OurFuture.org Blogs: Jacob S. Hacker

The House Public Plan: Yes, It's Worth It

Jacob S. Hacker — Fri, 06 Nov 2009 09:54:28 -0800

with Diane Archer

How short memories are in Washington. A few weeks ago, when it looked possible that Nancy Pelosi could marshal enough Democratic support to create a “robust” public insurance option with rates tied to Medicare’s, everyone was talking about the big savings and reduced premiums that a series of estimates by the CBO showed this option could create. Then, the concern was that the public insurance plan would put private insurers out of business by using the government’s bargaining power to drive too hard a bargain with providers, creating an “un-level” playing field.

Now, however, the punditocracy is abuzz about the latest CBO estimates that show that the public plan eventually embraced by Pelosi--one that would negotiate rates with providers, rather than base them on Medicare’s--might actually charge higher premiums than the average private plan. No matter that the CBO estimates clearly state that the higher projected premiums reflect its expectation that the public plan will disproportionately enroll less healthy Americans--which might be seen as a virtue, since these are folks private insurance tends to serve most poorly. And no matter that a subsequent CBO letter to the House stated that even a public plan with negotiated rates would still place “downward pressure on the premiums of private plans.” Suddenly, in the commentariat, the public plan isn’t a fearsome predator. It’s a complacent kitten. Initially not worth having because it would be too strong, it’s now, according to critics, not worth having because it would be too weak.

In truth, both the initial fears and current dismissals are overblown. The CBO’s declining estimates of savings certainly make a strong case for having the public plan use modified Medicare rates, as we have long argued. It’s a shame the House will not be considering a bill that shows how substantially a public plan can contribute to freeing up federal dollars to help Americans afford coverage. But we should keep in mind that the prime argument for the public plan has never been about a particular payment formula. It has been that a public insurance plan is vital as an institutional check on private plans, its role evolving to reflect the emerging weaknesses (or strengths) of regulated private competition. Put simply, health reform is much more likely to succeed with a public health insurance option, even one with negotiated rates, than if private insurers are left to run the show.

Let us start with the obvious: No one knows for sure the exact role that the public option will play. CBO may be correct that the public plan will attract a less healthy pool of enrollees, and that risk-adjustment (paying plans with higher-cost patients more) will not fully compensate for this. And it is surely correct that the public plan will have lower administrative costs than private plans. (It should be emphasized that if the public plan has higher premiums primarily because it’s attracting less healthy enrollees, then it is still reducing average premiums and hence federal subsidies for premiums. That’s because average premiums would be even higher if the people enrolled in the public plan enrolled in private plans. That’s what the CBO’s more recent letter discussing “downward pressure” on private premiums implies.) But while the CBO estimates are rightly the authoritative source for Congress, they are by no means infallible. CBO has made clear that an unusually high level of uncertainty attaches to its analysis of the public plan.

Take the CBO’s projections that the public plan would pay the same rates as the private sector. Nothing in the bill requires this. The Secretary of Health and Human Services, empowered to negotiate rates for the public plan, is simply barred from paying more than private plans do. The Secretary may end up being able to negotiate lower rates than the CBO projects. (When this issue was being debated in the House Energy and Commerce Committee, Secretary Kathleen Sebelius actually suggested that she could get better rates than Medicare, which raised more than a few eyebrows.) If the public plan is able to obtain more favorable rates, it will not only lower its premiums and increase its membership. It will also, through competition, bring down private plan rates. Private insurers overpay preferred providers at least in part because it’s a way for the insurers to keep competitors out of the market. But if a public plan is now in the mix, the game changes, and insurers may finally feel pressure to drive greater efficiencies.

