Tuesday, August 18, 2009

Obama Backing Away from the Public Option

President Obama is signaling that the public option is not a necessary component of his health reform proposals. This begs a couple of questions, which I’ll try to address here:

1. Will this improve chances of passage?

Yes, I think it will. Some healthcare plan would have passed the House of Representatives where the Democrats have a huge majority and Nancy Pelosi. But in the senate, there are several conservative Democrats like Evan Bayh, Mary Landrieu, Ben Nelson, and Kent Conrad. A public option may well lose their support. And Republicans will remain uniformly opposed. Since there are 40 Republicans and several conservative Democrats, public option supporters lack the votes to invoke cloture on a filibuster.

Removing the public option will soothe some fears. Many Americans are worried that they will be forced onto a government option which rations care and contains death panels. Now, it is easier for everyone to believe that they won’t have to make any changes in their healthcare.

Of course, there is still a chance that Democrats could push through a partisan bill through Congress. Perhaps the Democratic leadership could twist enough arms to get passage. If conservative Democrats in the Senate can be cajoled into opposing a filibuster, then a party-line vote might approve healthcare reform.

2. Is this good policy?

While it makes political sense, I’m not sure it is. Part of the reform package is supposed to be cost control. But trusting private insurers to rein in cost seems a fool’s errand. In just two years, Massachusetts—which relied on private insurers for its reform—has seen its cost go from $630 million to $1.3 billion. Still, the state has more than 200,000 uninsured. Insurance companies will charge all they can. Meanwhile, if reformers are serious about making sure the 47 million uninsured now have insurance, they will have no choice but to shell out large sums. We already have large deficits, and I see a reform like this only adding to it substantially.

Even worse, some government policies will give insurance companies an excuse to charge more. Preventing companies from denying coverage based on preexisting conditions means that companies will increase premiums to cover the increased costs. Now, some conservatives are touting reforms like letting people buy insurance across state lines. That should help, but it I don’t see it restraining costs all that much.

So I’m worried we’ll get the worst of both worlds. Some people will still lack healthcare, while costs are still too high. Some compromise.

1 comment:

  1. I covered this same topic today at BMD, with some slightly similar and some slightly different conclusions.