Moderates Are Embracing The New Public Option Compromise, But Will It Lower Costs?

Snowe and LiebermanToday’s morning papers indicate that key Senate moderates — Sens. Lincoln, Snowe, and Lieberman– are responding positively to a new public option compromise that would replace Majority Leader Harry Reid’s (D-NV) opt-out proposal with a network of nonprofit insurers administered by the Office of Personnel Management — the entity that runs the Federal Employees Health Benefits Program (FEHBP). From the Washington Post and Politico:

– LIEBERMAN: “If it’s private, and there’s no federal government financial exposure, and the government’s not creating an insurance company, that’s a long way toward what I’ve been concerned about.”

– SNOWE: “A very novel and innovative idea,” because the agency has experience negotiating with insurance companies.

– LINCOLN: “I just think it’s a good idea.”

Unfortunately, policy wonks aren’t nearly as optimistic. Public option godfather Jacob Hacker condemned the proposal as an “abandonment of the public plan idea altogether” and Timothy Stoltzfus Jost called the plan, “The dumbest idea yet.” “Nonprofit health plans are not part of the solution; they are part of the problem….[N]onprofit plans are already the dominant insurers in much of the United States. Of the nations 138 health plans with more than 100,000 medical enrollees, 84 of them, or 64%, are nonprofit,” he wrote.

While the details of the proposal are still unclear (nonprofits would compete in state-based exchanges with other private plans), its cost-saving capability rests in the power of the OPM to enroll nonprofits that can deliver quality care efficiently — with little administrative overhead. Here is what we know:

Q: Will we still see a public option in the Senate health care bill?
A: It’s unlikely that the current opt-out public option can attract 60 votes. The opt-out “is no longer being talked about,” Sen. Ben Nelson (D-NE) told Politico. Lawmakers are now considering establishing an FEHBP-like exchange of nonprofit insurers, administered by OPM.

Q: Will the OPM compromise lower costs?
A: It all depends on how the OPM acts. If it’s a prudent purchaser (and only picks the most efficient nonprofits), then it would save some money. However the OPM has not been successful in controlling costs within the FEHBP.

Q: Will the OPM compromise accomplish the goals of public option?
A: It may accomplish some of the goals of the public plan. The nonprofits are private insurers administered by a government entity that would compete on a level playing field with other private plans in state-based Exchanges. While competition may lower costs, this compromise will not introduce new delivery and payment reforms into the market.

Q: Will the OPM compromise still save a couple hundred billion dollars?
A: We don’t know yet. The Congressional Budget Office has yet to score the proposal. But so far, the only thing that saved anywhere in the range of a hundred billion dollars, was the Medicare +5 public option that the House considered but ultimately rejected. The CBO found that the current opt-out public option would save $3 billion over 10 years.

Q: What are the Democrats getting in return?
A: We don’t know yet. Over at The Treatment, Jonathan Cohn explains how progressives can use “their concessions on the public option to demand improvements elsewhere in the bill.” One idea is to extend prudent purchasing into the state-based exchanges.

Moderates are still considering other public option proposals. On Saturday, Snowe met with President Obama on Saturday to discuss the Snowe’s trigger public option compromise.