The same uncertainties surround the CBO’s prediction that the public plan will attract just one in five Americans within the health insurance exchange because of its higher projected premiums (down from earlier estimates of one in three). After all, the price of coverage is only one reason why people choose a health plan. The vast majority of older and disabled Americans enroll in the public Medicare plan--even though by choosing (excessively subsidized) private Medicare private plans, many can get broader benefits for less than they pay for Medicare plus supplemental insurance. By the same token, nonelderly Americans--even healthy non-elderly Americans--might be willing to pay a little more for a public plan if it offers the same transparency and accountability the public Medicare plan offers. Healthy people might choose the public plan because they will have the security of knowing that if they get sick or injured and need costly care, their plan will not be conjuring up ways to deny them needed coverage. (To be sure, if the private plans were required to be transparent about the services they covered and the rates they paid, it might be a different story. But the current congressional bills do little to require they disclose this data to enrollees.) And, of course, the more healthy people join the public plan, the more bargaining power the public plan will have and the more public plan rates will come down.

The public plan is also critical to reform as a cost and quality benchmark, one that is particularly crucial if private premiums accelerate upwards. The insurance industry has threatened that premiums will skyrocket if an individual mandate is not tough enough. It may be an idle threat, but if a final reform bill ends up looking more like the Senate Finance bill than the House bill, it might not be. In most local markets, competition is likely to be anemic, and regulation of insurers inadequate. There will be little to prevent insurers from raising rates as they have threatened.

Having a public plan in place should also help keep down the rate of growth of health insurance premiums over time. Over the past twenty years, the public Medicare plan has had a substantially slower rate of growth than private insurance. The CBO report on the House bill states that private insurers are better at controlling utilization than a public plan would be. But, to date private insurers have failed to prove their value at cost control and demonstrated they have strong incentives to delay and deny needed care rather than drive efficiencies in the system.

And remember: If the private plans continue to misbehave, drive up costs excessively, and otherwise engage in practices that are detrimental to our health security, Congress can later decide to strengthen the public plan and give it greater leverage to rein in costs and serve as a check on private insurers. Creating a public plan down the road is not realistic; that's one reason we seriously doubt any proposal to trigger the public plan would really work. Strengthening an existing public plan would be a far more likely prospect, especially if the public plan is proving its value in the market, as we believe it will.

What’s more, as far as payment and delivery system innovations are concerned, the public plan is really the only tool available for testing and implementing reforms in the market for the non-elderly. Private plans are notorious for keeping their innovations private--when they have them--and have little financial incentive to improve health care if it will not increase their bottom line. Yes, we can continue to rely on the public Medicare plan to test innovations. But working families have somewhat different needs, and it seems appropriate to pursue delivery and payment reforms more broadly, through both Medicare and a public plan focused on those younger than 65.

In short, it’s no time to be despondent about the fate of the public insurance option. For sure, pegging rates to Medicare and obligating Medicare providers to accept these rates would be far preferable, and a public plan with negotiated rates may do less to keep the insurers honest and drive down costs. But it’s still immensely valuable to give Americans an out--another choice--to let the insurers feel the heat of not being the only game in town. The fierce and continuing opposition of the insurance industry suggests that they think that a public option will prove a serious counterweight in an increasingly consolidated private market. The overwrought pessimism of the pundit class should not aid them in their cause of protecting themselves from a public-spirited competitor.

This article originally appeared in The New Republic.

Trigger Troubles—And Why the Senate Can’t Fix Them

Jacob S. Hacker — Thu, 22 Oct 2009 10:54:16 -0700

As closed-door discussions continue in the Senate, the resilient bad idea of triggering the public plan is once again on the table. Advocates of the trigger cast it as a compromise that will attract the support of the small number of conservative Democrats who have expressed reservations about the public option, as well as Republican Olympia Snowe, who has proposed a trigger.

But to be a compromise between public-plan skeptics and the majority of senators who support a public plan because it is central to ensuring affordable coverage while limiting the budgetary costs of reform, a trigger must have some prospect of working—and a trigger inserted into the two Senate bills now being merged would not.

A trigger would mean significantly less cost savings than a public health insurance option, and less affordable health care.

Private insurers are likely to raise premiums in anticipation of the implementation of reform without an imminent threat of public-plan competition.

Delaying a public plan may also jeopardize the cause of reform itself, because requiring Americans to buy unaffordable coverage has the potential to provoke a political backlash.

