The Not-So-Public “Public Option” in Health Care Reform (Part 1)

Yesterday I wrote about the myriad compromises that are likely to result in a health care reform plan so watered down that it’s hard to recognize as reform. The facet of reform that offered some real hope has also been the most contentious: the so-called public option, a government managed program that could compete with private insurers. The insurance companies don’t want this, of course, because they’re afraid people would quickly find out that the government, for all its bureaucratic shortcomings, could still do a better job at a lower cost than the profit-driven private sector. The insurance industry opposes a public option, and so does the AMA.

Now, the White House and some Congressional Democrats look like they may try to have it both ways on the public option, by offering a pale imitation of a real government-run alternative (which was itself already a pale alternative to single-payer.) Instead of a public option that was in effect an extention of Medicare, the models that now seem to dominate are two others, both of which would keep private insurers firmly in the mix: the Federal Employee Health Benefits program, and the idea of health care “cooperatives.”

Obama has been talking about the Federal Employee Health Benefits program since his campaign days, and it’s possible that this has been the White House’s back-burner strategy for a public option all along. Back in mid-March, Government Executive reported that  “the Obama administration is looking closely at the federal government’s health insurance program as it undertakes nationwide health care reform, a senior adviser to the president said.”

Senate Finance chair Max Baucus–who has received more in campaign contributions from the health insurance industry than anyone else in Congress–has also long hinted that the FEHB might provide the “compromise” that would allow bipartisan support. As Jerry Flanagan of  consumer watchdog.org reported in March:

Many agree that giving Americans an option to the private health insurance market is key to reform.  President Obama promised such a plan on the campaign trail.  Max Baucus made clear on Friday that keeping the public option “on the table” despite opposition from health insurers is central to the negotiations he must shepard as finance chairman.  That’s because he knows that powerful labor unions in particular have made the “public option” a part of their reform agenda.

 But Mr. Baucus also said on Friday that there are several different ways of putting a “public option” into place.  He said that such a system could either allow Americans to buy into Medicare, or in the alternative, open up the Federal Employee Health Benefits (FEHB) program.  But the latter is just another health insurance controlled system and misses the real cost saving benefits of a public option based on Medicare.

The FEHB has plenty of critics, especially when it comes to the costs for plan participants. The program provides coverage to millions of public employees, it is in no way a “public plan.” It simply allows federal workers to sort through a hundred different plans and pick one they want. Their employer, the government, then picks up a majority of the cost with the worker paying the rest. The coverage is generally good, but it is not cheap–in fact, 100,000 federal workers don’t participate because they can’t pay the price.

This is no victory for Obama, or liberal Democrats like Ted Kennedy, or for that matter, reformers in either party. In fact, it is a victory for the Heritage Foundation, and especially its chief of domestic policy Stuart Butler, a Thatcherite Brit who advanced this idea back in the early days of the Reagan administration, when Kennedy and others were pressing for health care reform.

In a recent guest posting on Healthbeatblog.org, FEHB subscriber Jim Jaffe describes the strengths and weaknesses of the program:

Allowing America’s uninsured access to the health plans offered Members of Congress—along with everyone else on the Federal payroll–could help those who could afford it although many would probably find the premiums beyond their reach, to say nothing of the subsequent deductible and copay requirements. 

But such a step would do little to reform the nation’s healthcare system because the Federal Employees Health Benefit Plans differ little from insurance plans offered by other large employers.

Federal workers and retirees may select a  plan at a cost ranging from just under $100 monthly for the cheapest individual plan to better than $500 for the most expensive family plan.  In each case, the government pays a significantly larger amount, generally about 70 percent of the total premium. 

The Federal plans–including point-of-service, HMOs and consumer-driven options–mirror those offered by large private employers via the usual insurers. Like a large employer, the federal government has the bargaining power to impose some restraint on premium increases and to assure that human resources personnel negotiating the contracts have included basic benefits. 

The FEHP program requires coverage of pre-existing conditions, caps out-of-pocket expenses, and offers subscribers clear information to help them do comparison shopping. On the other hand, Jaffe writes, the plans “are not particularlyuser friendly or structured for efficiency,” with enrollees facing many of the same complications and obstacles they would find with private insurance.  Jaffe concludes:

Granted from the perspective of an uninsured consumer having access to the federal plan would be far better than no insurance—if you can afford it.   But the FEHBP plans are clearly part of the old, flawed system that reformers talk about changing.  From an economic perspective, they are more problem than solution.  Premiums regularly rise at a rate double inflation.

TOMORROW ON UNSILENT GENERATION: Health care “co-ops”–the latest tepid version of a public option.

One response to “The Not-So-Public “Public Option” in Health Care Reform (Part 1)

  1. Pingback: Still Off-Topic: Model Health Reform Public Plan on FEHB? | Big Green Blog

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