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Several news sources are reporting that Harry Reid plans to put a national public option with an opt-out provision in the merged Senate bill. So far, there have been almost zero details on how this national public option with an opt-out provision would be structured. I’m going to explain four important variables and how they could affect the success and availability of the public option.
When
When can states first choose to opt out? There are two different opt-out time frames, which I will call “pre-reform opt-out” and “post-reform opt-out.” The public option is not going to be available until most of the reforms really start in 2013. A “pre-reform opt-out” would allow states to opt out anytime before the public option would first be made available in 2013. This would be a “bad” opt-out provision which would probably result in more states opting out. The earlier that states would be allowed to start opting out, the worse it is. Since no one would yet have access to the public option, opting out before reform started would be politically easier.
A “post-reform opt-out” would only allow states to opt-out after first having the public option available in their state for a period of time (say, 1-4 years). This is a “good” opt-out provision, and the longer the delay before a state can opt out, the better. By first making the public option available, states and their residents would be able to better know if it is something people like. If the public option succeeds as progressives hope, it would be politically more difficult to take away something people already have and like.
How
How would a state opt-out? There are several ways a state could be allowed to opt out: the reform package could require passing a law, or it could allow opt out solely by an act of the state legislature, a decree by the governor, popular ballot referendum, an order by a state insurance regulator, or some combination of the proceeding options. I’ve previously broken down how many people would likely be denied the public option depending on the different opt out mechanisms. The harder it is for a state to opt out, the better. I suspect, based on polling, a popular ballot referendum would be the mechanism to result in the fewest states opting out. The “best” opt out mechanism would require the state to pass a law opting out of the public option, then requiring it be upheld by a popular referendum.
Who
Who will pay for the added cost of states opting out? By holding down cost on the new health insurance exchange, the public option will reduce the amount of tax credits the federal government will need to provide individuals to help them afford health insurance. The CBO expects even a weaker “level playing field” public option would save the government $25 billion over the next decade. (I’ve examined the issue in more detail earlier.)
If a state opted out of the public option, it could increase insurance rates and the cost of reform to the federal government. Who should pay for this increased cost? The federal government could just pay the increased cost (the “federal government pays”). Uninsured people living in the state which opted out could pay the cost, by the federal government reducing the amount of their tax credits (the “middle-class pays”). Or the state government could be forced to reimburse the federal government for the added cost that resulted from them opting out (the “states pay”). I think it is unfair to force the rest of the country to pay higher taxes because Texas wants to reject a potential cost saver. The only fair solution would be to make states cover the added cost of opting out. This “states’ pay” provision should dramatically discourage states from opting out.
What
What kind of public option will it be? From reporting, the public option is likely going to be a “level playing field” public option which must negotiate rates with providers. We still do not know how the public option will be structured, or how it will be run. Will it get to combine its administrative paperwork functions with Medicare for better efficiency? Will all providers need to opt in to the public option or would Medicare providers be presumed to part of the network unless they opted out? Will it be part of the federal government or just have congressionally appointed management? It could be run directly as a part of department of HHS and run by government employees. It could also be structured like a quasi-public government corporations similar to Amtrak, the Federal Reserve, FDIC, or the Corporations For Public Broadcasting. The Senate HELP Committee’s public option would have quasi-subsidiaries in each state to slightly customize the public option for local needs. Would this feature be retained?
A public option that most closely resembles Medicare would be the best possible structure. Having a Medicare provider presumed opted in should help the public option get off the ground more quickly. Allowing Medicare and the public option to use a combined paperwork processing system would save the government money, and cut down on paper work for doctors. Preferably, the public option would be part of HHS and not a stand alone public corporations.
These four categories are some of the most important (but not the only) variables which should determine the viability of Reid’s public option with an opt-out. It is possible to design an opt-out that would result in very few if any states opting out. It would be a “post-reform opt-out” with a “states pay” provision. It would require a state law to opt out and a ballot referendum.
On the other hand, it is possible to design an opt-out that would result a large number of states opting out of the public option. If it were a “pre-reform opt-out” where the federal government paid 100% of the added cost, that would be a very “bad” opt-out design. Allowing only a decree by the governor or an act by the state legislature to opt-out the state would also dramatically increase the likely hood of states opting out. Like all things, the devil is in the details. We will soon know if Reid scored a real victory or delivered only an empty triumph.
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Thanks for your continued excellent reporting on this.
Another cost factor: who pays for the referendum in states not equipped for such a vote? Not all states have this system, and in those that don’t, a mechanism doesn’t exist. Won’t the state have to pay for this, and should we want states that currently don’t have referenda/initiatives to build infrastructure for them? They are notoriously destabilizing to government.
Also, would referenda be subject to a state’s citizen initiative process in states that have same? I can envision insurers paying signature gatherers to get an opt-out on the ballot and then flooding a state with money to pass an opt-out.
