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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?

But more than that, we're worried that the public plan actually becomes a dumping ground for the unprofitable patients. As it's happening in Medicare.

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?


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.

No votes yet


Submitted by jawbone on

at least not for me. I can get to it by clicking it on the Recent Blog Posts list, but not by just coming to Corrente.

It's a very good post, and it's making me feel guilty. I didn't make any calls today, darn it. Tomorrow fer sure. Speaker Nancy, Leader Reid, and my two senators at minimum.

Is it my PC -- something else?

Submitted by lambert on

No, not your browser. Just forget to check the right box when posting.

Submitted by jawbone on

anything called public plan (for those who want to try to pin down the wriggly little political critters on whatever vague answers we'll get when we call).

Most interesting is that Bowers says there are secret talks, behind the scenes meetings to 'fix" healthcare reform. Some of the news here is stuff we know, but, somehow, seeing it all together is, well, depressing. And infuriating. Damnable Bad Dems!

Today, The Hill reports that Blue Dogs and Republicans are holding secret talks on health care reform:

The talks have been so secretive and politically sensitive that some members interviewed by The Hill refused to name other legislators involved in the bipartisan effort.

Also today, former Democratic and Republican Senate majority leaders are coming out with plans to tax health care benefits, but with no public option.

A few days ago, Senators like Mary Landrieu and some Blue Dogs in the House have backed off their public statements in support of a public option.

Over the weekend, Kent Conrad is telling the world that there aren't enough votes for the public option. He claims that he was instructed to craft a compromise, non-public option plan by Senate leaders. (My emphasis and items numbered in original, but I couldn't get numbering to work)

Bowers suggests emailing and emailing and emailing, not calling. Just keep emailing until there are answers. (Me, I hate those autoreplies; I'd rather keep calling.) The questions:

Do you support a public healthcare option as part of healthcare reform?

If so, do you support a public healthcare option that is available on day one?

Do you support a public healthcare option that is national, available everywhere, and accountable to Congress?

Do you support a public healthcare option that can bargain for rates from providers and big drug companies?

Oh, don't forget to demand that CBO score single payer (HR676 should do nicely).

Refine as necessary to trap the weasels.

To add to the list of Bad Dems, Digby notes that Blanche Lincoln of Arkansas, state of many, many uninsured people, has come out for cooperatives as a way to kill even the public option.

“We want to keep what works in the private industry and make it better,” Lincoln told Arkansas reporters in a conference call today. “There’s a lot of discussion about what else we might need that we can’t get from the private sector.”


“A co-op would be the back up for the private industry,” Lincoln said.


“One of our biggest concerns is that it doesn’t need to be a government plan that usurps that ability to compete in the marketplace, which I’m concerned that a totally government-run option would do,” she said. (My emphasis)

Gotta love those Repub talking points! Well, BHIP* talking points, eh?

Better Dems should be the watchwords for 2010, btw. Fuhgeddabout these pseudo, Finance Party, FKD Dems.

*BHIP--Big Health Industry Players

Pacific John's picture
Submitted by Pacific John on

The ups and downs of the legislative process are simply for show, while the reality is, market dysfunction will be cemented in place for another decade or two. It's dead-on that the public option is simply a deceptive distraction.

However, the problem is larger than playing chess to set up long term single payer, the problem is that comfortable elites have a monopoly on power... something above 2/3 of the country, those dirty populists, have no representation.

In the historical sweep, our country has been brain-f***ed. American exceptionalism assumes liberal altruism and morality: WWII, civil rights, the New Deal, the Great Society. Nonsense.

The Clintons, flaws and all, had ties to average people that j school nest-featherers and entitled Ivy elites only see in the movies.

The only meaningful thing we can do is figure out a way to empower the other 2/3 of the country the way the Versailles-cozy Netroots did.

NOW just voted to step outside the bubble and survey the streets. Maybe it's a beginning.

Submitted by lambert on

I hope so. That was my reading, but my knowledge is very superficial.

BDBlue's picture
Submitted by BDBlue on

why Pacific John is hopeful. I have no reason to doubt it, I'm just trying to educate myself. Valhalla's post was a good start, but I'm still trying to figure out if what happened at NOW matters or not. Generally, I think it's a good thing when organizations focus on their issues and not particular politicians. Whether NOW will do that - and do it effectively - I'm interested in trying to figure out.

Pacific John's picture
Submitted by Pacific John on

... but events are changing that.

I think there is a chance that our band of brothers and sisters can mount a successful insurrection if events and technology break our way, but the chances are slim.

One thing to our advantage is we learned something from Obama and Alinsky: this is not a game to be won under rules of fair play and civility. If we have an opening, our single option is be ruthless toward the Versailles opposition. I'd prefer rules and laws that require fair play, but since they don't exist, we have to take the field as it is.

BDBlue's picture
Submitted by BDBlue on

NOW's election folding into that? One of the interesting things to me - despite some younger feminists' portrayal of Lyles as "change" is that Lyles was really part of the ruling regime and it was O'Neill and her team that were on the outside at NOW. But other than an unhappiness with the organization, I'm not yet sure how that potentially plays in the broader scheme of things.

