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A Public Option Even Blue Dogs and Republicans Can Embrace

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The public option is poised to be the deal-breaker with regard to health insurance reform. Progressive legislators are pledging to vote against any reform bill that does not include a public option. Blue Dog Democrats and Republicans are adamantly opposed to any bill that includes a government-run plan.

The key to breaking this stalemate and achieving bi-partisan support in Congress for health insurance reform is a market-oriented public plan that Blue Dogs and genuine conservatives can support: a government-owned corporation, similar to the Federal Deposit Insurance Corporation, which would offer only catastrophic health insurance policies.

This “Federal Health Insurance Corporation” (FHIC) should be self-supporting, with premiums set just high enough to cover the cost of benefits paid. Since the public plan would be revenue-neutral, it would not add to the deficit or require raising taxes.

The FHIC could issue vouchers for regular check-ups to promote preventative care. All other interactions between patients and their doctors, hospitals, and other care providers would be paid for directly by the policyholder. If total expenditures for a given year reached a relatively high deductible amount, the policyholder would be reimbursed for any expenses over that amount.

Some private insurers already offer catastrophic plans, primarily to individuals not covered by their employers. These plans are not terribly popular because premiums are still relatively high. Furthermore, they don’t have the advantage of creating the illusion that somebody else is paying for your health care. A market-oriented public plan could set premiums much lower, since it would not have to show a profit or cover the costs of maintaining a sales staff, advertising, and paying executives tens of millions of dollars per year.

By working the way insurance is supposed to work (covering only catastrophic events) this approach would further reduce the cost of health care by doing away with the middleman in most doctor-patient interactions. The bureaucrats at private health insurance companies would not be replaced by government bureaucrats.

The vast majority of people do not need thousands of dollars worth of health care in a given year. The premiums we pay, directly or indirectly, for comprehensive health insurance plans are far and away the biggest health-related expense for the vast majority of individuals and families. The cost of a few office visits, routine tests and minor procedures could easily be paid out of pocket if insurance premiums were drastically reduced.

The fact that the public option would be limited to offering catastrophic health insurance policies and reimbursing policyholders whose health care costs exceed the deductible amount should make it clear that it does not amount to a government takeover of health care.

People who believe that the government can’t do anything right, or who want comprehensive policies, would be free to continue patronizing private insurance companies. On the other hand, individuals who cannot afford health insurance now, because of preexisting conditions or limited income, would have an affordable alternative to remaining uninsured.

The establishment of a Federal Health Insurance Corporation would be a giant step in the right direction toward both of our stated goals: reining in the cost of health care and reducing the number of uninsured.

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About Winston Apple

Winston Apple is the author of "Edutopia: A Manifesto for the Reform of Public Education." He is a former teacher. He has a Masters Degree in Curriculum and Instruction from the University of Missouri at Kansas City (1990). He is also a singer-songwriter and recording artist.
  • Clavos

    An excellent idea excellently presented.

    Good article, Winston.

  • Mark Schannon

    I like where you’re going with this, but I think the concept needs more detail.

    For example, how high would the deductible be? If it’s too high, too few people will sign up. If it’s too low, you’ve defeated the purpose.

    Also, those without insurance or who currently have high deductibles are forced to subsidize those with better insurance policies. They (we actually) pay doctors full price until the deductible is met while insurance companies work out deals to pay less. I would think your plan needs to address that inequity.

    The vast majority of people do not need thousands of dollars worth of health care in a given year.

    This point is critical–I don’t know what vast majority is, if it’s true, or if it’s enough to balance those who do need thousands of dollars a year in medical help.

    In Jameson Veritas

  • jacksmith

    NO CO-OP’S! NO TRIGGERS! A Little History Lesson

    No Triggers!

    Young People. America needs your help.

    More than two thirds of the American people want a single payer health care system. And if they cant have a single payer system 77% of all Americans want a strong government-run public option on day one (86% of democrats, 75% of independents, and 72% of republicans). Basically everyone.

    According to a new AARP POLL: 86 percent of seniors want universal healthcare security for All, including 93% of Democrats, 87% of Independents, and 78% of Republicans. And 79% of seniors support creating a new strong Government-run public option plan, available immediately. Including 89% of Democrats, 80% of Independents, and 61% of Republicans, STUNNING!! Senator Max Baucus, You better come out of committee with a strong government-run public option available on day one.

    The History:

    Our last great economic catastrophe was called the Great Depression. Then as now it was caused by a reckless, and corrupt Republican administration and republican congress. FDR a Democrat, was then elected to save the nation and the American people from the unbridled GREED and profiteering, of the unregulated predatory self-interest of the banking industry and Wallstreet. Just like now.

