German Chancellor Otto von Bismarck once said, “Laws are like sausages: it’s better not to see them being made.” What he meant was that the compromises and payoffs necessary to move legislation generally aren’t pretty and often involve fudging on ideals to pass a reasonably good policy.
Crafting the current health care legislation is no exception to this statement, and it’s likely that Congressional Democrats pushing a strong public option will face a moment of truth on the slaughterhouse floor in November.
Assuming they do not have the votes to pass a bill with a pure public option, Democrats should embrace a compromise allowing states to opt out of a national public option. Despite a few weaknesses, the opt-out plan will accomplish most of the goals a pure public option would and is far superior to other potential compromises currently being discussed.
And remember, effective health insurance reform is critical to recently graduated college students, who are disproportionately likely to be uninsured.
Why is the public option so important? By providing a government-run insurance plan, insurance companies gain an additional competitor. Given the government’s history of running highly efficient programs like Medicare — which has overhead costs of three percent compared with the 12 to 20 percent overhead most insurance companies have — a public option will force insurers to keep rates lower in order to compete, which would curb health care costs.
The key when grinding out a compromise is to ensure that the sausage still has some real meat in it —that the final plan has the ability to curb costs. The first two compromises, health cooperatives and triggers, don’t pass USDA inspection.
Cooperatives, championed by Sen. Kent Conrad (D–N.D.), create statewide, consumer-owned co-ops. The problem is that most have failed in the past. Also, as political scientist and public-option architect Jacob Hacker points out in the most recent issue of the New England Journal of Medicine, most state-level co-ops would be too small to negotiate rates with health providers, canceling out the benefits of a public option. Conrad’s plan is like putting lipstick on a sick pig.
Sen. Olympia Snowe (R–Maine) has suggested creating a “triggered” public insurance option. If private companies can’t keep costs under control in a state after several years, a public plan will become available. But Snowe’s plan doesn’t bring home the bacon. As Hacker argues, her trigger’s requirements are so stringent that the trigger won’t get pulled. Making a public plan available on a state-by-state-basis also discards the size and simplicity that allow a unified federal plan to control costs.
Enter Sen. Tom Carper (D–Del.), who suggests providing a public option that states can opt to join. Carper’s plan is a pig with wings — but it needs one more adjustment to fly. The problem is that putting the burden on state governments to opt into a program makes not joining a plan the easier option.
Instead, giving states the option to opt out of the plan, as suggested by Sen. Chuck Schumer (D–N.Y.), leaves states the flexibility to get out of the plan if they wish, but it also puts the burden of opting out on state legislators and governors, which takes time and energy. As a result, most states — or at least a solid core — will take part in the public option, which will give it enough size to negotiate lower rates.
One potential objection to the opt-out plan is that states that keep the public option will become welfare magnets and draw low-income individuals from states that opt out. But since the public option will be funded by premiums and not by state subsidies, it doesn’t do states any financial good to opt out. Finally, having a public option actually will be good for states by lowering individual premium costs and making the plan more attractive for small businesses, which currently face crushing costs to insure their employees.
There are weaknesses — the few states that are likely to opt out also tend to have embarrassingly high rates of uninsured individuals. For example, the highest uninsured rate in the country in 2008, according to the Kaiser Foundation, is 27.7 percent. That rate belongs to Texas, a state well known for its reactionary politics.
But at the end of the day, when the pork hits the sausage grinder, Schumer’s opt-out compromise keeps the goals of reform intact better than other compromise options, if congressional Democrats can’t get the votes to pass a pure public option. His plan is far superior to the currently embarrassing state of American health insurance coverage.
Patrick O’Mahen can be reached at email@example.com.