If Congress Passes Health Care Legislation without a Public Option…

[Time for change]

As Congress considers voting down health care legislation that contains a public health insurance option that Americans may choose in place of currently available private health insurance, they – and we – should consider a few things.

The most fundamental consequence of failure to include a public option in health care “reform” legislation will be that the plan will involve massive government subsidy of the private insurance industry. There will be several very negative consequences that accrue from that simple fact:


Greater expense and less coverage

Since private health insurance is much more expensive than government health insurance, that means that the plan will of necessity be characterized by one of three very serious problems, or more likely by a combination of those three problems: Either it will 1) be far more expensive; 2) cover far fewer people; or 3) cover far less health care for those who have insurance than a plan that contains a strong public option would.

There is no getting around this. It is simple arithmetic. Those who complain about the expense of a public option are woefully ignorant or they are hypocrites. Private health insurance is far more expensive than public insurance, for some very simple reasons. The plan will either cost far more, or it will cover far less.

There are several reasons why private health insurance necessarily costs far more than government health insurance compared to what we get for it. Private insurance companies spend money on the following items, which a government sponsored plan would not have to spend:

• Advertising and marketing costs
  
  
• Lobbying costs: Private health insurance companies spend tons of money to lobby our government for such things as … passing legislation to subsidize their corporations at taxpayer expense.
  
  
• Profits for their investors
  
  
• Screening their customers so that they can allow only the healthiest – that is the most profitable – into their plans
  
  
• Multimillion dollar salaries for their CEOs – which they justify by saying that they couldn’t produce such a superior product without those multimillion dollar salaries
  
  
• Other administrative/legislative costs: Government sponsored health insurance plans would of course also have to spend money on administrative costs. But one of the favorite pastimes of private health insurance companies is finding creative ways to avoid paying claims to their customers. Doing that requires special administrative efforts, and of course occasionally results in costly lawsuits.

So take your pick – greater expense, less coverage, or a combination of both.

Some have complained that a public option plan will also subsidize the health insurance industry, because some people will choose to use their government subsidies to purchase private insurance. That is true in some sense. However, the competition provided by a decent government plan should more than offset the advantage of those subsidies. In fact, Pulitzer Prize winning economist Paul Krugman believes that a strong government sponsored public health option will kill the private insurance industry because they will not be able to compete with it. And that is precisely why they have spent so many millions of dollars lobbying against a public option.


Income inequality

Extreme income inequality is a good indication that large segments of society lack the opportunity to make a decent living. It is also a formula for expanding social and political inequality, and it thus creates a vicious cycle.

The graph pictured below has great relevance to today’s situation. In the late 1920s income inequality rose precipitously, to peak just prior to the Stock Market Crash of 1929, which precipitated the Great Depression. The graph plots income inequality in the United States over time, as calculated by the ratio between the average income of the top 0.01% of U.S. families and the bottom 90%:



The bottom line lesson of this graph is that major economic inequality is followed by economic depression. Following onset of the Great Depression, President Roosevelt leveled the economic playing field with his New Deal, which helped greatly to bring us out of the Depression. With the onset of Reagan economics about a half a century later (which included the dismantling of many New Deal programs), and again with the onset of George W. Bush’s economic policies, economic inequality began to skyrocket again – which helped to bring us to our present state of affairs.

Paul Krugman, in his book, “The Conscience of a Liberal”, discusses the importance of universal health care as one big step towards leveling the playing field:

The principal reason to reform American health care is simply that it would improve the quality of life for most Americans…

There is, however, another important reason for health care reform. It’s the same reasons movement conservatives were so anxious to kill Clinton’s plan. That plan’s success, said William Kristol, “would signal the rebirth of centralized welfare-state policy” – by which he really meant that universal health care would give new life to the New Deal idea that society should help its less fortunate members. Indeed it would – and that’s a big argument in its favor…

Getting universal care should be the key domestic priority for modern liberals. Once they succeed there, they can turn to the broader, more difficult task of reigning in American inequality.

