Peter Harbage and Karen Davenport have a new report for CAPAF in which they make the case for a robust public option as a component of a systematic health care exchange, and spelling out some details:
The operational features of this public health insurance plan and exchange would include: health insurance plan and exchange would include:
* A health insurance exchange that offers private insurance plans and a public health insurance plan—all of them competing on a level playing field.
* A public insurance plan operated by public employees separate from existing public and private plans.
* Comprehensive and affordable coverage, with guaranteed access to health insurance and other consumer protections offered by all plans in the exchange.
* A service delivery model that provides choice among insurance providers, better care coordination, and fair and efficient payment processes for patients and physicians alike.
* A health care system that promotes innovation rather than risk segmentation.
* An option for individuals to keep the coverage they have today if they so choose.
The point that I think receives too little attention in the debate is the one about innovation rather than risk segmentation. At the moment, insurance companies primarily compete by getting better at risk segmentation—at avoiding the riskiest cases, and doing various kinds of price discrimination. We can and should regulate much of this away. But if that’s all we do, we’ll still have a situation in which the companies are trying to find new and more creative ways of doing risk segmentation. We’ll end up “overly dependent on government enforcement to achieve the goals of health reform,” playing an endless game of cat-and-mouse to see whether or not we’re actually achieving our policy objective of promoting health in a reasonably fair and cost-effective manner. Inserting a publicly managed enterprise into the framework lets us rely more on competition and less on regulatory mandates.
The way this works is that if the private plans can’t or won’t compete by offering innovation, value, and quality then the bureaucrats at the public plan should be able to beat them. That, in turn, creates incentives for the private sector to unleash its own imaginative powers on beating the bureaucrats. Otherwise, it’s just bureaucrats drawing up rules and then the private sector dully complying with the rules while working creatively to find loopholes.