Soothe My Worries About a “Public Option” Boondoggle. Please.

An interesting thread developed last night here on TMV, in which several people who are not ideologically sitting behind a firewall (“Public plan or nothing!” or “If the government touches it, it’s Socialism!”) tried to find areas of common ground on health care reform. We found several areas of agreement. However, we also heard from folks who think there are irreconcilable ideologies at work.

I concede the possibility, but I’m not ready to accept it as a foregone conclusion.

I’ve been accused of dishonesty because I’ve failed to acknowledge that I’m completely unwilling to accept anything that includes a public option. That’s false — but I do have very serious reservations.

They’re not rooted in irrational fears of socialism or “death panels” or disdain for the poor or racism or that we’ll be providing abortions to all or insurance to illegal immigrants. At the highest level, my reservations primarily stem from a desire to maintain as much authority as possible at the state / local levels, and from my strong feeling that on a national scale, public health care for all would become a boondoggle beyond anything ever seen before.

The first of those requires careful appraisal and a constant balancing act. Yes, we’ve grown enormously and society has changed. Yes, we have common national interests. No, we should not therefore should toss the baby with the bathwater every time we’re discussing complex issues and national policy. Aside from constitutional considerations, there are very good reasons why it makes excellent sense to keep decisions and delivery mechanisms at the state and local level.

Meanwhile, the Wall Street Journal’s description of the program in Maine hits right on my worries about a boondoggle today.

In 2003, the state to great fanfare enacted its own version of universal health care. Democratic Governor John Baldacci signed the plan into law with a bevy of familiar promises. By 2009, it would cover all of Maine’s approximately 128,000 uninsured citizens. System-wide controls on hospital and physician costs would hold down insurance premiums. There would be no tax increases. The program was going to provide insurance for everyone and save businesses and patients money at the same time. [...snip]

Here’s how the program was supposed to work. Two government programs would cover the uninsured. First the legislature greatly expanded MaineCare, the state’s Medicaid program. Today Maine families with incomes of up to $44,000 a year are eligible; 22% of the population is now in Medicaid, roughly twice the national average.

Then the state created a “public option” known as DirigoChoice. (Dirigo is the state motto, meaning “I Lead.”) This plan would compete with private plans such as Blue Cross. To entice lower income Mainers to enroll, it offered taxpayer-subsidized premiums. [...snip]

After five years, fiscal realities as brutal as the waves that crash along Maine’s famous coastline have hit the insurance plan. The system that was supposed to save money has cost taxpayers $155 million and is still rising.

A program that was supposed to save money by reducing health-care waste and inefficiencies has seen a 74% increase in premiums. But even those inflated payments can’t keep the program out of the red.

Please — read it all. The article isn’t full of hysteria or fear-mongering. It doesn’t hinge on partisanship. It’s talking about cause and effect, and describing how a specific plan has worked (or has not worked) — a plan that sounds (to me) VERY much like what’s being proposed.

So I have a question for the folks who have drawn a “public option” line in the sand: How do you feel about the Maine plan? Are you sure that what you’re pushing for won’t end up being a magnified version of their problems? Using this example, help me understand why you think things would work differently (i.e. better) when expanded to a national scale.

I’m not looking for impassioned arguments involving moral imperatives or Brother’s Keepers. I’m not trying to argue Federalism or Socialism in this post. I’m asking about cause and effect, and fiscal impact. I want to avoid a boondoggle.

If your answer is that we’ll tax the the top 1%, then — assuming that narrow population could manage it (and I don’t think they can) — what will you do when that non-static funding source dries up as the extremely high earners move into their retirement years? Or as their wealth fluctuates? Have you thought this all the way through?

You may feel that you’ve already explained this ad nauseum. If so, then I hope you’ll forgive me but it’s gotten lost in all the shouting.

I’m asking in good faith. Help me see why your insistence on the “public option” won’t break the system beyond any hope of functionality or recovery. Because I’m honestly worried that it will.

Author: POLIMOM

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73 Comments

  1. @Andy: “About 50% of healthcare in the country is publicly funded and those areas are experiencing unsustainable cost growth too.”

