Hacker Defines Strong Public Plan (It Ain't Co-Ops)

Today, the Institute for America's Future released a new report by policy architect of the public health insurance option Jacob Hacker [1], sizing up the existing House and Senate bills, and the expected compromise out of the bipartisan Senate Finance Committee talks.

The bottom line: the House versions, in general, include a public plan strong enough to effectively lower costs. [1] The Senate health committee's public plan version is weaker, while the Senate Finance Committee's flirtation with co-ops would be a disaster.

Hacker writes, "to counteract the enormous leverage of the dominant insurers and provider systems in most local markets, the public plan needs an adequate amount of bargaining power at the outset to achieve its core goals. Otherwise, private insurers will threaten its viability, and it will not have the ability to keep costs in check."

Only the House bill from the Ways & Means and Education & Labor committees give the public plan sufficient power by tying the public plan to Medicare: [1]

If we are to be serious about “bending the curve” of long-term cost growth and thereby reducing the huge burden of medical costs on all Americans, then we have to use every tool in our toolkit, and Medicare’s payment system is an important tool. Medicare rates are transparent, rather than the proprietary information of specific plans. They are grounded in formulae that can be seen, debated, and challenged, encouraging accountability. The CBO can easily estimate the savings they will produce. And they have an obvious and necessary connection to the first component of the Medicare tie-in: that, by default, Medicare providers will participate in the new public plan.

While the Blue Dog Democrats complain the most about excessive spending, they are the ones who did away with the Medicare link in the House Energy & Commerce committee, weakening the public plan's ability to cut costs.

However, the House Energy & Commerce committee chair, Rep. Henry Waxman did insist upon empowering Medicare to negotiate for lower drug prices, which Hacker says "would provide critical relief to older Americans and increase the ability of the federal government to bring costs down over time." The other House version lacks that provision.

Hacker praises the Senate health committee for including a public plan, but argues for the House provisions to prevail in any eventual House-Senate conference: "The HELP Committee bill has an even weaker guarantee that the public plan will be able to establish itself. Like the Energy and Commerce Committee bill, it states that the Secretary has to negotiate rates directly with providers [instead of tying rates to Medicare]. But the legislation also lacks the presumption in the House bill that Medicare providers will participate (with an opt-out option), putting the public plan at a disadvantage against the private insurers with established networks. This is also a not-so-good provision that should be changed to the House approach of presuming participation but allowing an opt-out."

But Hacker's biggest ire is saved for the bipartisan rump group from the Senate Finance Committee which has been pushing co-ops [1] instead of a strong public plan:

Consumer cooperatives would have several severe disadvantages. First, they would require building a new set of plans largely from scratch and having them certified in every state, which would mean forfeiting the administrative, economic, and political advantages of building on the Medicare infrastructure. Second, such models would also require forfeiting another major advantage of a Medicare-like public plan: the ability to provide enrollees with a broad choice of providers...

...Finally, and most important, the prospect for cost restraint and quality improvement under these proposals would be limited. Medicare has increasingly out-performed private plans in restraining the rate of increase of health spending while maintaining broad access.74 A new public plan could draw on Medicare’s experience, as well as the experience of the national VA system, to improve its cost-control methods and enhance the quality of care. By contrast, cooperatives, if established after a potentially lengthy period of development, would be relatively small and scattered and therefore lack the means to restrain cost increases or drive delivery or payment reforms on a broad scale.

On a media conference call today hosted by Institute for America's Future to release the report, FireDogLake's Jane Hamsher pressed House Progressive Caucus leaders Reps. Raul Grijalva and Keith Ellison [2] if the 60 House members who have pledged not to vote for legislation without a public plan, would bend the definition of a public plan to include the weak co-op model, noting The Hill just reported the 60 "include lawmakers who have said they can accept health cooperatives [3] and others who say they wouldn't vote against the House bill in the end."

But Grijalva and Ellison insisted a public plan means just that" a real, robust public plan. Grijalva waived off The Hill report saying any "slippage" would be "minimal."

With the politics of health care so fluid, it would be foolish to assume anything.

The best thing we can do is make sure Hacker's analysis gets a wide airing, so the people and their elected representatives know the difference between what works and what doesn't, and we won't get hosed with those devils in the details.

More takes from today's media call from Tapped's Dana Goldstein [4], Talking Union [5] and TPMDC [6].