But how will health care “reform” that is characterized mainly by a massive transfer of taxpayer dollars to the health insurance industry help towards reducing income inequality to decent levels? I don’t see how it can. In all likelihood it would greatly expand the wealth and power of the insurance industry – which they would of course use to rig the system even further in their favor. That is a scary thought.


Considerations of fairness

The health insurance industry has been given their chance. Under their control, the cost of health care continues to soar, along with their profits. Many millions of Americans have found their legitimate health care claims denied in their hour of need, after pouring their hard earned money into health care premiums for much of their lives. And the opponents of government sponsored health insurance scream about the dangers of government rationing of health care! What a joke!

The same politicians who tout the “free market” and market competition as a supreme value are the ones who whine and complain that a public option insurance plan will hurt private insurance companies – as they accept hundreds of thousands of dollars in bribery… I mean campaign contributions from them. Yes, indeed it will. That’s too bad. They’ve had their chance. If they can’t stand the heat of the competition, then they should get out of the business.


What our best economists have to say about the need for a public health option

Let’s take a look at what our best economists have to say about this. Coincidentally – or NOT – these are the same people who warned us against bailing out failing banks with hundreds of billions of dollars of taxpayer money. They warned us against doing that for much the same reasons as they are now using to warn us against a massive government subsidy of the insurance industry:

Paul Krugman
On August 20th Paul Krugman wrote about the futility of trying to appease Republicans in the Obama administration’s quest to enact meaningful health care reform:

But there’s a point at which realism shades over into weakness, and progressives increasingly feel that the administration is on the wrong side of that line. It seems as if there is nothing Republicans can do that will draw an administration rebuke: Senator Charles E. Grassley feeds the death panel smear, warning that reform will “pull the plug on grandma,” and two days later the White House declares that it’s still committed to working with him.

It’s hard to avoid the sense that Mr. Obama has wasted months trying to appease people who can’t be appeased, and who take every concession as a sign that he can be rolled. Indeed, no sooner were there reports that the administration might accept co-ops as an alternative to the public option than G.O.P. leaders announced that co-ops, too, were unacceptable.

So progressives are now in revolt. Mr. Obama took their trust for granted, and in the process lost it. And now he needs to win it back.

On August 23rd Krugman wrote about what he describes as the inanity of the hysterical arguments against the public health option:

The debate over the public option has, as I said, been depressing in its inanity. Opponents of the option – not just Republicans, but Democrats like Senator Kent Conrad and Senator Ben Nelson – have offered no coherent arguments against it. Mr. Nelson has warned ominously that if the option were available, Americans would choose it over private insurance – which he treats as a self-evidently bad thing, rather than as what should happen if the government plan was, in fact, better than what private insurers offer…

How will this all work out? I don’t know. But it’s hard to avoid the sense that a crucial opportunity is being missed, that we’re at what should be a turning point but are failing to make the turn.

Robert Reich
Robert Reich, President Clinton’s former Secretary of Labor, recently wrote about the futility of leaving our health care insurance needs in the hands of private insurers:

Without a public, Medicare-like option, health care reform is a bandaid for a system in critical condition. There's no way to push private insurers to become more efficient and provide better value to Americans without being forced to compete with a public option. And there's no way to get overall health-care costs down without a public option that has the authority and scale to negotiate lower costs…

He explains why private insurance companies are so aggressively against the public option:

… A public option would cut deeply into their current profits. That's why they've been willing to spend a fortune on lobbyists, threaten and intimidate legislators and ordinary Americans, and even rattle Obama's cage to the point where the Administration is about to give up on it.

And he offers political advice to our elected representatives and to us:

The White House wonders why there hasn't been more support for universal health care coming from progressives, grass-roots Democrats, and Independents. I'll tell you why. It's because the White House has never made an explicit commitment to a public option… If Obama tells Senate Democrats he will not sign a healthcare reform bill without a public option, there WILL BE enough votes in the United States Senate for a public option.

I urge you to make it absolutely clear to everyone you know, everyone who cares about universal health care and what it will mean to our country, that the bill must contain a real public option. Tell that to your representatives in Congress. Tell that to the White House… If you are receiving piles of emails from the Obama e-mail system asking you to click in favor of health care, do not do so unless or until you know it has a clear public option. Do not send money unless or until the White House makes clear its support for a public option.

