On Why We Need To Lose The Public Option
By Justin Gardner | Related entries in Health CareThe following editorial from Steven Pearlstein is one of the more clear headed I’ve read on health reform, the public option and why co-ops could be better. So I’m going to excerpt a little more than I usually do.
First, on why health reform is needed and why the magic of the market isn’t helping contain costs…it’s actually driving it up…
Because consumers don’t pay out of pocket for much of their health care, they don’t shop around for bargains the way they do for cars or toilet paper. Nor it is clear that people would flock to the heart surgeon in town who advertises bargain-basement rates.Competition is also imperfect because many regions of the country have dominant hospital chains that can virtually dictate rates to private insurers. You simply could not offer a competitive insurance product in Northern Virginia, for example, if Inova’s Fairfax Hospital weren’t in your network. And in many rural communities, there’s only one hospital.
Drug companies have monopoly pricing power for drugs under patent for which there is no substitute. Ditto for medical-equipment makers with the latest imaging machines or artificial hip joints.
But would a single, government-run organization really help contain those costs? Not necessarily…
[...] there’s no particular evidence that a government-run insurance plan will be any more successful than what we currently get from big private insurers — unless, of course, the government-run plan is so big or so powerful that it can dictate prices to providers, as Medicare now does. Proposing that, however, would immediately unite doctors, hospitals and drug companies in opposing reform.You also hear the argument that government-run insurance would have lower costs because it wouldn’t have to generate a profit (that’s true) and would be more efficient than private insurers (that isn’t). The evidence of greater efficiency is Medicare, which spends about 2 to 3 percent of its budget on administration. But if a government-run plan had to spend its own money to collect premiums, market itself to customers, maintain a reserve, and manage care in a way that lowers costs and raises quality — none of which Medicare now does — then you can be sure its administrative costs would be nowhere near 2 or 3 percent.
And on co-ops…
Although public-option enthusiasts scoff at the idea, the experiences of a number of communities show that cooperatives could significantly contain costs, provided the cooperatives are big enough and built around networks of hospitals and physician practices that accept a fixed, annual fee for treating patients rather than billing for every procedure. The key isn’t that the cooperatives would be not-for-profit, but that the annual payments would give doctors and hospitals a financial incentive to control costs, better coordinate care, and eliminate procedures with little or no benefit.
We also have to look at what’s most palatable for Americans and what legislation can actually pass. One that divides everybody or one that attempts to unite us and recognizes that health care differs from community to community.
Long story short, Dems who demand the public option need to make absolutely sure they’re fighting for the right thing before they refuse to vote for co-ops. Because that might be the only solution that has the votes and they might ultimately be better for health reform in the long run.
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August 19th, 2009 at 10:59 am
Whether we end up with co-ops, or with a public option, is far less significant for those of us who do not currently have employer-provided health insurance than one simple issue: will we be able to get the same tax break that now attaches to employer-provided plans? (Or, I suppose, will everybody else lose the tax break — either way, something like equal treatment will be restored.)
August 19th, 2009 at 11:51 am
[...] progressives who don’t sign up for “public option” purism and choose instead to remain open to compromises that might actually bridge part of the partisan divide, such as the propo… to help cover the 47 million uninsured and to help reduce overall health care costs. These are the [...]
August 19th, 2009 at 3:16 pm
Health Co-ops have a history of failure because they can never garner enough negotiating power to compete effectively against the insurance companies. Lack of competition is a huge part of what is killing the system. When a company like Welmark is allowed to control 71% of the insurance market with in the state of Iowa, then Iowans are basically screwed. For a co-op to be any where near competitive with that it would have to be a national organization and have a membership of hundreds of thousands. A $500 a month insurance premium is not an affordable premium.
August 19th, 2009 at 3:18 pm
Also note, that you won’t gain a single GOP vote by watering it down and going with co-ops.
August 19th, 2009 at 3:38 pm
I have to admit this is a very reasonable and objective editorial. I have to agree with Vast. I do not know the specific history of co-ops, but I do believe based on what I know about their structure is that they could potentially be less competitive than I think would be necessarily for really lowering health care costs. That and the fact that, like Vast, I don’t think a co-op would garner enough votes from republicans to make it seem like this health care reform is a united effort. So I just say why not add in the government option? Its not a guarantee of efficiency, but it is a guarantee of competition.
