Nate Silver believes progressives should trade the public option away, but what he wants in return is far more useless and an even tougher political battle.
And the public option, as currently constructed, would only enroll 3-4 million people, according to the CBO. It’s a relatively minor provision, and one that, in its present, already-compromised state, I’d happily trade off for more comprehensive subsidies for the working poor, or a more robust Free Choice Amendment.
First the only reason Congressional Budget Office (CBO) and Centers for Medicare & Medicaid Services (CMS) think so few people will sign up for the public option is because they admit that the new exchanges and the other reforms will not work properly. The regulations and the risk adjustment mechanisms are too weak to prevent the private insurance companies from gaming the system. They will still try to cherry pick the healthy and drive away the sick.
The only reason the public option will need to charge higher premiums (causing few people to sign up for it) is because it will be the only plan trying to be socially responsible and not treat Americans with health care needs horribly. Even though the public option will need to charge higher premiums because of the lack of a strong risk adjuster, by being a good option for less healthy Americans, the CBO says it will still bring down the cost of premiums across the board on the exchange.
Remove the public option, and the exchange goes from a bad place to buy health insurance to an awful, even more expensive place to get health insurance. Why anyone thinks it is a smart trade-off to make the exchange a much worse place to get health insurance (by removing the only socially responsible plan), but increasing the number of people who have access to this terrible insurance market, is beyond me.
Both the House bill and the Senate bill have simple mechanisms in place to greatly expand access to the exchange after only a few years. If the exchange is a great place to buy insurance, businesses will quickly flock to it. The reason the CBO says so few people and businesses would use the exchange is not because they can’t, but because they wouldn’t want to. There is no need for the free choice amendment if you can get the exchange right. If people like the exchange, it is designed to grow quickly.
The point of the public option is to make the quality of health insurance on the exchange better and to bring down premiums. The more appropriate trade off, then, would be for things which could serve a similar function; for example, a medical loss ratio of 90%, only allowing non-profit insurance on the exchange, a single reimbursement negotiator, and/or a much stronger Dutch-style risk adjustment mechanism. (The insurance companies and their partners in the Senate will fight these changes equally as hard, and they are even more difficult to explain to the general public.)
Increasing subsidies in exchange for dropping the public option is an equally bad potential trade. Dropping the public option should increase the overall bill’s cost by roughly $20 billion, and increase the premiums on the exchange. Therefore, getting more generous subsidies would require a massive increase in price of the bill. Finally, I don’t trust the long-term stability of the current subsidy levels in the bill. I can easily see that in 2015 the tax credits would be seen as too low, and Congress would approve a modest expansion. I can equally see a Republican congress in 2015 deciding to slightly cut the size of the tax credits. Either way, I am confident the current level of tax credits in the bill is the one thing most likely to change in the coming years.
Finally, dramatically increasing the price of the bill with more generous tax credits or blowing up our current employer health care system with the free choice amendment would be huge political battles. Neither is likely to poll as strongly as the public option. Nor does either have support among the conservative Democrats who are opposed to the public option. These changes would be an even bigger political rift than the public option. The progressives chose to fight for the public option because it is the most popular tool to ensure more people get better quality health insurance at a lower cost.
Most importantly, there is no deal or trade off possible. The conservative Democratic Senators are not asking for progressives to compromise, they are demanding the capitulate to prove who really has the power in Washington. If progressives give in, it will prove that they have zero power in Congress, and they would end up with nothing in return.