Trigger proposals demonstrate the futility of designing a workable trigger

Criteria for triggering the creation of a public plan must concern both affordability of coverage and the growth of premiums over time—yet the triggers on the table concern only the former.
They are all focused on the individual premiums people pay, rather than their total out-of-pocket costs. As problematic, they are vague with regard to what is affordable. Private plans could cover less or shift more costs onto patients to meet the affordability standard.
They assess affordability based on the price people pay after receiving assistance from the federal government. This means that efforts to help people afford coverage reduce the chance of a public plan that will rein in costs for individuals and taxpayers.
They assess whether affordability standards are met at an aggregate level, such as within states. Yet local markets vary greatly. If some markets have very high cost-growth, a trigger might not be pulled if other markets have lower cost-growth. Residents of a high-cost, low-competition area would, in effect, be held hostage by an overly aggregated measure.
They envision a weak public plan that cannot drive competition or rein in costs.

Key characteristics of the Senate health bills keep a trigger from working and make a public plan without a trigger especially vital in the Senate.

They leave an enormous responsibility for the regulation of private insurance to the states—which for the most part have not had the wherewithal or will to take on large private insurers.
They have much weaker regulations of private insurance plans outside of the exchange—the plans on which most Americans will rely after reform.
They lack strong requirements on private insurers to provide data that could be used to assess whether a trigger should be pulled.

Added to the Senate bills, a trigger would represent a backdoor way of killing the public health insurance option that a majority of Americans (and U.S. senators) support. It is past time to trigger real competition for private plans that have failed to ensure affordability or cost restraint for decades.

A longer version of this post appears today on The Treatment at The New Republic. There are also more details in this issue brief.

The Public Option At Risk

Jacob S. Hacker — Thu, 01 Oct 2009 10:44:51 -0700

In my interview with Laura Flanders of GritTV, I analyze the prospects for the public option in the Senate in the wake of the Senate Finance Committee's two votes against public option proposals this week.

I'm baffled, as I said in the interview, about how Democrats can think that it is good public policy to force Americans to buy private health insurance without doing anything to make sure that the health insurance is affordable.

But, as Sen. Charles Schumer, D-N.Y., one of the public-option amendment sponsors, said, this is an issue that will only grow in the days ahead. For one thing, there are a number of progressives in the House and the Senate who believe, as I do, that a public option is at the core of meaningful reform. Plus, if a reform bill with a public option was filibustered on the Senate floor, I doubt that Democrats have the stomach to see the bill defeated over that one issue.

Also, reform opponents threw everything they could at the reform effort during the August recess, and yet Democrats in both houses remain committed to the effort.

Finally, I have a great deal of faith in the American people and the support they have shown so far.

If we have a vigorous debate on the public option in the weeks ahead, I believe we can win that debate. The most important thing that progressives can do is get even more engaged than they have been up to now. In doing so, the two most important questions about any health care reform proposal are:

Does it provide affordable coverage for all Americans?
Does it create accountability?

You can't have one without the other, and you don't have either without the public plan option.

Co-Op Proposal An Effort To Kill The Public Plan

Jacob S. Hacker — Thu, 06 Aug 2009 11:21:17 -0700

The Senate Finance Committee today has unveiled a health care reform plan that does not include a public health insurance option. It instead proposes the creation of health co-operatives. At a media teleconference earlier, I explained why this will not work and should be seen for what it is: an effort to kill what would be an effective competitor to the private insurance market. Please listen below.

A public health insurance option would provide a cost and quality benchmark for private insurers, a backup for people who could not get access to private insurers and a cost-control backstop that would drive innovation and efficiencies that private insures could use. A co-operative would not have the reach necessary to fulfill these functions successfully in a market dominated by a a few large players.

Health Care For The Blue Dogs

Jacob S. Hacker — Tue, 28 Jul 2009 10:03:05 -0700

The fate of health-care reform hangs on what President Obama and leading Democrats do in the next few weeks. In particular, it hinges on an effective response to moderate Democrats in the House -- known as "Blue Dogs" -- who are threatening to jump ship.