Valhalla's picture
Submitted by Valhalla on

What I found encouraging was the extent to which the NOW election mirrored the divisions of the primaries and yet in this case, bullying and personality-worship did not win. I think the election of a non-Gandy-picked successor was not just rejection based on unhappiness with the organization, but based on a very particular sort of unhappiness. NOW under Gandy mirrored regulatory capture, I think, only it was capture of an advocacy organization by the politicians rather than agencies by corporations. Maybe cooptation is a better word. That unwinning and self-defeating strategy was rejected.

So even if O'Neill utterly fails to live up to her supporters expectations, the desire to return to real advocacy over insider-baseball is a good thing. Then, O'Neill's resume is fairly impressive, and her slate as well, so there is actual potential for NOW to now live up to those expectations.

As to whether it's a reflection of some other, more encouraging trend generally, I think the jury's still out. On the one hand, this was not any sort of general election across a broad, variously-informed electorate. Only delegates to NOW were allowed to vote. They had to be NOW members for at least 3 months, and it's the chapter presidents who choose the delegates. Violet has the reqs (in comments). I imagine many chapter presidents were acutely aware of the dramatic loss of membership under Gandy-Lyles (because it was also loss of $) and I'm sure many heard a serious earful from long-time NOW members during both the primaries and the general for Gandy's failure to speak out against the rampant misogyny. Plus it was a close vote.

Perhaps I'm just overly optimistic (gees, you'd think I'd learn!) but it's just such a win (and relief) to have one figure with a national podium who speaks out unequivocally for equality (I lived off that vid of Clinton's pro-choice statement while testifying before for. relations for weeks) that I'm willing to let a bit of hope creep back into my mind. Perhaps this O'Neill's win is an anomaly; but maybe it's the first pebble of the avalanche.

Submitted by lambert on

... here, and I wonder if it bears on this election, in any way.

In a way, this seems like yet another foreign country to view through the lens of the primaries -- what with Gandy supporters claiming Palin supporters swung the election to O'Neil (though maybe they did...) and then threatening to leave if they lost. Yay.

Submitted by lambert on


This caught my eye:

2005 - $4,869,844
2006 - $4,426,365
2007 - $3,680,200
2008 - N/A

2005 - $1,773,410
2006 - $778,362
2007 - $770,517
2008 - N/A

2005 - N/A
2006 - $201,720
2007 - N/A
2008 - $252,008

2005 - $ 6,643,254
2006 - $ 5,406,447
2007 - $ 4,450,717

Analysis: NOW receipts declined over 30% in the two year period from 2005 to 2007.

Kim Gandy, President
2005 - $169,041 + $21,802 Total: $190,843
2006 - $176,009 + $22,252 Total: $198,261
2007 - $166,984 + $26,323 Total: $193,207

Olga Vives, Executive VP
2005 - $139,698 + $12,200 Total: $151,898
2006 - $151,305 + $12,853 Total: $164,158
2007 - $145,116 + $13,920 Total: $159,760

Latifa Lyles, Membership VP
2005 - $63,416 + $2,026 Partial year Total: $65,442
2006 - $151,305 + $6,455 Total: $157,760
2007 - $145,117 + $22,224 Total: $167,341

Melody Drnach, Action VP
2005 - $61,708 + $4,160 Partial year Total: $65,868
2006 - $151,305 + $11,858 Total: $163,163
2007 - $145,117 + $19,596 Total: $164,713

Looks straightforward to me. Gandy failed to annount Lyles as her successor because, well, they sucked.

Pacific John's picture
Submitted by Pacific John on

but I depend on people like Alegre to keep me filled in.

I interpret the NOW leadership change as a sign that some issues groups realize getting sucked into Obamaspere was terrible. This is certainly not a very profound observation. Lynette Long showed that NOW's financial trend looks very bad, despite the fact that Obama co-opted independent liberal issues groups (new membership to many of our groups were excited by Obama, so the groups felt necessarily compelled to support the Dem nominee, but like the blogosphere, they were co-opted from the bottom up.)

What I can say is I met Kim Gandy and other top feminist leaders during the campaign. They were conflicted about the Obama phenomena, but as reported recently, ended up getting seduced by access to the new administration. I was also running in circles close to Kim, and chatted with her in Denver - by coincidence she introduced me to Eleanor Smeal. Discussing the campaign, they appeared to be crushed that we had dozens of witnesses to caucus theft. They knew the general outlines already, but didn't want to. They appeared willing to work with Obama no matter how Nixonian his campaign. Kim was on the campaign trail campaigning with a group of women the same time I was in the field, and at that Denver event, you could see the lines being drawn between people who were choosing to step outside the system, and those who were going to play an inside game. Kim and Eleanor were going to be inside, as if perhaps their self-worth depended on it.

I can't guess how this will end up, but clearly, a lot of liberals are waking up with a hangover, realizing they were seduced.