Finally (pie in the sky here) if states are allowed to opt-out, can progressives get Kucinich’s state single-payer considered as an opt-in? If we’re letting states out of Public Option, shouldn’t we also empower them to go farther, all the way to state-based single-payer demonstrations?
Here is a major hole in the health care bill i just realized. If the insurance companies must accept pre-existing conditions, then NO ONE will need to get any insurance until they get sick. You only need it when you get sick. When you get sick, they can’t turn you down. So, there really is no reason to get insurance until you get sick. They can’t turn you down, so you run no risk.
IT is kind of like if auto insurance companies can’t turn you down if you come to it with a wrecked car, and then must pay to have it repaired. You might as well wait until you have an accident.
Once people realize this, I wonder what they are going to do. That certainly is going to affect the buy in curve, especially since the penalties for not having insurance were reduced.
that is why there is an individual mandate to fine you for not having insurance.
Perhaps they might consider setting conditions on states that opt-out, making it less attractive for them to do so. Will those states still have an individual mandate? Also, perhaps the employer health insurance mandate (which is likely going to be removed in the new bill) will resume for states which have opted out of the public plan.
If they do go the way of the trigger, perhaps they might consider a progressive trigger that contracts and thereby becomes increasingly likely to trip as time passes. IOW, the insurance companies could not hold to a steady status quo just short of trigger conditions, because conditions which are “safe” for them one year would next year be enough to set off the trigger.
If this is true then Harry better retire and tell his son no career in politics.
It is a debacle. It is a bailout to a criminal enterprise. Let’s hope people will stop caring about the nonsense the house of lords hath wrought and allow the bill from the house to come forth.
They really do not understand what they are asking for, our dear lords and queen. They are telling us it is better to die than to risk their boredom with our fantasies.
We don’t want your crap oh Senate of the damned. Best you go back and give us what we demand. For this time, there is no turning back.
This is the remedy I’m going to choose if there is no public option and the federal government gives taxpayer money to the same private companies who are bankrupting us now. I refuse to participate in any reward system.
I’m a 60 year old smoker (trying to quit). I’m healthy and have never come close to having as many medical expenses as premiums paid. Under the senate finance committee bill, my insurance will cost 6 1/2 times as much as that for a young person.
A clunker plan for a 24 year old is a cadillac plan for me so there goes more money out the window. Why can’t we just all pay the same premiums and get our insurance through a national exchange? Why in the world isn’t congress giving serious consideration to the Wyden plan?
Congressional Budget Office (CBO) score’s the baucus plan at $829 Billion over a 10 year period, that is paid for. The CBO also states that it will lower the deficit by $80 Billion and it would be much lower if there was a public option.Criminally corrupt politicians are the reason the U.S. is ranked near the bottom of every catagory when ranked next to other modern, industrialized nations. Time for publically funded elections. lieberman $12.6M, mcconnell $7.8M, baucus $7.7M, cornyn $6.7M, kyl $5.6M, grassley $5.4M, ensign $5.2M, conrad $5.1M, cantor $4.9M, nelson $4.9M, burr $4.8M, boehner $4.4M, hatch $4.4M, lincoln $4.1M, vitter $3.9M, carper $3.6M were paid by the Medical Industrial Complex to kill Health Care Reform. (Source: OpenSecrets.org, Aug. 09)Follow the Money: LinkCall Congress and demand, Single-Payer Health Care for All!(Toll Free # House and Senate)1-866-338-1015 _____ 1-866-220-00441-866-311-3405Sign Single-Payer, Public Option and Health Care as a Civil Rights Petitions: Link Link Link kucinichpetition Don’t let the Medical Industrial Complex steal your Health Care from you and your family by donating huge sums of money to Crooked Politicians in order to maintain the Status Quo. Keep up the good fight.SEMPER FI!
I think Harry is waving goodbye.
Jon- please help me understand—
if the public plan is still going to be paid for with premiums from people + subsidies
and the plan should be much cheaper in premiums and cost to run (overall expenses: admin + claims)
and the individual mandate will be penalizing the uninsured and this goes into general US treasury funds
Why would the public plan have a problem?
for example — if a ‘full public option’ (50 states) had 12 million participants (with limited eligibility) and even 10 states drop out (and let’s assume that the 10 would be very ‘red’, in other words, less populated generally) — we can safely say that 2.4 million people would be the upper limit on those ‘lost to the pool’.
Explain how a pool of 9.6 million people is, from a real actuarial standpoint, different than 12 million?
Are you assuming that few of the add’l 2.4 million would actually be utilizing health care services?
what you write may sound ‘intuitive’, but we should have REAL numbers and REAL actuarial math to back it up.