    It's about half the increase of private insurance. So while private insurance will double in 10 years, Medicare cost will double in 20. Buys us a decade. Maybe we'll eventually have the nerve or the desperation to actually address the tough choices. Is there an age or health status at which we can't have organ replacement surgery (or we pay out of pocket)? I guess that's a nonstarter if anyone in the public sector talks about it (death panels?). So we'll let corporate goons make those decisions instead. sigh.

  2. Leonidas, figures can lie. The total fraud is 13% (300 billion paid, 40 billion fraud and “waste”). Yeah, it's wasteful and if we can just get it down to the fraud rate on private insurance…. Oops. they're doing no better.

  3. Hemm,

    ” Any ways to save money you know of or is stating that the current system is broken all you have?”

    here are a couple of ideas,

    1. Let the states have some say in Medicare, not every state population is the same, and each state could tailor their services to better represent their populations that are dependent on Medicare. Medicare users in Florida and those in North Dakota, might have quite different overall needs.

    2. Pay the patients not the doctors. Why should bad doctors get as much as good ones. By determining a fair pricing for different recieved treatments and giving that money directly to the patients , they will be encouraged to find the best treatment for the money and to not seek treatment beyond what they need. this would reduce the costs of lots of extra uneeded proceedures.To keep doctors from pricing themselves out of the medicare market, a limit on how much they can charge above the base rate would need to be set, based on experience and sucess rates. However, it should be required that the payments are spent on medical care, at least the majority of them to reduce fraud possibilities.

    3. Allow indeminity insurance, this would help correct mispricing by doctors.

    4. Allow for beneficiaries to hire doctors as advisors to their use of other doctors and the healthcare system, medicare forbids this now I think.

  4. By the way, the cost of Medicare, even though it's the highest risk population in the pool, is the same as private insurance does with low risk patients and relentless claims denial departments. THAT is waste. When the government can pay costs for an 80 yo grandma and it costs less than a fit young person, something is very wrong. No, wait. Something is very right when a public system can do what NO private insurance company can, or even wants to. It covers the worst of the worst at cheaper cost.

    MagicalSky I'm with you. Public *option* will be just fine. Those who want to continue to keep their ramoras, oh, sorry, their private insurance are welcome to do so.

  5. GreenDreams, with the lack of government commitment of reasourses to fraud prevention is it any wonder they haven't found more?

  6. @ Greendreams-

    I don't trust you. You're poor. Jazz the reasonable moderate said so.

  7. Leonidas

    I appreciate your ideas.

    I would say up front that the current bills don't really address Medicare, and I think that is a major failing. Health care today is divided into pools of good risk and bad risks. Older Americans run higher medical bills, and I don't see private insurance wanting to work that segment as their profits would be at risk. For the participants, private insurance rates who go ever higher just when their incomes decrease due to retirement.

    The current system could certainly gain by strong cost reduction incentives Part D is a great example. Import those drugs made in the US and exported to Canada. They cost 50% less up there. pharma profit is one thing, gouging is quite another.

  8. CS

    “That depends entirely on the size of the tax credit.” Sorry, but I'm a little dense here. How can a tax credit exceed the tax charged? The poor don't make much and the don't pay much in taxes. It seems to me that any medical charges exceeding those taxes would have to be provided by you and me.

    Isn't that what we don't want now? Like I said, I'm obviously missing how you see a credit would work.

  9. Polimom, of course it's an attack. The WSJ op-ed section is even less accurate and honest than Fox News. The same can be said of Investor's Business Daily. Every word and every number on any political or politicized subject in a WSJ editorial will be slanted to the Republican Party and its positions. I cannot think of one exception.

  10. For the Right, what are your specific means to avoid this collapse without addressing the non-competitive aspects in the present system.

    Hemm, it's a good question, but I'd first unpack a couple of its premises.

    First, who's against competition? Competition is precisely what will bring down costs. It's the only thing that ever does, and it has worked great in every other industry. We need dramatically more of it in health care.