The main worry expressed by the Blue Dogs is that the Congressional Budget Office has predicted that leading bills on Capitol Hill won't bring down medical inflation. The irony is that the Blue Dogs' argument -- that a new public insurance plan designed to compete with private insurers should be smaller and less powerful, and that Medicare and this new plan should pay more generous rates to rural providers -- would make reform more expensive, not less. The further irony is that the federal premium assistance that the Blue Dogs worry is too costly is the reform that would make health-care affordable for a large share of their constituents.

The Blue Dogs are right to hold Obama and Democratic leaders to their commitment to real cost control. But they are wrong to see this goal as conflicting with a new national public health insurance plan for Americans younger than 65. In fact, such a plan, empowered to work with Medicare, is Congress's single most powerful lever for reforming the way care is paid for and delivered. With appropriate authority, it can encourage private plans to develop innovations in payment and care coordination that could spread through the private sector, as have past public-sector innovations.

Increasing what doctors and hospitals are paid by the new public plan, as the Blue Dogs desire, would only raise premiums and health costs for their constituents. It would also fail to address excessive payments to hospitals and specialists that private insurers say they have lacked the leverage to bring down. Offering public plan rates at close to Medicare levels while giving doctors and hospitals the choice of accepting them -- as the House legislation does -- is a way to test the market. If providers accept the rates, as the CBO projects they will, the Blue Dogs will get what they want: lower costs. If not, the bill in the House contains provisions for adjusting the rates, including nearly $10 billion to raise rates in rural areas if an independent study determines that higher rates are needed.

Many Blue Dogs fret that a new public health insurance plan will become too large, despite the CBO's projection that the overwhelming majority of working people will have employer coverage and that the public plan will enroll less than 5 percent of the population. Their concern should be that a public plan will be too weak. A public health plan will be particularly vital for Americans in the rural areas that many Blue Dogs represent. These areas feature both limited insurance competition and shockingly large numbers of residents without adequate coverage. By providing a backup plan that competes with private insurers, the public plan will broaden coverage and encourage private plans to reduce their premiums. Perhaps that's why support for a public plan is virtually as high in generally conservative rural areas as it is nationwide, with 71 percent of voters expressing enthusiasm.

Yet the Blue Dogs have mostly ignored the huge benefits of a new public plan for their districts. They have also largely ignored the disproportionate benefits promised by new federal subsidies for low- and medium-income workers. Right now, large swaths of farmers, ranchers and self-employed workers can barely afford a policy in the individual market or are uninsured. They will benefit greatly from the premium assistance in the House legislation promised for workers whose earnings are up to 400 percent of the poverty line, from additional subsidies for small businesses to cover their workers, and from a new national purchasing pool, or "exchange," giving those employers access to low-cost group health insurance that's now out of reach.

And given that Blue Dogs are worried about the federal cost of reform, they should applaud the House bill's requirement that all but the smallest of employers make a meaningful contribution to the cost of coverage. This will not just raise much-needed revenue. By ensuring that most employers contribute to the cost of insurance, it will also reduce the incentive for employers to drop coverage and let their workers go into the pool, increasing the size of the exchange and the public plan.

Blue Dogs have the future of health-care reform in their hands. If they hold firm to their principles of fiscal responsibility and effective relief for workers and employers in their districts, what's good for Blue Dogs will also be good for America.

Make Health Care Affordable And Accountable

Jacob S. Hacker — Tue, 23 Jun 2009 09:08:35 -0700

This is excerpted from written testimony submitted to the House Education and Labor Committee, one of three House committees jointly writing health care reform legislation, on June 23.

For national health care reform to succeed, it must create accountability in American health insurance, expand coverage while making it more affordable for workers and their families, and adequately fund our health care priorities while putting in place the preconditions for long-term savings to the federal budget. The draft legislation prepared by this special House of Representatives tri-committee promises enormous progress in meeting all three of these goals.

Both accountability within the insurance market and shared responsibility are necessary to slow the growth in health care costs not just for workers and their families but also for employers, states, and the federal government.

