Why the public option is a FAIL in the making and no progressive should support it
It's simple. You do the math on savings and you look at how the insurance companies are going to behave, given their incentives*. From Bill Moyers Journal on May 25, 2009:
BILL MOYERS: I want to get your thoughts on President Obama's plan. As I read it, it's very difficult, at this moment, to know the details of it.
DR. SIDNEY WOLFE: 'Cause there aren't any details.
BILL MOYERS: There aren't any details. But he seems to be advocating a public option that would compete with the private insurance-driven sector, as a way of lowering the cost. What do you think about it? Is that- am I reading his plan correctly?
DR. DAVID HIMMELSTEIN: Well, most of the cost savings he's talking about are really illusory, I think. And my research group has done most of the research work on administrative costs in health care. And the administrative costs he's talking about saving are a tiny fraction of the potential savings under single-payer. 'Cause hospitals have to keep their bureaucracy, if you're dealing with hundreds of different plans.
Single payer has administrative costs of 3%, vs 30% for CEO salaries and bonuses, profit, and the call centers to deny you care under for profit "health" "insurance." Getting rid of that waste saves $350 billion a year. Since the public option is but one plan among many, you don't get the adminstrative savings. QED.
[HIMMELSTEIN, cont'd] And doctors have to keep the bureaucracy in our office. You don't actually get the streamlining that you get from having one payer that has one set of rules and can pay lump sum budgets to hospitals.
$350 billion a year is a lot of money to leave on the table, especially to prop up the business model of denying health care for profit.
And will the insurance companies try to game the system?
BILL MOYERS: What do you mean? How would that happen?
DR. DAVID HIMMELSTEIN: Well, the private insurers have all kinds of tricks to avoid sick patients, who are the expensive patients. So, you put your signup office on the second floor of a walkup building. And people who can't navigate stairs are the expensive people.
DR. SIDNEY WOLFE: Get rid of the heart failure patients.
DR. DAVID HIMMELSTEIN: Or you have your signup dinners in a rural area at night, where only relatively healthy people are able to drive and stay up that late. So, there's a whole science to how you sign up selectively healthier patients. And the insurance industry spends millions and millions of dollars on that. And would continue to as they've done under Medicare. Selectively recruiting healthier patients, who are the profitable ones, leaving the losses to the public plan.
And there's really, despite regulations in Medicare that says you can't do that, that's continued to happen. And it means that every time a patient signs up with a private plan under Medicare, we pay 15 percent more than we would pay if that same patient were in the Medicare program.
With that 15% going directly to CEO salaries and bonuses, profit, and the call centers to deny you care. On your dime!
BILL MOYERS: We the public?
DR. DAVID HIMMELSTEIN: We the public.
Quelle surprise. And it's not some sort of evil in the twisted souls of health insurance executives -- though their souls are twisted, no question, just like tobacco executives -- that will make the public option a dumping ground: It's the rules of the game. The CEOs have a fiducicary obligation to their shareholders to maximize profits, and if ripping off the taxpayers by turning public option into a dumping ground maximizes profits, they are duty bound to do that very thing.
[HIMMELSTEIN, cont] But it's not been efficient. It's been effectively a subsidy. And that's what we fear will happen with this public.
DR. SIDNEY WOLFE: Well, we also have some experience. Because in seven states, ranging from Washington to Minnesota, to other states, Maine, they have tried what amounts to a mixture of a private and a public plan. And it's way too expensive as David mentioned. [FAIL] As long as you have private plans in there, everybody still has to do all the bookkeeping.
So, it has failed. [FAIL] I mean, as Einstein has said, the definition of insanity is doing something over and over and over again, and expecting to have a different result. We've seen the same unsatisfactory, unacceptable result, in state after state after state after state after state, why mess up the whole country with it? [FAIL]
Why mess up the country? To keep the insurance companies in business!
The public option is not some sort of compromise. It is not some kind of gentle glidepath to single payer, since the legislation will be designed to make the transition to single payer FAIL, as Kathleen Sibelius admits. And as the public option FAIL takes 10 years or so to play out, it will suck all the oxygen out of real policy change and discredit government involvement in health care into the bargain, as Medicare Part D is doing -- making the transition to single payer even less likely. Meanwhile, Versailles, having guaranteed a market to the insurance companies by mandating participation, will chip away at the subsidies that make it possible for the 50 million uninsured to participate in that market, screwing them even further. And as the FAIL plays out, many hundreds of thousands will continue to be denied care, and thousands of them will die. How can any progressive support the public option with a straight face?
Progressives shouldn't waste their time and energy on the public option; that public option is at the the extreme left of "serious" discourse means absolutely nothing in policy terms, because the Overton Window is skewed so far right that no workable policy is available anyhow. Let Dean do what he thinks he needs to do; let the career liberals in MoveOn, SEIU, and OFA use public option as a fundraising vehicle; wev. None of this is relevant, and all of it is a distraction.
What progressives should do is advocate, as forcefully as possible, for the right, the science-based policy: Single payer. That way, when the public option FAILs, the groundwork for success will have been laid.
NOTE * Clue stick: The health insurance companies are for-profit institutions, so the incentive is always to deny care to those who need it. All other things being equal, it's always more profitable to collect a premium and then never pay out! Of course, that presumes a completely amoral set of CEOs and corporate practices, so, er, well...
UPDATE And after the faux conflict, here we go. It turns out that the Democrats are better are guaranteeing the continued existence of health care for profit than the Republicans. It's like FDR in reverse, isn't it?
UPDATE Well, well. An old friend pushing FAIL.