    FDR proposed a Government-run health insurance plan to go with Social Security. To assure all Americans high quality, easily accessible, affordable, National Healthcare security. Regardless of where you lived, worked, or your ability to pay. But the AMA riled against it. Using all manor of scare tactics, like Calling it SOCIALIZED MEDICINE!! :-0

    So FDR established thousands of co-op’s around the country in rural America. And all of them failed. The biggest of these co-op organizations would become the grandfather of the predatory monster that all of you know today as the DISGRACEFUL GREED DRIVEN PRIVATE FOR PROFIT health insurance industry. And the DISGRACEFUL GREED DRIVEN PRIVATE FOR PROFIT healthcare industry.

    This former co-op would grow so powerful that it would corrupt every aspect of healthcare delivery in America. Even corrupting the Government of the United States.

    This former co-op’s name is BLUE CROSS/BLUE SHIELD.

    Do you see now why even the suggestion of co-op’s is ridiculous. It makes me so ANGRY! Co-op’s are not a substitute for a government-run public option.

    They are trying to pull the wool over our eye’s again. Senators, if you don’t have the votes now, GET THEM! Or turn them over to us. WE WILL! DEAL WITH THEM. Why do you think we gave your party Control of the House, Control of the Senate, Control of the Whitehouse. The only option on the table that has any chance of fixing our healthcare crisis is a STRONG GOVERNMENT-RUN PUBLIC OPTION.

    An insurance mandate and subsidies without a strong government-run public option choice available on day one, would be worse than the healthcare catastrophe we have now. The insurance, and healthcare industry have been very successful at exploiting the good hearts of the American people. But Congress and the president must not let that happen this time. House Progressives and members of the Tri-caucus must continue to hold firm on their demand for a strong Government-run public option.

    A healthcare reform bill with mandates and subsidies but without a STRONG government-run public option choice on day one, would be much worse than NO healthcare reform at all. So you must be strong and KILL IT! if you have too. And let the chips fall where they may. You can do insurance reform without mandates, subsidies, or taxpayer expense.

    Actually, no tax payer funds should be use to subsidize any private for profit insurance plans. So, NO TAX PAYER SUBSIDIES TO PRIVATE FOR PROFIT PLANS. Tax payer funds should only be used to subsidize the public plans. Healthcare reform should be 100% for the American people. Not another taxpayer bailout of the private for profit insurance industry, disguised as healthcare reform for the people.

    God Bless You

    Jacksmith — Working Class

    [edited for spam content]

  • Jim

    This idea has been floated before. A fairly high deductible health insurance plan is all most folks want.

    Here are two issues with your proposal.

    First, government has not proved it can run a business. See Freddie Mac. The problem is that it invariably becomes a political tool.

    Second, your assumption that a business can be run ‘without a profit’ and without paying market wages for competent managers is erroneous. We WANT to have profitable companies that can withstand adversity with competent managers to run them.

    Your foundational idea is still a good one though. To get an affordable catastrophic health plan, with a range of deductibles, the government only needs to do two things. First, institute tort reform. States who have done so have seen insurance rates drop 40%. Second, allow insurance companies to compete across state lines. This would increase competition in the market place, further reducing rates.

    Currently only government regulation stand in the way of this idea.

  • Mark

    First, government has not proved it can run a business. See Freddie Mac.

    Unfortunately, neither has the private sector. See the current unemployment rate. (So, what’s the third option?)

    Second, your assumption that a business can be run ‘without a profit’ and without paying market wages for competent managers is erroneous.

    Some not-for-profits do a good job of delivering services; some not so good…kind of like private-for-profits.

    First, institute tort reform. States who have done so have seen insurance rates drop 40%.

    Some data would be nice here. From what I’ve seen I have to conclude that the rates that you are talking about are those that doctors pay for their malpractice insurance.

  • http://paulrobinsonpoetry.wordpress.com/ Paul Robinson

    “Tous pour un, un pour Tous”

  • Spelling Nazi

    I have to conclude that the rates that you are talking about are those that doctors pay for their malpractice insurance.

    No, the rates all of us (or our insurers) pay for unnecessary expensive tests (known as “defensive medicine”) ordered with an eye to possible litigation only, a practice which is quite common.

  • http://www.winstonapple.blogspot.com/ Winston Apple

    From comment 2 – Mark Schannon:

    “…I think the concept needs more detail. For example, how high would the deductible be? If it’s too high, too few people will sign up. If it’s too low, you’ve defeated the purpose.”

    I am less concerned with the details than I am with the concept, but for what it’s worth:

    There is an inverse relationship between premiums and deductibles. The higher the deductible, the lower the premium, and vice versa. The exact amounts of each should be subject to change, but I would recommend keeping premiums as low as possible and setting the deductible no higher than necessary to balance out premiums and pay-outs. I would also favor utilizing a fairly low deductible amount that kicks in on a sliding scale, with the policyholder paying a decreasing percentage of additional bills as the total amount spent on necessary health care within a given year increases.

