Is a 'public plan' the fix for health insurance?

Tom Curry National affairs writer • Profile • E-mail

Two words — public plan — now dominate the debate over how to overhaul the nation’s health insurance system.

President Barack Obama and many congressional Democrats support the idea of giving Americans a menu of insurance options which would include a government-run plan resembling the Medicare program for older and disabled Americans.

Three House committee chairmen have published a 850-page draft of a health insurance redesign that includes a public plan. In their draft, the public plan would be offered alongside private-sector insurance plans through a government-run marketplace called the Health Insurance Exchange.

People buying in to the Exchange — those with incomes up to $43,000 for individuals or $88,000 for families of four — would get subsidies, called "affordability credits," to purchase coverage.

Details on how a public plan would work won't become definite until a compromise House-Senate bill emerges later this summer.

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But a group of 120 House Democrats announced this week that they’ll vote down any insurance overhaul that does not include a public option. Any bill would need 218 votes to pass in the House; with most of the House’s 178 Republicans opposed to the Democratic plan, this group of 120 Democrats is decisive.

Underscoring the political stakes in the battle over the public plan, the Democratic-allied group, Moveon.org is running ads to put pressure on two Democratic senators who’ve indicated they may not support a public plan: Sen. Mary Landrieu of Louisiana and Sen. Kay Hagan of North Carolina.

Both Landrieu and Hagan won election last November and thus don’t face voters again until 2014.

Referring to Hagan, MoveOn.org executive director Justin Ruben said, “Our 115,000 members in North Carolina — many of whom volunteered for or donated to her campaign last year — believe the public option is the heart of true health care reform. We'll run ads in North Carolina and D.C. asking that she advocate for the public option and support the president in truly solving the nation's health care crisis.”

So here are some questions and answers about the public plan:

How might this public plan help me and my family?
In his press conference Tuesday, Obama said a public plan would be “an important tool to discipline insurance companies.”

He said he supports a public plan “that's not profit-driven, that can keep down administrative costs, and that provides you good, quality care for a reasonable price.”

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He added that if a public plan “is able to reduce administrative costs significantly, then you know what, I'd like the insurance companies to take note and say, hey, ‘if the public plan can do that, why can't we?’”

John Holahan, the director of the Health Policy Center at the Urban Institute, a non-partisan Washington think tank, said “having a competitor to private plans, under a fair set of market rules, will provide more choice and place substantial cost containment pressure on the health care system.”

But opponents of a public plan say it will undermine private sector insurance, eventually leaving nothing but taxpayer-provided and government-run insurance.

Stuart Butler, a health care analyst at the Heritage Foundation, a conservative think tank, said at a forum sponsored by the Alliance for Health Reform that it would require “a staggering leap of faith to assume that the Congress and the United States government will somehow operate like a sort of benign umpire in the system, when it actually is also a team owner.”

Health care economist Victor Fuchs, a professor emeritus at Stanford University, said a public plan, which he calls “a government health insurance company” was not necessary to solve the problem of needing to subsidize people who are too poor to purchase insurance.

And he said a public plan would not necessarily have low administrative costs.

Writing in the May 28 edition of the New England Journal of Medicine, Fuchs said supporters of a public plan "often point to Medicare as a model, noting its low overhead and high beneficiary satisfaction. But a new company would face a very different situation from that of Medicare, which has a captive audience and doesn't have to sell insurance and administrative services in competition with other companies."

How would a public plan be different from the existing taxpayer-financed plans, Medicaid for low-income people, and Medicare for people age 65 and older?
The plan would serve a younger and healthier population than Medicare serves.

Unlike Medicaid, the plan would serve middle-income people and perhaps even some wealthy people.

And public plan advocates say that unlike both Medicare and Medicaid, the plan would not be paid for by the taxpayers.

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Under the proposal introduced by House Democrats last week, the plan would get some unspecified amount of start-up money from the federal government.

But the intention of public plan proponents is it would become self-sustaining — that is, financed by the premiums paid by the people who enroll in it.

But Holahan said in an interview with msnbc.com Wednesday that “the public plan is probably going to get sicker than average people” signing up for it. “There are an awful lot of people who have had health problems and have had bad experiences with insurance companies. And they will probably gravitate toward the public plan. So the public plan has some things going against it, too.”

Holahan told the House Ways and Means Committee in testimony Wednesday that because it would attract sicker than average people “the public plan could have somewhat higher premiums as a result.”

He also said, “A public plan should be compensated if it ends up with populations with higher medical needs.”

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