Urban Institute Skeptical of Watered-Down Public Option

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One issue that probably hasn’t gotten the attention it deserves is the growing evidence that the watered-down (i.e., “level-playing field”) version of the public option currently under consideration is so watered-down that it doesn’t really accomplish anything. A new report from the Urban Institute appears to make precisely that argument. As Igor Volsky explains:

The report says that the Senate and House’s public option provisions (which require the public plan to independently negotiate rates with providers) would have little hope of lowering costs in areas of the country with high provider concentration. In areas where hospitals have “too strong a market presence to be excluded from insurer networks,” hospitals could dictate prices, stripping the public plan of its ability to negotiate cheaper rates, the report warns. According to a 2006 study, 86% “of large metropolitan areas were considered to have highly concentrated hospital markets.”

The report’s authors suggest that a better compromise would be a trigger mechanism, in which the trigger, if pulled, unleashes a strong public option:

In the absence of enough political support to pass a strong public option at this time, a “trigger” for a strong public option should be considered for inclusion in health reform legislation whether or not a weak public option is included as a political compromise. Even the threat of such a plan being triggered offers the potential to affect market dynamics between insurers and providers.

I think this suggestion is probably correct, but also a bit politically naive. The concern about a trigger has always been that if the proponents of a public option don’t have the political clout to get one created in the 111th Congress, they’re definitely not going to have the clout necessary to get a trigger pulled by the 114th or 115th Congress. The stronger you make the hypothetical public option, the less likely it seems that the trigger will ever be pulled. The genius of a public option that actually exists, no matter how watered-down or opted-out or whatever, is that it actually exists and whatever good it can do it can actually do. And note Peter Harbage and Karen Davenport’s argument that a level playing field public option could do a great deal of good even without exercising the kind of market power that Urban is confirming the level playing field public option won’t have.

But this should remind us that the majority of funds that employers and people pay in insurance company premiums ends up in the pockets of doctors, hospitals, and other purveyors of medical services. Compared to other countries, Americans pay for more services and we pay more for them. The evidence that all this extra money is getting us extra value is hard to come by. But note that even mild suggestions for mild shifts in direction away from the status quo—such as the recently floated idea that women aged 40-50 with no identifiable risk factors for breast cancer should be spared the expense and inconvenience of mammograms that lead primarily to false positives and painful, unnecessary treatment—tend to be greeted with hostile reaction from the public.