Since Brian Beutler thinks the public option might make a comeback, I decided to post about something that's irked me for while...
Most of the time, when people think of "the public option," they think of it as just one key part of ObamaCare that died in the negotiation process. But the public option was much more than that. If Democrats had skipped the entire "comprehensive health reform" process and simply expanded Medicare to include a public exchange, they could have obviated the need for most of the complicated and controversial provisions in the Affordable Care Act.
I know what you're thinking: "What the hell is this guy talking about?" But keep reading, and I promise you'll understand by the end. And to be clear, I'm not trying to second-guess the President or Nancy Pelosi or anyone else. Politics is extremely complicated with lots of moving parts, and hindsight is always 20-20. But the fact that you can't change the past isn't a good reason not to reflect how different policies could have achieved similar outcomes. And as far as I know, there was NEVER any mention of the idea of passing a stand-alone public option. It was always mentioned as part of a "comprehensive" package.
Instead of a 1,000-page bill that terrified the country into "ZOMG government takeover of health care" hysteria, Democrats could have accomplished most of the same goals with a ten-page bill and even had an awesome political talking point to go with it: "we are not touching the private insurance market, we are simply offering an option for those who are locked out of it."
Contrary to popular belief, the basic crux of ObamaCare was not "universal coverage." Universal coverage would be single payer, and we can't have that, because what are we, some kinda communist dictatorship like Germany or Canada? And single payer was never gonna happen in 2010. Expanding Medicare would have been much more plausible. The politics of expanding a popular program are much more friendly than telling the country you're going to nuke their health insurance. Anyway, the main point of ObamaCare was not universal coverage, but rather to vastly expand coverage for people who needed or wanted it. That is a key difference.
The government didn't need an individual mandate or an employer mandate or a ban on preexisting conditions or even an 80/20 rule to expand coverage. And they definitely didn't need to expand Medicaid. All they needed to do was set up a "Medicare Public Exchange" in which anyone who wanted a plan could buy one, at a percentage of their income. Low-income people could get one for free, gradually eliminating the need for Medicaid altogether... more on that later.
And no, this wouldn't be some kind of "high risk pool." People predicted that the ObamaCare enrollees would skew older and sicker, and that didn't happen. With a public exchange, a death spiral would be even less likely to happen because the government would be charging much less than for-profit insurance companies, meaning "young healthies" would be even more likely to sign up than they were for ObamaCare.
Let me explain exactly what my "Medicare public option" would have looked like and what it would have accomplished:
The Medicare Public Exchange would:
1) not discriminate based on preexisting conditions or sex.
2) charge you a simple percentage of your income for a plan, because ACA's subsidy formula is a disastrous mess. I have detailed a more breakdown on that below.
3) be an arm of the Medicare program, instead of Medicaid. Medicaid is controlled by the states, which allowed the Supreme Court to gut the expansion, leaving it up to states. The federal government controls Medicare, however, meaning the high court could not have easily gutted it. Furthermore, Medicaid's reimbursement rate is so low that few doctors accept it. But almost everyone accepts Medicare.
4) include a similar "tier" system of bronze, silver, gold, platinum so people can decide how much risk they want to take.
The Medicare Public Exchange would make the following ObamaCare provisions unnecessary:
1) The "Preexisting Conditions" clause
There's no need to force insurance companies to take sick people if the government offers to take sick people. The government, unlike private companies, isn't worried about shareholders or profits. This would have been a formidable talking point ("The government has a responsibility to ALL its citizens" etc) and any claims of "government takeover" could be countered with "this bill doesn't touch the private insurance market."
2) Individual mandate.
The individual mandate was a compromise to insurance companies who knew that many of young healthy people who are necessary to avoiding a death spiral would need a strong push (the "stick") to get them to cough up $200 a month for services they may or may not need. But the public exchange bill wouldn't have touched the private market, making this provision unnecessary and saving Democrats lots of political headaches.
3) The Employer Mandate
Because of all the fear-mongering over the debt, Democrats seemed obsessed with making ACA "deficit neutral" so they included lots of controversial provisions, such as the medical device tax and cuts to Medicare overpayments (although Republicans voted for those same cuts). But one of the dumbest provisions was the employer mandate. You can see the White House fumbling with it every year. Why set up exchanges for people locked out of private insurance and then tell employers that they must provide their employees coverage? It makes no sense. It seems that it was written just as a way to collect more revenue and make the bill the "deficit neutral."
Furthermore, another headache with ObamaCare is that anyone who's offered insurance through their job is ineligible to buy an exchange plan, unless the employer plan has almost no benefits or is obscenely expensive. In many cases, this means employees are stuck in a plan that is still very stingy or moderately expensive. But they have no choice in the matter. If someone wants to deny the insurance their employer provides, and purchase government option, they should be able to do that.
The Medicare Public Exchange would have accepted everyone, even people offered insurance through their job, and made the employer mandate completely unnecessary. (As a side note, employer-provided coverage makes no sense. I don't get homeowners or health insurance through my job, so why health insurance?)
4) The 80/20 Rule
The 80/20 rule is a lesser known provision that forces insurance companies to spend at least 80% of premiums on health care rather than administrative costs and profits. It seems to be working quite well right now, but I believe that the Medicare Public Exchange would have made this provision unnecessary. Public competition would have forced insurance companies to keep their premiums low.