August 19th, 2009 at 5:32 pm
Coops would have enough negotiating power to balance insurance companies if they were regional (more members = more negotiating power) and if they had government backing (not control) to help them.
Successful co-ops DO exist, like HealthPartners in Minnesota.
Actual government ownership is not competition because it always collapses to government monopoly, Spk.
August 19th, 2009 at 6:57 pm
I’d support co-ops if they were strong enough. Let them use MediCare rates, make the co-op members their customers, and make them big enough to compete with anybody and I’m happy.
I’ll still fight for a public option, because I think it would work better, tho.
August 19th, 2009 at 7:10 pm
“Actual government ownership is not competition because it always collapses to government monopoly, Spk.” This is a lie. It takes almost no research to find that there are many mixes of government plans and private plans in the world.
August 19th, 2009 at 7:23 pm
It takes almost no research to find that there are many mixes of government plans and private plans in the world.
I wouldn’t call it a lie, but it is obviously untrue. Private security firms supplement the police, FedEx costs a lot more than the post Office but is apparently doing fine, non-profits frequently operate in the same sector as various government services, etc.
Heck even in Canada there is private health insurance available to supplement public insurance.
August 19th, 2009 at 7:46 pm
The fact is that all the “facts” that the nutters use to scream about the public option are completely fabricated. there are no facts, if there were it’d be an easy decision to go for that as a solution or not.
August 19th, 2009 at 8:09 pm
Before jumping to the conclusion that we don’t need the public option, here’s a different argument:
http://voices.washingtonpost.com/ezra-klein/2009/08/against_giving_up_on_the_publi.html
August 20th, 2009 at 7:52 am
So the magic of the free market isn’t working because there is no free market. This guy is telling you that people don’t shop for insurance (I think car insurance would be a better example than toilet paper). The only reason this happens is because the government doesn’t allow out-of-state providers to be liscensed, and structures the tax system to promote employer-based insurance.
In other words, if the co-ops are large enough, they can dictate lower payments to doctors and hospitals, forcing them to reduce the amount of care they give.
I love this new euphamism people are using to describe cutting benefits…”eliminate procedures with little or no benefit.” Like hip replacements or bypass surgery after 60. Its called rationing.
August 20th, 2009 at 9:06 am
I love this new euphamism people are using to describe cutting benefits…”eliminate procedures with little or no benefit.” Like hip replacements or bypass surgery after 60. Its called rationing.
You do realize that the Conservative solution to health cost increases is based almost entirely on eliminating needle procedures?
Check out the New Yorker article on McAllan, TX. There Doctors have an excellent racket. They prescribe needless procedures like tests in exchange for a cut of Medicare’s fee. Since it’s only a test there is virtually no risk anything can go wrong, and with high enough volume MediCare payment rates are quite profitable.
There are many other expensive procedures that could be prevented if we paid for cheap preventive care. premature babies are very, very expensive. Classes that teach expectant moms the best way to avoid premature births, and regular appointments with doctors to make sure everything’s going smoothly, can cut premature births by 75%.
But in the current US System nobody has an incentive to pay for those classes. Providers could afford it, but they are also the ones who get major revenue from premature births. Insurance companies don’t like paying for this kind of care because you are only guaranteed to save money if you get thousands enrolled.
Believe me, there’s plenty of fat in the US Health system. And it is related to bypass surgery, hip replacement, or trying to keep grandma alive for too long.
August 20th, 2009 at 11:07 am
“Its called rationing.”
You mean the same thing that insurance companies are doing now?
While I am beginning to agree that opening up the markets to allow people to purchase across state lines, I don’t believe for a moment that will be a long term fix. All it would mean is short term competition until the big companies eat up all the small companies and then we are right back were we started, although this time it will be one or two companies owning the entire market of the nation instead of just the markets of one state. There has to be an entity out there that can compete with insurance companies that can’t be bought and sold by bigger companies. Co-ops will not be able to compete with that.
August 20th, 2009 at 9:49 pm
Trust me. All we have to do is do away with 100% of regulation and the market will fix everything. Without having a 100% free market, we need a public option which is barred by law from ever becoming for profit.
August 21st, 2009 at 10:05 pm
100% free market means more people uninsured, as insurance companies tend to find ways to get sick people off their rolls, and those people can’t get insured by other companies due to “pre-existing conditions.”
As long as their is an insurance company standing between you and your doctor then your gambling with your life.