In recent years, the need for comprehensive health reform has become glaringly apparent. Health insurance premiums have skyrocketed, more than doubling from 1999 to 2008, while the scope and generosity of private coverage have plummeted. Not only have the ranks of the uninsured continued to expand, but, in addition, the number of Americans who have insurance yet lack adequate protection against medical costs has increased dramatically. More than half of bankruptcy filings are related to medical care, with the vast majority of medical bankruptcies involving households that have insurance coverage. Employers, workers, states and localities, and the federal government—all have seen their budgets under siege because of runaway health care costs and all require long-term relief.

Amid the crisis, there has emerged a growing recognition not just of the need for action but also of the virtues of a public-private “hybrid” approach to health reform. The approach to reform embodied in the tri-committee draft legislation is such a model—a model that builds on the best elements of the present system: large group plans in the public and private sectors. By lowering the cost of care and requiring that all firms eventually contribute to the cost of coverage, the legislation would encourage employers to continue to provide health insurance. At the same time, it would put in place a new means—the so-called health insurance exchange—of allowing Americans without access to secure workplace coverage to choose among insurance plans that provide strong guarantees of quality affordable coverage over time.

An essential feature of this new framework for obtaining group coverage is “public plan choice,” the creation of a new public plan modeled after Medicare that would be available to Americans younger than 65 who lack good employment-based coverage. Public plan choice is not by any stretch of the imagination “Medicare for all.” Rather, it simply creates a public health insurance plan with incentives to focus on value and innovation that competes on a level playing field with private insurers within the new insurance exchange. Private employment-based coverage would continue, and workers without such coverage would be able to choose from a menu of options that includes a range of private insurance plans as well as the new public health insurance plan.

Moreover, this new public health insurance plan should be—and is, in the draft legislation—self-supporting after initial setup costs are financed (that is, it should be financed by the same sources as any other plan within the exchange, notably, individual premiums, employer contributions, and income-related subsidies). It should also be—and is—subject to the same rules as the private plans and be separate from the national exchange, so the referee (the exchange) does not have a player (the plan) in the game.

This idea is overwhelmingly popular. In a recent poll conducted by the New York Times and CBS News, 72 percent of those questioned supported a government-administered insurance plan that would compete with private insurance. The support for a public plan came from Republicans and Democrats alike. Half of those who identified as Republicans said they would support a public plan, along with three-quarters of independents and nine out of ten Democrats.

Choice, Accountability, and “Healthy Competition”

The aim of public plan choice is healthy competition—that is, competition to make Americans better cared for and more secure. Such competition requires not an endless array of choices, but rather a reasonable number of meaningfully different choices. In much of the country today, health insurance competition is remarkably limited. Most metropolitan areas have no more than a few dominant insurers in control of the market. And these companies are often unable or unwilling to rein in health care costs. It is often in their interest to pay higher rates to key doctors and hospitals because they can pass on these costs to individuals and employers. In the process, they make it difficult for weaker insurers to build competitive provider networks and bring costs down. Even the largest insurers are hard-pressed to enter established markets.

Because the hospital market has grown increasingly concentrated, moreover, providers wield considerable power of their own to drive up the rates they receive from insurers and restrict competition. In areas where hospital market concentration has grown the most, hospital prices and profitability are very high, yet service and quality of care is no better than in other areas, the evidence suggests. As John Holahan and Linda Blumberg of the Urban Institute explain, “Dominant insurers do not seem to use their market power to drive hard bargains with providers . . . . Competition in insurance markets is often about getting the lowest risk enrollees as opposed to competing on price and the efficient delivery of care.”

A public health insurance plan would provide greater competition for insurers and providers and greater choice for Americans. Indeed, a key reason for public plan choice is that public health insurance offers a set of valued features that private plans are generally unable or unwilling to provide. Stability, wide pooling of risks, transparency, affordability of premiums, broad provider access, the capacity to collect and use patient information on a large scale to improve care—these are all hallmarks of public health insurance that private plans have inherent difficulties providing. On the other hand, private plans are generally more flexible and more capable of building integrated provider networks, and they have at times moved into new areas of care management in advance of the public sector.