    The most important consideration regarding this approach to a public option is that the FHIC sets premiums just high enough to cover the cost of benefits paid. Making the public plan revenue neutral, is the key to getting the support of genuine fiscal conservatives since that eliminates the need to add to the deficit or raise taxes.

    From comment 4 – Jim: “…government has not proved it can run a business.”

    I don’t claim any special knowledge in this area, but I think the Federal Deposit Insurance Corporation (FDIC) has operated pretty efficiently and served a worthwhile purpose. The FDIC is a government owned corporation. Freddie Mac, on the other hand, is a stockholder-owned corporation chartered by Congress as a government-sponsored enterprise (as is Fannie Mae).

    In general, I think the idea that government can’t do anything right is dangerous. There is certainly corruption and incompetence within government. As Mark points out in comment 5, those factors are at play in the private sector as well.

    I am a moderate libertarian. I believe in keeping the government as small as possible. I do, however, believe that government has a critical role to play in reining in the excesses of markets gone wild. (Witness the events of the last year.) I believe that our most important task as citizens is to elect representatives who will protect the common interest from undue corporate influence and make government agencies as honest and efficient as possible.

    With regard to “paying market wages for competent managers”:

    I read recently that the CEOs of the ten largest insurers made an average of $8.5 million in pay last year. I don’t know how much the top executives at the FDIC are paid, but I’m guessing it’s a lot less than that.

    I agree that insurance companies should be allowed to compete across state lines.

    Finally, I’m certainly not opposed to the idea of tort reform, but I believe its importance is over-valued. Estimates that I have come across indicate that malpractice insurance for doctors adds 2% to the overall cost of health care. On the other hand, the involvement of private health insurance companies adds 20 to 40% (depending on whose numbers you believe) to the cost of health care. I would also add that although silver-tongued devils like John Edwards may unduly influence juries in malpractice cases, it is juries that come up with the lottery-size figures that are awarded.

    The main point of my essay was that the key to getting a public option included in the health insurance reform proposals that are under consideration is to make the government-run plan market-oriented and self-supporting. I believe that we are in real danger of getting mandates requiring us to purchase insurance, without the inclusion of a public option. If that happens the ransom paid to private health insurance companies by individuals and businesses will be an act of piracy that reveals the Somali pirates as rank amateurs.

  • Mark Schannon

    Winston,

    But the devil is in the details. I think the lack of specificity is what’s causing some/a lot/all of the confusion. I do like the idea, but you’ll never sell it to the conservatives without specifics. Few of them seem to believe the revenue neutral concept & the Republicans are using that as a campaign banner hoping to rout the Dems in 2010, which makes it all the more difficult.

    And Mark (the other Mark, LOL) is exactly right–incompetence, stupidity, mismanagement, corruption, and (your gripe here) are as prevalent in the private sector as in the public.

    It’s seems the more we outsource government functions to private companies, the worse things are.

    Maybe the problem is with us human-type people. Most of us couldn’t screw in a lightbulb with a diagram & the rest don’t want to.

    In Jameson Veritas

  • Winston Apple

    I know the Devil used to be in the details. Since he joined the Republican party I’m not sure that’s true anymore.

    The basic details, as I would envision them:

    The bill should create a government owned corporation called the Federal Health Insurance Corporation. It would offer a single plan based on low premiums and a relatively high deductible so that routine care would be paid for directly to care providers by policyholders with no involvement by the FHIC unless total expenditures by a policyholder exceed the deductible amount in a given year. Policyholders would need to keep their receipts long enough to have documentation available in the event that they exceed the deductible amount. There would be no need to replace the bureaucrats at the private health insurance companies with government bureaucrats.

    The bill should make it clear that the FHIC will be self-supporting, with premiums and deductibles set at levels to make that happen. There would be an inverse relationship between premiums and deductible amounts. The lower the premium, the higher the deductible would need to be, and vice versa. I would personally favor keeping the deductibles as low as possible to make policies affordable, therefore moving in the direction of universal coverage without mandates. A board of governors could be put in place to adjust rates as needed.

    I would like to see the bill limited to the single topic of creating the Federal Health Insurance Company. The language of the bill should be kept simple enough that even a town hall heckler can understand that it will be operated with funds raised solely through premiums. No tax hike. Not a dime added to the deficit. That would smoke out the senators and representatives who are acting as nothing more than bagmen (and women) for the health insurance pirates. Then, if the bill doesn’t pass, we could vote them all out of office next year and re-introduce the legislation in 2011.

    Will Blue Dogs and Republicans support a government-run plan that is actually far more market-oriented than the present system or are they just looking for an excuse to protect the status quo (and the profits of private insurance companies)? Inquiring minds want to know.

  • Mark Schannon

    So that’s where the Devil went. Phew, I was worried he was hiding in my closet. But no closet Republicans here.

    There’s only one real problem with your approach: it’s too reasonable. But you got my vote.

    In Jameson Veritas