Considering Carper’s Public Option Compromise

tom-carperPolitico is reporting that Sen. Tom Carper (D-DE) is floating a new public option compromise that would “allow states to individually decide whether to create a private-insurance competitor such as a government plan and a nonprofit insurance cooperative, or to open up state-based insurance pools for government workers to every resident.” The option won’t come up during the Senate Finance Committee’s mark-up but may end up in the merged Senate bill or in an amendment offered on the Senate floor.

The idea mirrors Len Nichol’s proposal to establish a series of public options based on already existing state-employer health plans (currently offered in 30 states). The government would offer states start-up funds to establish a program that would compete on a completely level playing field .The public plan would have to be actuarially sound, would not leverage Medicare to force providers to participate or use Medicare payment rates, and would likely adhere to the same rules regarding reserve funds. Patients who are weary of private providers would likely enroll in the public option.

Large progressive states like New York and California will likely embrace this proposal; more conservatives states may wait to see if these public plans save money.

And it’s not clear that they will. State-based public options would enter concentrated markets (already dominated by one or two private insurers) and lack the market clout to negotiate significantly cheaper rates or institute reforms that change the way care is paid for. Existing state-run employer plans (and Medicaid in many states) have already given up on the ‘public’ aspect of their plans and outsourced the work to private insurers. As a result, they have failed to significantly lower health care costs or bring any real change to the market place. In other words, like Carper’s proposal, they are ‘public plans’ in name only.

This compromise may appeal to Blue Dogs or conservative Democrats who aren’t terribly interested in expanding government programs or using the government to lower health care costs; some moderate Republicans may also jump on board. After all, they believe that cost control and delivery reform are best left to a marketplace of private insurers and that’s exactly what Carper does. He creates “public options” that operate like a private plans.