blue Cross and Blue Shield Assn. and America's Health Insurance Plans stated that it's impossible to create a government plan that could operate on a level playing field because it "would use its built-in advantages to take over the health insurance market."

The hot button issue is whether the government plan would have access to Medicare rates for hospitals and providers. In many markets, Medicare pays hospitals 30% less than do private insurers, said Investment Advisor Christine Arnold of Cowen & Co. at a meeting last month sponsored by the Center for Studying Health System Change (HSC).

"We'll be going to single-payer system if we go down this road," Arnold predicted. Some reformers believe that a public plan could compete more fairly if required to be actuarially sound and denied access to Medicare rates or networks.

FALLBACK OPTIONS

The dissension has prompted talk of compromise. One option is to establish a public plan as a back up, with a trigger mechanism that would kick in if certain conditions emerge, such as a lack of private competition or too-high premiums and costs. A fallback approach was included in the Medicare prescription drug program in 2003, but was never triggered because competition turned out to be highly robust. Another approach is to establish health cooperatives, which would have some government oversight and support but operate privately.

White House Chief of Staff Rahm Emanuel indicated that a competitive market able to "keep private insurers honest" is more important than establishing a government-run system. Insurers propose that before establishing a public plan, reformers first explore whether insurance market reforms can broaden coverage to sufficiently reduce the number of uninsured.

President Obama wants to sign health reform legislation this year and has signaled he'll accept a measure with a $1 trillion-10-year price tag that covers at least 75% of the uninsured. Leading Democrats insist they won't support a reform bill without a public plan, but the President is keeping options open. Many of the legislative details will be hammered out on Capitol Hill this fall by a committee formed to reconcile differences between House and Senate bills. There will be considerable horse-trading and maneuvering over health exchanges, public plans, tax reforms and price controls, with everyone keeping an eye on costs and coverage.

Jill Wechsler, a veteran reporter, has been covering Capitol Hill since 1994.