    Second, “what specific measures will reduce costs?” implies the wrong thing. I can and have listed a bunch of inefficiencies that are begging to be corrected and will result in lower costs. But your question implies that there ought to be some central authority spotting inefficiencies and taking action to correct them, and that if conservatives can't sell you on a specific list, they're talking out of their hats.

    I dispute the premise. The main observation guiding fiscal conservatives' thinking is the central authority model doesn't work. The authority can only spot problems big enough to see from outer space, and even those it has limited ability to fix because they tend to be very political. It's not working yet again in Maine, which is no surprise.

    Look at a business model like record stores. Politically speaking no central authority could have decided to kill record stores, but they've been eroded from underneath by small degrees, and now they're being replaced by cheaper, more efficient distribution channels. Driving efficiency is a grass-roots activity that can ultimately bring huge changes in the landscape.

  11. Dr J
    “I dispute the premise. The main observation guiding fiscal conservatives' thinking is the central authority model doesn't work”

    Fine, costs are increasing beyond control under the current system which is private oriented. They clearly won't do anything on their own, so fiscal conservatives must not have an option.

    You don't trust the central authority, but year after year increases in the private sector clearly demonstrate they have no ability or willingness to bring down costs. That's the premise of yours that I reject. A scary central bogeyman authority or a runaway price rise via private industry only concerned in enlarging the amount that passes through their hands..

    What do you want to believe, your fear or your lying eyes :)

    Every idea we talked about the past few days should definitely be put on the “list.”

  12. Here's a question to the free marketeers. Why should the private sector be trusted? Over and over distrust of government is put forth by conservatives as their motivation. Government is a huge bureaucracy. It has too much red tape. Guess what. Corporations have bureaucracy. They have massive amounts of red tape. They also have something the government lacks. A desire for profit as motivation to deny the services they agreed to provide (See recission.). When it comes to corporate integrity we have many recent examples of corruption and dishonesty. Look at Enron and other energy traders who rigged the markets in California a few years back. Real estate and mortgage brokers who rigged paperwork. The entire basis of passing useless mortgages back up to investors because they wouldn't be hit when they failed is dishonest. The list goes on. Could we regulate them? Of course not. We could pass the laws, sure. But in the not too distant future we would just see what we've seen happen with the financial sector. The people with an economic stake would wait until they had the right people in office and then the rules aren't enforced or repealed. We had Glass-Steagall. Then came Phil Gramm, Republicans like him and Democrats dumb enough to not realize the damage they were doing in dealing with him. In healthcare there are multiple cases of recission that have made the news. There are cases of suppression of factual evidence of side effects of drugs when the pharmaceutical company involved needed their stock prices pumped up and couldn't “afford” bad news about a drug they wanted to hit the market.

    Those are some of my reasons for doubting the efficacy of any private sector solution to our health care problems at least as much as Polimom distrusts the government.

  13. “Fine, costs are increasing beyond control under the current system which is private oriented.”

    “Private-oriented” is to competitive market as “fruit-flavored” is to fruit or “creme filling” to cream. The health care market is laboring under huge distortions that inhibit competition, garble pricing signals, and squeeze out all accountability for value-for-dollar. The way the system works today, no one really cares how much 98% of the transactions end up costing. Of course costs are going through the roof and millions of people are simply priced out. We simply need to remove these distortions and let the market do what it does well in every other industry.

    By all means, keep a list. But like I said, the longer and shrewder your list is, the more trouble you'll have acting on it from above. Complex political systems like our cannot be changed that way, at least not much. If you want really meaningful change, you have to embrace the profit motive and unleash the entrepreneurs to subvert the old order from below.

  14. “Why should the private sector be trusted?

    At the macro level, because it has a much better track record. Countries that leverage their private sector enjoy much better economic growth than those that try to centrally manage their economies.

    At the micro level, because it's opt-in. If you don't trust company X to provide good value for your money, you keep it in your wallet.

  15. Health insurance is opt-in?

  16. It sure is. A good chunk of the uninsured are young, healthy people between jobs who don't think their risk is worth the premium and make a rational bet. According to the actuarial tables, odds are they will save money.

