Community rating for health insurance and universal health insurance coverage is extremely popular with the public. It has 86% support.
While there is dispute over whether our health care system should be more like the Medicare, the Canadians and the French (single payer), or more like the Dutch and the Swiss and federal civil servant coverage (universal private health insurance coverage), there is widespread support for change from the status quo, that leaves 14% of people uninsured.
There is no great support, anywhere in the current debate, for a British style system, where the government runs the hospital and employs doctors directly. The people who don't like the Democratic health care proposal, which is similar to the Dutch and Swiss systems, who want any kind of meaningful health care reform, want a single payer system, like Canada and France, not a single provider system, like the British.
Politically, single payer is not on the table. This is true mostly because none of the Presidential candidates in 2008 backed that approach, not Obama, not Clinton, and not any of the Republican candidates. Elections have consequences. So, the real choice at this point is between universal private health insurance coverage for all, or nothing.
Does the "Public Option" matter?
In my view, the debate over a "public option" is a red herring. It doesn't matter.
To opponents, a "public option" sound like Congress is considering a British style system, but will do far less than its supporters think to control costs. To supporters, a "public option" sounds like Congress is considering some sort of single payer system, which it isn't. Congress is simply considering chartering a new non-profit health insurance company.
The people who support single payer health care reform aren't wrong. Single payer systems are cheaper. A universal private health insurance coverage systems provides some of the benefits of a single payer system, but not all of them. They have simply been outmanuvered politically.
But, the advocated of a single payer system, mostly progressive Democrats, are wrong to believe that a "public option" will address health care cost concerns that they had hoped to address with a single payer system.
The extra edge that single payer systems have comes primarily from the single payer's superior bargaining power (similar to that of a labor union) and its administrative simplicity, not from the inherent efficiency of government bureaucrats relative to private sector bureaucrats.
Competitive markets, even with the small number of competitors found in health insurance markets, do a great deal to moderate excessive premium prices that are within the control of the insurer. The presence of non-profit participants in that market further limits their ability to overcharge.
But, adding one more government run player to a health insurance market that already has several important non-profit participants doesn't provide either the superior bargaining power or administrative simplicity of a single payer system. And, the need for a subsided public insurer of last resort for people with pre-existing conditions (like Cover Colorado), disappears when health insurance companies are no longer allowed to consider pre-existing conditions when writing health insurance policies (i.e. when community rating is adopted).
The administrative simplification that a single payer system makes possible is far less feasible with half a dozen or more private insurers still in the health insurance market. Medicare is administratively simple because every provider for elderly patients uses a single set of forms and it covers almost everything. A public option doesn't change this situation.
A public participant in the market among many, even if that participant can cut corners on marketability and doesn't have to make a profit, still can't unilaterally control prices. Marketing can encourage people to pay a little bit more for a private health insurance plan than a public one. And, an public health insurance company that doesn't pay what other players in the market do will face the same problem that Medicaid has had in trying to get providers to accept below market rate compensation for their services.
The Politics Of A Public Option Get Easier, Not Harder
Advocates of a public option also argue that the current reform bill is the last best chance to get a public option. If they are right, and they are also right that a public option matters, this is a concern. They are wrong in this political calculus as well.
Once the other parts of health care reform are in place, chartering a government owned, non-profit, not meaningfully subsidized health insurance company, which is all that the public option proposes to do, is going to be much harder to fight legislatively. There is no opportunity, with that kind of simple, narrow legislation, to attribute costs from other parts of the health care reform plan to this piece of the puzzle, or to argue convincingly that it amounts to a government takeover of private health insurance. It becomes an issue of allowing competition or not, in a market that already has non-profit competitors, in exchange for the possibility of reduced health care costs without meaningful additional public spending.
Indeed, another way to get a public option, if one is not convinced of my analysis (particularly for states that have highly concentrated health insurance markets), is to allow states to create health insurance plans if they wish (a power that they probably already have in most states). Where the market is concentrated and support for a public option is high, states could act. Where the market is not concentrated or support for a public optioon is low, states could do nothing.