Public Option: Reconciliation Protection, Part 1

It is becoming more and more clear that efforts to find a bipartisan bill are falling apart [1]. I think the only way that health care reform will be passed is using reconciliation. The strange rules [2] of reconciliation mean that some parts of the bill could be stripped out by the Byrd Rule [3]. The Byrd Rule basically says that anything in a reconciliation bill must cost or save money. This is part one of a series where I provide ideas on how to protect the many parts of reform from the Byrd Rule.

It is possible that any public option can pass using reconciliation. Even though the public option is meant to be revenue neutral, it will take in large amounts of money (in the form of premiums) and spend large amounts of money (in the form of reimbursements for procedures). This alone might protect a public option from the Byrd Rule. If not, things get a bit more difficult.

We know for a fact that the the original House robust public option has been scored by the CBO as saving billions [4]. Since the size of subsidies are based on the three cheapest plans, offering a cheaper public plan reduces the size and cost of the subsidies. For that reason a robust public option based on Medicare payment rates should be protected.

A very robust public option does not seem to have the votes in the Senate or the House. Chuck Schumer's “level playing field” public option, found in the Senate HELP Committee bill [5] and House Energy and Commerce Committee bill, seems the most likely to pass. Unfortunately the CBO says [6] it does not save a substantial amount of money. I can think of four politically acceptable ways to protect the “level playing field” public option:

1) It would need a large $10 billion loan and/or seed money fund to start with. The cost of that loan or start up fund might be big enough to save it.

2) The plan could be written to pay the government a profit for a few years or pay back a high interest loan. The revenue this would bring in might protect it.

3) Subsidies are currently based on the average of the premiums of the three cheapest plans. The bill could be rewritten to base the size of the subsidies on only the cost of the public option's premiums. This would not only save money, but would make the public option an essential part of scoring the overall bill.

4) Finally, the public option could be robust for only a very brief period of time. It would pay Medicare rates for only the first year or even a few months. This time period could be adjusted so that it is just long enough to save just enough money to make the “level playing field” public option safe from the Byrd Rule.

Crossposted on The Walker Report [7]