In short, public and private plans have unique strengths, and both should have an important role in a reformed system. Public plan choice simply means that all Americans without good workplace coverage, not just the elderly or the poor, should have access to the distinctive strengths of a public health insurance plan, as well as the strengths of private plans. Such healthy competition has long been the stated rationale for encouraging Medicare to include private plans alongside the public program. The argument for a competitive partnership between public insurance and private plans applies at least as strongly to nonelderly Americans as it does to those in Medicare.

Healthy competition is about accountability. If public and private plans are competing on fair and equal terms, the choice of enrollees between the two will place a crucial check on each. If the public plan becomes too rigid, more Americans will opt for private plans. If private plans engage in practices that obstruct access to needed care and undermine health security, then the public plan will offer a release valve. New rules for private insurance could go some way toward encouraging private plans to focus on providing value. But without a public plan as a benchmark, backup, and check on private plans, key problems in the insurance market will remain.

Public Plan Choice is Essential to Cost Control

Perhaps the most pressing of these problems is skyrocketing costs. Public health insurance has much lower administrative expenses than private plans, it obtains larger volume discounts because of its broad reach, and it does not have to earn profits as many private plans do. Furthermore, experience suggests that these lower costs are accompanied by a superior ability to control spending over time.

Medicare has a better track record than private health plans in controlling costs while maintaining broad access to care, especially over the last fifteen years. By way of illustration, between 1997 and 2006, health spending per enrollee (for comparable benefits) grew at 4.6 percent a year under Medicare, compared with 7.3 percent a year under private health insurance.

Over the last generation, public insurance has pioneered new payment and quality-improvement methods that have frequently set the standard for private plans. More important, it has the potential to carry out these vital tasks much more effectively in the future, using information technology, large databases of practices and outcomes, and new payment approaches and care-coordination strategies. Indeed, a new public plan could spearhead improvement of existing public programs as well as private plans.

To be sure, there are reasonable concerns about how a new public plan will use its bargaining power—concerns reflected in current proposals for state-based public plans, consumer cooperatives established by the states, or even private insurers under public contract. Yet a watered-down public plan or a private alternative to a public plan would not serve the three vital functions of a competing public health insurance plan—to be a “benchmark” for private plans, a “backup” to allow consumers access to a good plan with broad access to providers in all parts of the country, and to serve as a cost-control “backstop.” Consumer cooperatives, for example, will be extremely difficult to create and are unlikely to serve as a backup in most of the nation. They will also lack the ability to be a cost-control backstop, much less a benchmark for private plans, because they will not have the reach or authority to implement innovative delivery and payment reforms.

In sum, public plan choice is essential to set a standard against which private plans must compete. Without a public plan competing with private plans, we will continue to lack strong mechanisms to rein in costs and drive value down the road.

Jacob S. Hacker is a professor of political science at the University of California, Berkeley
and co-director of the Center on Health Economic & Family Security at the UC Berkeley School of Law.

Why We Can't Compromise On Public-Plan Choice

Jacob S. Hacker — Wed, 27 May 2009 11:45:46 -0700

Of all the components of the health reform package that will be debated in Congress this year, none inspires greater admiration or ire than the idea of “public plan choice.” Public plan choice means simply that Americans younger than 65 who do not have employment-based health insurance should have the option of enrolling in a new public health insurance plan that provides good coverage on equal terms in all parts of the country.

As I have argued at length, by creating a benchmark for private plans and a new means of reining in costs and improving quality, public plan choice is the key to ensuring that health reform provides quality affordable care to all Americans over the long term.

Health Care: How 'Public' Must A Public Plan Be?

In the days leading up to the America's Future NOW! conference starting June 1, we're hosting an online dialogue featuring conference speakers on the key issues they will be addressing during the conference. Join the conversation by clicking the "Discuss" link below or contribute your own post.