Thanks for the thorough opt-out exegesis. Most appreciated. The closure was a nice touch too.
Now we know what to look for in Reid’s opt-out proposal to determine if it’s the good, the bad, or the ugly.
The smart money is probably on Eli Wallach.
Bill Nelson is calling for a post-reform opt-out:
http://news.firedoglake.com/2009/10/26/bill-nelson-on-opt-out-60-votes-not-there-should-be-post-reform/
Reid announced Opt-Out!!!!!!!!!1
POST Reform opt out, 2014, one year AFTER implementation!
So, why not accept the public option with a favorable opt-out provision, AND have a trigger that brings on Single Payer if this whole scheme doesn’t work to contain costs, get everyone covered, etc.?
Jon,
Thanks for your lucid analysis of some critical variables in this issue. I would “recommend” this if I could.
Bob in AZ
States should also be able to decide if they want to reimburse doctors and hospitals according to Medicare rates. That way if California wants to structure a public option similar to Medicare, and North Dakota doesn’t, that shouldn’t be nationally dictated.
If the public option is required for a year or two, that is fantastic. The state legislatures won’t be able to take it away from their constituents if its popular.
And now all the focus needs to shift to the Wyden amendment. Anyone should be allowed to join the public option. A national public option that states can opt-out of that would only affect 5% of the population is a hollow victory.
It is not a matter of risk pool but negotiation power. A public option with 10 million people can probably get a better deal on drugs and medical equipment than one with only 2 million. Simple power of scale. It would probably not be huge but pennies add up.
Does anyone really think there will still be a Democratic majority by that time? With the bailout revolution gaining steam?
This whole thing will be DOA before it starts, especially with the economy getting worse.
And the mandate is NOT like car insurance. You can get car insurance for couch change. Health insurance is about the cost of a mortgage.
Good luck. All for nought.
The ONLY thing that makes ANY sense is single payer.
This thread is likely dead now, but two problems:
1 unless the fine is more in cost than the comparable insurance, the fine won’t do much. Currently, the fine is less as I understand. And, I think the number of people subject to fine is less.
2. There is no reason, if you feel you are healthy, to buy insurance before you get sick. So, I’m not just talking about people who don’t carry insurance now because they think they are quite healthy; I’m talking about people who HAVE insurance now, but have it “just in case” they get ill and want to be in before it happens. Now, there will be no reason for them to be “in” “just in case.” Many of them will save money and drop out. Why spend it when you don’t need to?
If you get sick, or think you might, you get insurance then. You can’t be turned down.
As I say, it’s like having a car insurance situation where you don’t have to buy insurance until you get in an accident. Why would you pay until then??
This whole thing has become a real mess. They should have had hearings, looked at everything, including single payer, brought the public along and then put together what came out of the hearings well. Not, put something together in the back room and then try to find people to support it.
I say start from scratch and hold hearings on single payer. Shit can the whole thing.
Chuck Schumer must really think that his constituents are idiots.
From a press conference today in Rochester:
Conflating opt-out for individuals with opt-out for states?
You might almost think that Schumer has something to hide.
We don’t have to start from nothing and we don’t have to hold more sham hearings: HR 676 / Medicare For All is a real bill already in the House that builds on an existing program.
Call Congress and tell them to support HR 676 / Medicare For All: the only real option for the American public.
So what happens when the severely ill move to states that have not opted out, perhaps sacrificing their jobs in order to get care for cancer, transplants, etc? State opt-out could work hand-in-glove with the big insurance players to select the sick and elderly out of the system, while driving a state’s jobless and indigent into other jurisdictions. This could be the medical equivalent of buying the homeless bus tickets to New York.
Jon, Very nice piece. But, how about some more emphasis on the start time, eligibility restrictions, and tie to Medicare rates. Is this bill good enough yet to support progressives voting for it? I don’t think so. It needs at least:
– The starting time of the PO and the exchange to be within one year. A 2013 start dates makes the bill unacceptable to me, since if people don’t see benefits from the bill immediately, I think there is a good chance that Democrats will lose at the polls in 2010 and 2012, and they deserve to lose as well
– The PO to be available to everyone and not restricted only to the unemployed, and those who can’t get insurance through their employment. Without this, there is a good chance that the PO won’t be able to compete with the private insurers and also won’t lower insurance prices
– The PO rates to be tied to Medicare rates. Pelosi’s Medicare + 5% is OK, but we also need careful structuring of Medicare rates so that rural/urban differenecs don’t kill the PO in rural areas.
Don’t you agree?
I don’t recall any extensive hearing on Medicare for All. When did they take place? They certainly weren’t well publicized.
I’m talking about scrap what is there now. Begin again with hearing on single payer. Bring out in public what is good about it. Have it well publicized the voters can see and hear what’s what.
That is the way you build support.
Now, we have a hodge podge.