    Even people buying insurance will–in a functioning market–have a wide range of choices. If one company has a bad reputation, they can sign up with another one. Say it with me: “exactly the way competition works in every other industry.”

  17. @ HemmD

    ” “I dispute the premise. The main observation guiding fiscal conservatives' thinking is the central authority model doesn't work”

    Fine, costs are increasing beyond control under the current system which is private oriented. They clearly won't do anything on their own, so fiscal conservatives must not have an option. “

    and I dispute your implication that the federal government is not at present responsible for a good portion of the current rising costs. Laws allowing huge rewards in malpractice suits drive up doctor costs, regulations about where you can purchase healthcare insurance drive up insurance costs, level upon level of bureaucratic function drive up hospital and doctor costs, other insurance regulation that interposes itself and prevents usage of indeminity insurance increases the cost across the board.

  18. @Jim Sattefield

    “Those are some of my reasons for doubting the efficacy of any private sector solution to our health care problems at least as much as Polimom distrusts the government.”

    Fair enough your entitled to your own bias, but understand one very big difference. The Private sector can be monitored and disciplined by public watchdogs with the force of law behind their regulators and and criminal investigators, the government has no check on its power outside of itself. I'll make a guess (and it is a guess) that you are not a fan of George Bush (I'm not either), would you trust the Bush administration to run an honest healthcare system and be diligent in investigating violations if those violations forwarded his political agenda despite being illegal acts? I wouldn't. So why should I want this type of thing left in the hands of politicians and their appointees? Why should you want this?

  19. Sorry, but I'm a little dense here. How can a tax credit exceed the tax charged? The poor don't make much and the don't pay much in taxes.

    Wow, Hemm, I'm sorry but I didn't know that people were unaware of this. Tax credits have nothing to do with whether or not you have a net income tax liability. We pay out tax credits right now to people who pay nothing in income taxes (the EITC.)

    So, these proposed tax credits would work the same way- not refunding people an amount that they paid in income tax, but actually giving them a net positive amount of money above and beyond their earned income.

  20. Why should the private sector be trusted?

    The 'private sector' that I trust refers to private individuals, empowered to actually make choices (which we don't really have the ability to do now.)

  21. The deficit has now grown to over 9 trillion dollars under the leadership of President Obama and the Democrats. The irresponsible spending spree of the Democrats must end now. Health Care Reform will further increase an already ridiculously high deficit. Nor can people afford the new taxes and fees to pay for Health Care Reform that are on the table right now.

    Moreover the fear of government run “death panels” becomes very real when the House Bill includes over 500 billion cuts in Medicare despite the fact there will be a 30% increase in Medicare enrollment once the baby boomers hit 65. The real fear is once the government has more control over the health care dollar how will they go about reducing costs other than rationing which is par for the course in other Nations who have government run health care?

    If Congress is sincerely interested in lowering the costs of health care
    insurance and making it more available and affordable for everyone Congress could do it with a one page Bill by: (1) Allow insurance companies to compete across State lines, (2) Do tort reform and (3) lift all the government mandates that increase the cost of insurance so that insurance companies can tailor their plans based on the wants, needs and pocket books of the people. That is how costs can be lowered and free choice can reign.

    AGAIN, A 9 TRILLION DOLLAR DEFICIT IS UNSUSTAINABLE AND THE DEMOCRATS AND PRESIDENT OBAMA MUST FACE UP TO THE FACT THAT THE NATION CANNOT AFFORD ANOTHER HUGH GOVERNMENT PROGRAM LIKE MEDICARE, SOCIAL SECURITY AND MEDICAID THAT WILL BANKRUPT US ALL.

  22. I'd loke to add another item to your list tsuh1231
    (4) allow insured to tailor the components of the insurance..i.e. my wife and I are 61 and 62 respectively…we have NO NEED for an insurnace component that includes maternity, pre-natal, post-natal care….in NJ it is mandated in our private insurance….so I am advocating ala carte insurnace….with premium reflecting the actual insurance purchased.

    just my $0.02

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