No Public Option.. No Mandates or Subisides for Private Insurance

[Joanne98]

Dean Baker has an important post at TPM, Are Mandates Mandatory?, in which he lays out the logic of how different components of health care reform fit together. Dean shows, in particular, that the justification for imposing mandates on business to provide insurance has now collapsed, given the distrust the White House inflicted on itself on whether there will ever be a viable public option.

Let's review what the deal was about. The insurance industry tried to sell the insurance mandate as a necessary condition for their willingness to end their abusive practices, practices that should be outlawed in any event. As AHIP's Karen Ignagni said months ago, and Aetna's CEO Ron Williams (appearing tonight on PBS News Hour) explained, they would agree not to deny care for prior conditions, to stop the most egregious rescissions of those who became sick, and to limit discriminatory pricing. But in that deal, the government would force everyone to purchase insurance, and impose, with exceptions, pay or play mandates on both businesses and individuals to help cover the costs and discourage free riding.

Since reformers wanted to lower costs and make coverage universal, but realized insurance premiums under today's system would be unaffordable for many, the federal government would offer subsidies to those with incomes up to 3 or 4 times the federal poverty level. While subsidies were necessary to pay the high premiums, they would constitute a windfall for the insurance companies, by increasing the chances that their high premium charges would be paid.

But from the public's standpoint, that was not the end of the deal.
To help make premiums more affordable for individuals/businesses required to purchase insurance and to reduce the government's exposure to subsidies, the government would also require the private insurers to compete against a government sponsored public insurance option (PO). With hoped for cost efficiencies via ties to Medicare, the PO would both pressure private insurers to lower their costs/premiums and provide a model for insurance behavior, thus reenforcing the reforms of insurer practices and giving consumers an alternative if the insurers evaded the rules.

I don't know whether the Obama WH intended the PO as a bargaining chip or merely blundered into making it so; the fact is they have now undermined key elements of the overall "deal."

Given this breakdown, Dean Baker logically concludes that the imposition of employer mandates is no longer justified.


But it is important to understand that the mandates are not about extending coverage, they are about preventing free-riding. They are, in effect, a form of taxation, and a very regressive one. . . .

We know that it will be necessary to revisit health care in the not too future in any case. The lack of mandates will help to ensure that this date comes sooner. Then we can talk about measures that will allow us to control costs, like a robust public plan.

But, if we can't get a public plan in this round, why should progressives be pushing for a regressive tax that will go into the pockets of the insurance companies and their overpaid CEOs? Let the insurance companies try to make a living in the market; when they grow up and feel strong enough to compete with a public plan, then we can have mandates.

I'd adapt that logic and extend it to the individual mandates as well. If the private insurance industry is not to be confronted on price competition by a strong PO, then there is no moral justification for forcing business or individuals to purchase insurance from an industry that works relentlessly to exclude any competition and as a result has become egregiously concentrated with market power to fix prices.

Even if competitive pricing were possible in the insurance industry -- and Krugman/DeLong/Baker, citing Ken Arrow, Stiglitz and others, show it isn't possible -- then the existing insurance market concentration would certainly stifle it.

That leaves the problem of 46 million uninsured and millions more underinsured. There is a straightforward solution to part, but not all, of this problem, and it's sitting in the existing bills. Expand eligibility to Medicaid and/or Medicare.

We would collect whatever federal revenues are necessary, via any less regressive tax and/or savings, including money from ending federal subsidies to private Medicare Advantage plans, and use it instead to pay down the costs of getting millions more covered by Medicaid and/or Medicare. Move as many of the uninsured as we can into those functioning programs.

Reforms should also have the feds fully fund Medicaid -- most states won't or can't pay for this -- and move to end any inadequacies in Medicaid coverage so that patients get the same basic coverage that Medicare recipients receive. Then fill in the gaps/doughnut holes in Medicare -- and tell senior's were' going to improve and preserve Medicare, not strip it.

Then move to reform Medicare provider payment practices, including adequate funding for rural areas, better allocations to primary care etc, and reforms of provider payment incentives plus a stronger MedPAC.