5) HealthCare.Gov Disaster
OK, this isn't a "provision" of the law, but rather a necessary tool to sign people up. But the website was unquestionably the biggest face plant of Obama's tenure. It was completely self-inflicted and avoidable. I could write a whole other piece on how avoidable that problem was... but I digress. The Medicare Public Exchange would still need a website to sign people up, but it wouldn't be nearly as complicated or glitchy.
One thing that really bogged down healthcare.gov was the issue of deadlines. ObamaCare mandates "enrollment periods" so that people don't just buy a health insurance plan after they break their arm or get cancer. We all saw how the rush to buy insurance before the deadlines in December and March led to outages and egregious errors. The Medicare Public Exchange has no individual mandate and thus has no enrollment period or deadlines. They could have rolled out the Medicare Public Exchange state by state, slowly working out the kinks.
Furthermore, because it's so straightforward and easy to understand, the Medicare Public Exchange would have never been named "ObamaCare" and attacked relentlessly, so there wouldn't have been any grand opening day in which political reporters who already have health insurance created accounts on a health website to see how it was working. It would have been completely uneventful and boring.
You may have read all this and said to yourself, this sounds like a really sneaky way to introduce single payer... and you're right! Contrary to what many people think, ObamaCare moved us further away from single payer by moving even more money to the private health insurance industry. Just look at their profits since ObamaCare took effect. This is especially true in states like Arkansas, which has a private Medicaid program (other states like Indiana and Pennsylvania are being even more aggressive in their privatization of Medicaid). The big insurance companies love ObamaCare. That's why more insurers are jumping in this year.
Republicans are constantly badgering us about how the private sector can do everything better than the government. If a Medicare Public Exchange had been set up without any additional regulations on the private market, it would have been amazing to watch Republicans lose their minds as liberals said "OK, we didn't touch your private market, we just set up our own, and people love it."
Of course, Republicans would have said "we can't compete with socialism!" And they're right! Americans love socialized medicine. That's why Medicare is so popular. Medicare has millions of patients, low administrative costs, and doesn't spend any money on million dollar bonuses for executives. Medicare is also seeing its per-beneficiary costs drop, to the dismay of conservatives who want to dismantle it.
To be fair, ObamaCare is also socialism, but the Medicare Public Exchange would have been a much more straight-forward socialism, not a 1,000-page monstrosity full of obscure provisions and typos that can be misconstrued.
Eventually, the Medicare Public Exchange would have accomplished through approximately ten pages almost everything that ObamaCare accomplished, while bringing us closer to single payer and with a fraction of the political headaches. That is why Republicans feared it so much in 2009 and that is why they're trying to kill postal banking now. But unlike USPS having little to no experience providing loans, Medicare is extraordinarily experienced in providing health coverage.
The Medicare Public Exchange wouldn't completely kill the private market though. Wealthy people would still be able to buy supplemental plans, but wealthy Medicare enrollees can already do that! Even countries with full-blown single payer have private companies which sell supplemental plans.
And the Medicare Public Exchange wouldn't be able to accomplish everything that ObamaCare did. There are some provisions in ObamaCare like the new Medicare readmissions policy which are working great. But that could have been added to the law and would have been very uncontroversial.
And you may be asking, "So in your imaginary world where ObamaCare never passed but the Medicare Public Exchange did, it sounds like private insurance companies can continue shameful practices like having no out-of-pocket max, charging women more, or drastically raising premiums every year." And that would be correct, but that just means that over time, more and more people would quit their private plan and join the Medicare Public Exchange, forcing private insurance companies to either adapt or go out of business. The government is writing the rules without any regulations, just through leading by example. Postal banking could achieve similar results!
So in summary, Democrats could have taken a few weeks and drafted a simple bill which would have accomplished almost everything ObamaCare did with none of the political vulnerabilities.
Would it have passed in 2010? Who knows. Is it too late to try it again if Democrats retake the House in 2016? Probably, given how entrenched ObamaCare is now. But if you're like me and you believe in simple policy which has broad, positive implications and low political risk, then the Medicare Public Option is worth fighting for. Democrats should at least make a strong push to get the Democratic 2016 platform to include a public health option as well as a public banking option.
If you're interested, check below the fold for how I would have simplified the subsidy calculation, which is currently an unholy mess.
For those interested, I have expanded on my subsidy formulations...
One of the things that is absolutely ridiculous about ObamaCare is how much the percentage of your income rises as your income rises. So someone earning $15,000/yr pays only 2%, but if someone earning $20,000 would pay over 5% of their income! And if you're an older individual earning over $47,000, you would have to pay over 15% of your income on health premiums. That is so stupid that it makes me want to scream at whoever wrote it. But I won't...
My subsidy calculation formula would replace ObamaCare's byzantine formula with a simpler one, similar to how marginal tax rates work.
Individuals/families earning under 100% FPL would pay zero. Individuals/families earning between 100-400% of FPL would pay 2% of their income after 100% FPL per enrollee. Anyone earning more than that would pay 4% of their income over 400% FPL per enrollee. And there would be no age rating.
So, to give you an idea, here are some random examples:
An individual making $10,000/yr or a married couple making $15,000 would get free health care.
A family of four earning $30,000 per year would pay $123 per year per enrollee. That's 1.6% of their income.
A family of three earning $50,000 per year would pay $604 per year per enrollee. That's 3.6% of their income.
A family of five earning $90,000 per year would pay $1,241 per year per enrollee. That's 6.9% of their income.
A family of six earning $150,000 per year would pay $2,803 per year per enrollee. That's 11.2 % of their income.
As you can see, like income taxes, it's a progressive system. The more you make, the more you pay. This is how socialism is supposed to work.