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Senator Majority Leader Harry Reid has just let his preference be known about the public option. He claims wants a public option that is not government-run like Medicare but instead, a “private entity that has direction from the federal government so people that don't fall within the parameters of being able to get insurance from their employers, they would have a place to go.”


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Harry Reid could mean a few different things with his statement. The first is that he really does mean something very similar to Medicare but is only trying to muddle the debate. Very few people seem to really understand how Medicare is run on a day to day basis. Only part of Medicare is really "run by the government." Like many government programs, most of its functions are contracted out to private companies. Medicare does not directly collect claims from providers but contracts out many of the administrative functions to private companies.

Progressives should not be very bothered if a public option contracted out the most of the administrative functions to a private company. As long as the government is the ultimate insurer, payer, and decider on the issue of claims, that is what is really important. What is most important is that the private entity contracted by the government has no financial stake in whether a claim is or is not denied.

I suspect what Harry Reid really wants is what I labeled the “national semi-independent non-profit” public option. I think this has less to do with a political philosophy and more to do with budgetary optics. Having the government collect premiums and pay out claims would appear to be an expensive expansion of government (even if it is budget neutral). To make the public option appear off the federal government's budget you can create a new non-profit trust or company from which all claims are paid. You can also mandate that this new non-profit entity is run by a government appointed board and is directly regulated by some part of the department of HHS.

With a “national semi-independent non-profit” public option, the devil is always in the detail. It is possible to set it up so that it would behave in a manner that is almost indistinguishable from a government run program. It is also possible to set it up so that it ends up completely failing or acting indistinguishably from current private insurance companies.

What I think Reid is advocating is much closer to (and probably to the left of) Schumer's single national cooperative compromise. The health insurance equivalent of the Corporation for Public Broadcasting, Federal Reserve, Amtrak, FDIC, etc... It does not sound anything like Conrad's worthless idea of small independent regional cooperatives. Reid seems to want a single national plan with direct government oversight; both are critical ingredients missing from Conrad's proposal.

Crossposted on The Walker Report

Extended (Optional)

Originally posted to thehouse1 on Sat Aug 29, 2009 at 12:17 PM PDT.


What does Reid mean by a private "public option"?

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