San Francisco: A Public Option That Works

Polimom wrote an excellent post just a few hours ago titled “Health Care and Insurance: A Lost (and Crucial) Distinction.” It is generating some great, instructive, civil discussion on a subject that I had not given much thought to.

I highly recommend you go there and partake in the discussion.

I have been there and learned a lot.

But I also learned something new when reading the New York Times today. At first, I thought about posting it as a comment on Polimom’s thread, but I don’t want to once more divert the discussion. So here it goes.

I have read about the Massachusetts “universal” health care plan and the mixed reports about its success.

A Times Op-Ed, “A Public Option That Works,” discusses the results of the only other “near-universal” health care plan in the United States: the one in San Francisco.

The article starts with two “burning questions” at the center of the health care debate in America:

First, should employers be required to pay for their employees’ health insurance? And second, should there be a “public option” that competes with private insurance?

The Op-Ed says that, ” Answers might be found in San Francisco, where ambitious health care legislation went into effect early last year.”

These are some of the points the authors use in answering the questions:

Today, almost all residents in the city have affordable access to a comprehensive health care delivery system through the Healthy San Francisco program. Covered services include the use of a so-called “medical home” that coordinates care at approved clinics and hospitals within San Francisco, with both public and private facilities. Although not formally insurance, the program is tantamount to a public option of comprehensive health insurance, with the caveat that services are covered only in the city of San Francisco. Enrollees with incomes under 300 percent of the federal poverty level have heavily subsidized access, and those with higher incomes may buy into the public program at rates substantially lower than what they would pay for an individual policy in the private-insurance market.

The authors maintain that in order to pay for this program, San Francisco has put into effect an employer-health-spending requirement, similar to the “pay or play” employer insurance mandates presently being considered in Congress.

They add that these spending levels are much higher than those mandated in Massachusetts, and more stringent than any of the plans currently under consideration in Congress. “Businesses can meet the requirement by paying for private insurance, by paying into medical-reimbursement accounts or by paying into the city’s Healthy San Francisco public option.”

As for results, according to the Times, “Thus far, around 45,000 adults have enrolled, compared to an estimated 60,000 who were previously uninsured.” A modest 20 percent of the covered businesses have chosen to use the city’s public option for at least some of their employees. “But interestingly…very few (less than 5 percent) of the employers who chose the public option are thinking about dropping existing (private market) insurance coverage.”

As to the impact of higher costs, the authors claim that the San Francisco experience should put to rest some of the concerns over how increased costs would seriously harm business: “Many businesses there had to raise their health spending substantially to meet the new requirements, but so far the plan has not hurt jobs.”

And how have employers adjusted to the higher costs, if not by cutting jobs?:

More than 25 percent of restaurants, for example, have instituted a “surcharge” — about 4 percent of the bill for most establishments — to pay for the additional costs. Local service businesses can add this surcharge (or raise prices) without risking their competitive position, since their competitors will be required to take similar measures. Furthermore, some of the costs may be passed on to employees in the form of smaller pay raises, which could help ward off the possibility of job losses. Over the longer term, if more widespread coverage allows people to choose jobs based on their skills and not out of fear of losing health insurance from one specific employer, increased productivity will help pay for some of the costs of the mandate.

They conclude:

The San Francisco experiment has demonstrated that requiring a shared-responsibility model — in which employers pay to help achieve universal coverage — has not led to the kind of job losses many fear. The public option has also passed the market test, while not crowding out private options. The positive changes in San Francisco provide a glimpse of what the future might look like if Washington passes substantial health reform this year.

Too small and non-representative an experiment, you say? Perhaps.

Not worth considering? You tell me.

Written by some flaming Liberal?

One of the writers is William H. Dow, – Nonpartisan Independent Health Analyst; Member of the Council of Economic Advisors during the Bush Administration and now a professor of health economics at the University of California, Berkeley.

His co-authors are Arindrajit Dube, an economist at the Institute for Research on Labor and Employment and Carrie Hoverman Colla, a doctoral student in health economics.