The general consensus here on Daily Kos has been that a public option is essential to healthcare reform. Indeed, there is even a movement afoot (enthusiastically cheered on by many of us) to obtain commitments from progressive Democrats to vote against any healthcare reform proposal (no matter how otherwse worthwhile) which doesn't include a public option.
Conservative (but intelligent and rational) economist Greg Mankiw has suggested that a public option without exclusive taxpayer subsidies will be no different than any other non-profit health insurer, in which case it serves no point - and the real fight is about taxpayer subsidies.
Is Mankiw right? Do we really need a public option? What can it accomplish that a non-profit private insurer can't (and how does it need to be structured)? Should we be spending our energies fighting for something else?
In evaluating the importance of a public option it is important not to lose sight of the goals of healthcare reform: to broaden affordable access to healthcare (ideally to every American) while maintaining consumer choice and not bankrupting our country.
Democratic healthcare reform proposals generally seem to include bans on excluding pre-existing conditions, guarranteed issue, and community rating. Once these restrictions obtain on insurance companies, it won't be any easier to obtain public insurance than private insurance.
Taxpayer subsidies are being provided to poorer Americans under the proposals. It seem to be the case under the proposals (and correct as a matter of policy) that the subsidies follow the indivdual: that is, if you choose a private plan, your subsidy should be no less than if you choose a public plan. Thus, there is no logic to the argument that a taxpayer subsidy is particularly tied to a public plan.
A public plan would have the virtue of being a non-profit and could therefore be somewhat cheaper than a private for profit plan. But there are other non-profit insurers around and they don't seem to do things that differently than for profit insurers; nor have they fundamentally changed the insurance market.
Also, the idea that a public plan would enable more effective cost control is belied by Medicare's continuing inability to control costs.
So far, the case for a public plan doesn't look particularly compelling. We should, therefore focus our efforts on other facets of the healthcare bill, right?
Well, lets not be too hasty here.
It is possible that Mankiw is right, of course, but that does leave one wondering why the insurance industry seems so vehemently opposed to a public option. After all, if a public option doesn't do anything, there is no need to oppose it; and insurers seem willing to swallow a lot of other things to avoid this. What is it that makes a public option scarier to insurers than a lot of additional regulation?
In a word, competition. To put it another way, markets are more powerful than regulators. The insurers recognize that and that is why they oppose a public option.
While it is true that the plans under consideration all impose some additional requirements on what insurers can and cannot do, they will still have a great deal of latitude. If private insurers don't cover what they should, in the absence of a public option individuals have limited recourse. On the other hand, in a competitive environment, the private insurer who fails to cover what it agrees to will soon find itself without customers; not just those it treats poorly, but others who hear about its actions.
In a similar vein, the public plan will de facto become something close to the minimum standard for coverage. (It will be close to instead of truly the minimum standard because there may be some varying preferences among indivduals.)
I don't think I would go so far as to say that I'd prefer no heathcare bill to one without a public option; but a public option will make the difference between an incremental improvement and a significant one.
The effect a public option is supposed to have has implications for features a public plan needs to possess. In particular:
(1) Everyone has to be able to enroll in it, whether or not they could be covered under an employer plan or other plan.
(2) It should not be subject to a trigger. (There is no reason to believe that the insurance market is going to magically become more competitive by itself.)
(3) It should be capable of being paid for with pre-tax dollars to the same extent as any other insurance plan.
(4) Until it has reached critical mass (say 20,000,000 members or so) it should gain the benefit of medicare rates.
(5) It should be possible to enroll via any contact point with the government simply by checking a box on a form.
Finally, what about the Conrad cooperatives? Could that serve the same function?
Well, since everyone has to be able to enroll in it you would need to cover the United States. You would want it to have the same plan and same forms and procedures everywhere for administrative simplicity and to enable consumers to better understand what they are getting. You could have a very large coop which would cover the entire nation....but at that point, you wind up with something that is a public plan, anyway. So the bottom line is .. no the Conrad coops really don't do a thing.
[By the way the little ad is not necessarily something I endorse.]