This isn't just Obama's test. It's our test.

Dean Baker
Dean Baker, co-director of the Center for Economic and Policy Research, recently drove home the point that private insurance companies cannot compete with government sponsored health insurance:

If the insurers ever had to compete with a publicly run insurance plan on a level playing field, they would be blown out of the water. We know that private insurers can’t compete because we already had this experiment with the Medicare program. When private insurers had to compete on a level playing field with the traditional government-run plan they were almost driven from the market. That is why they got their friends in Congress to pass Medicare Advantage. This program spreads the wealth around by giving the private insurers a subsidy…

Then he summarizes what will happen if Congress enacts “health reform” without a public health option:

The fight is over whether Congress will leave in place structures that will siphon an ever-larger amount of money out of taxpayers’ pockets and put this money in the hands of the insurance industry, the hospitals, the drug companies and the doctors…

Unless Congress creates a serious public plan, you can expect to be hit with the largest tax increase in the history of the world – all of it going into the pockets of the health care industry.

The editorial board at The Nation magazine
I’m not certain that The Nation has economists on their editorial board, but in my experience their opinions are almost always right on target no matter what the subject. In their most recent editorial they expressed their hopes for health care reform in an editorial titled “By any Means Necessary”.

We hope the president, his Congressional allies and millions of Americans will be inspired to honor and do battle for Kennedy's lifelong cause. Surely Obama knows that the Senate's fighting liberal would not have put the fate of the nation's healthcare into the hands of private insurance companies, which increase their quarterly earnings by denying people care. Reform is not possible without a public alternative to the private companies, one based on coverage for all and quality care rather than profit…

Like so many other progressives, they speak of the folly of “bipartisanhip” in today’s political climate:

Obama often speaks of his desire to get beyond the partisan divide, but what good is bipartisanship at this moment? The Republican Party… does not simply want to criticize or modify Democratic healthcare proposals. It is determined to cripple or kill reform, and with it Obama's presidency… It's high time for Obama to part ways with the Party of No, which has been stoking outlandish fears about government "death panels" and "socialism" …

And they speak of the folly of enacting health “reform” legislation without a public health option:

If the Dems put forth a watered-down "bipartisan" bill with no public option, they will be justly blamed for its inevitable failure – and will see ugly results in the 2010 midterm elections. If, on the other hand, Republicans manage to defeat a good bill, let them try to explain themselves to midterm voters, who will still be at the mercy of Big Insurance and Big Pharma.

This is what the American people voted in Democrats for in 2006 and 2008

Our elected representatives in Congress – and President Obama – should not lose sight of the fact that the American people elected them in large part to enact meaningful health care reform. Presidential candidate Obama promised a strong public health option plan, and he spelled out the specifics of that plan in great detail on his website during his presidential run. That plan is no longer described on his website. But during the 2008 presidential race I summarized it in posts that specifically and very favorably compared it to John McCain’s non-plan. If our President and Congress back away from this now, that would represent a betrayal of the American people who voted them into office, in my opinion.

I heard David Gregory disingenuously claim on Meet the Press this morning that the American people do not support “Obama’s plan” for a public health option, citing an inappropriately worded poll as his evidence. After millions of dollars of private insurance company money have been used – with the help of our corporate news media – to misinform the American people about the “Obama plan” and its associated “death panels”, it’s no wonder that a slim majority of American’s don’t support the “Obama plan”. That does not negate the fact that Americans have consistently demonstrated widespread support (more than 75%) for a health insurance plan that includes a “choice of both a public plan administered by the federal government and a private plan for their health insurance”.

The editorial in “The Nation” (that I quoted above) that proclaims the need for a public health insurance option concludes with the following warning and tribute to Ted Kennedy:

Every so often in American history a window to change opens… If Obama gives up this fight and caves in to lobbyists – and if Congressional Democrats and the grassroots fail to deliver the support he needs – that window will slam shut, and with it the chance for reform, which might not come for another generation. That would be a tragedy – and no way to honor the Lion of the Senate.