Note that all of this can be accomplished through reconcilation, since we don't need the exchanges or the PO. We need 50 votes.

The private industry and conservative are adamantly opposed to even a rigged "market" in which private insurers would compete only against a very limited, hobbled, slowly phased in PO with no initial provider networks. Fine. If they can't confront even a severely hobbled PO, then there's no reason to pour hundreds of billions into subsidizing them. To paraphrase the President, this is neither keeping what works nor fixing what doesn't; it's subsidizing what doesn't work.

We should solve the problem of insufficient coverage in the cheapest way possible, through expansion of existing programs, using existing networks of doctor/hospital providers. Subsidizing inefficient, powerful insurers is the most expensive solution.

Then work on a separate bill, which may require 60 votes, to impose regulation to end the industry's most egregious practices, not as a substitute for a PO as Lux suggests, but because those practices are outrageous and should end. If the Republicans and Conservadems want to defend coverage denials, rescission and discrimination, let them take that vote into 2010.

http://seminal.firedoglake.com/diary/7337

[luckyleftyme2]

1. this is my take

well all we have heard from the right is no way,it will destroy your healthcare system;drive up costs etc. while the thuth is we have the most expensive health care system in the world and it rates 37th; so much for throwing money around! rationing by price; denial by panels made up of lawyers!
read and heed the latest misinformation heard around the clock by the right.
they are saying Obama is backing down on public insurance;he never said this until they your heros who want to keep you enslaved are saving you.
read and heed this was published in june:
Home > News > National News > Jun 2009
National News
Obama Flexible But Says Public Health Option Would Control Costs
June 24, 2009

E-mail this Article Post Comment Print this Article Article Reprints

President Barack Obama said Tuesday his healthcare overhaul needed a public insurance option to enforce market "discipline," but stopped short of saying he would veto legislation without one.

Obama, who has made healthcare reform a top legislative priority, said he would insist Congress pass a plan to control skyrocketing costs and cut the number of uninsured. But he added "we have not drawn lines in the sand" on other issues.

"The public plan, I think, is an important tool to discipline insurance companies," Obama told a White House news conference. "I think there is going to be some healthy debate about the shape that this takes."

The United States spends some $2.5 trillion annually on healthcare, about 16 percent of gross domestic product, but trails many developed countries on important measures of health. Some 47 million Americans are uninsured and have little access to the healthcare system.

Obama, who promised reform during his presidential campaign, has stepped up his efforts to sell the public on his proposals, holding a series of speeches and meetings, including one at the White House set for Wednesday night.

In an interview with ABC's "Good Morning America" to be aired on Wednesday, Obama said he "absolutely" believed Congress would pass healthcare reform this year because "the American people understand it has to get done."

He has proposed allowing those who do not have insurance through their employers and who cannot afford to buy it privately to purchase it from a marketplace where private insurers and a public insurance plan would compete.

Shortly after Obama's news conference, an organization representing private health insurance companies made public its blunt rejection of any state-run health plan, posting a June 19 letter to Democratic Senator Edward Kennedy on its website.

"A government plan option -- in any form -- is unnecessary to achieve comprehensive reform and would have devastating consequences on the health insurance coverage," said the letter from the heads of America's Health Insurance Plans and the Blue Cross and Blue Shield Association.

Republicans and private insurance companies have raised concerns over a public plan, arguing it would lead to a government takeover of the entire U.S. healthcare system and drive private insurance companies out of business.

Obama rejected that notion at his news conference.

"If private insurers say that the marketplace provides the best quality health care; if they tell us that they're offering a good deal, then why is it that the government, which they say can't run anything, suddenly is going to drive them out of business? That's not logical," he said. "They should be able to compete."
they can't compete and keep driving up costs while hiding enormous profits!
thats what this is really about!
wake up!wake up America stop buying the lies of the rip off artists!
we pay way to much for health insurance ; 45 million are rationed because they cannot afford the premiums;we have boards working in the insurance companies denying claims while people are going untreated!
how can anyone think we can continue with this industry out of control?
wake up America!