Recently, some policy experts have called for a “compromise” approach that would involve state-based public plans designed to mimic state self-insured health plans. Some have even backed models that simply involve a government contract with one or more private insurers to administer claims. Neither approach would achieve the cost savings nor delivery system changes that a truly national public plan could. Indeed, in an online debate, Stuart Butler of The Heritage Foundation correctly stated that a self-insured nonprofit health plan such as those now run for public employees in many states would be “a public plan in name only.”

A true public plan cannot rely on private insurers to set premiums, provider rates, or terms of coverage, and it must be publicly accountable at the national level. The simplest, most workable, most cost-effective, and most attractive way to achieve these crucial goals is to model the new public plan on Medicare, the successful and popular public health insurance program for the elderly and disabled.

A Medicare-like public plan would be much more stable and secure than other approaches. It would provide the broadest possible choice of doctors. It could be offered throughout the nation on the same terms. It would have the lowest administrative costs. And its bargaining power and large risk pool would allow it to offer the most affordable possible premiums and most effectively restrain costs while upgrading the quality of care.

No less important, this model is overwhelmingly popular: In polls, between two-thirds and three-quarters of Americans say they want private plans to compete with a “government-administered public plan similar to Medicare.”

In stark contract, state-run plans or plans run by third-party administrators would have severe disadvantages:

1. They would require building a new plan (or a new set of regional plans and oversight agencies) largely from scratch, which would mean forfeiting the administrative, economic, and political advantages of building on the Medicare infrastructure.

2. Such models would also require forfeiting another major advantage of a Medicare-like public plan: the ability to provide enrollees with a broad choice of providers.

3. Most important, the prospect for cost restraint and/or quality improvement under these proposals would be limited. Medicare has increasingly out-performed private plans in restraining the rate of increase of health spending while maintaining broad access. A new public plan could draw on Medicare’s experience, as well as the experience of the national VA system, to improve its cost-control methods and enhance the quality of care.

In short, the public health insurance plan should be a model for how to deliver cost-effective high quality care. Only a national, comprehensive and truly public plan can provide this essential benchmark for private plans.

So let’s not compromise away an essential element of health reform. When the debate over reform heats up, advocates will need a clear, simple, and unthreatening vision of reform that makes a simple promise: Americans should get a real choice between private insurance and a Medicare-like public plan, not a false choice between private insurance plans and a “public plan in name only.”

Mandate Myopia

Jacob S. Hacker — Tue, 26 Feb 2008 07:40:12 -0800

Back in the early 1990s when health reform went down in flames, there was one word that kindled rage in the hearts of reform’s opponents: “mandate.” This time around, Democrats insisted they would relegate the offending word to the dustbin of history. Now, employers would have a “choice” of providing coverage or helping their workers pay for it (no mandate there!), and Americans would get to pick their health plans from a new “menu” of options (just like at Denny’s!). Universal health care had a kinder, gentler face.

So why in the world are presidential candidates Barack Obama and Hillary Clinton beating one another up about, of all things, health care mandates? Clinton has said that Obama’s plan would leave millions more uninsured than hers, because it lacks a requirement that all adults obtain coverage (a so-called individual mandate). Meanwhile, Obama’s campaign has countered—in a mailing that’s, sadly, a preview of what Republicans will say about mandates of any sort—that a mandate would amount to forcing people to buy coverage they can’t afford.

Join Jacob S. Hacker at the Take Back America conference March 17-19 and help move the universal health care debate forward.

RELATED: Lewin Group affirms that Hacker's Health Care for America plan leads to universal coverage.

For anyone who follows health policy, it’s a sordid spectacle. For anyone who doesn’t, it must be totally incomprehensible—like watching two rocket scientists boil a discussion of space travel down to a squabble over the angle of reentry. And yet, arcane as it may seem, the debate carries real dangers. Fourteen years after President Clinton tried and failed to achieve universal coverage, Democrats are making the same old mistake of letting technical litmus tests blind them to the larger challenges they face on health care.

The current enthusiasm for individual mandates rests almost entirely on the experience of single state: Massachusetts, which was implementing an individual mandate just as Democrats were formulating their campaign plans. Never mind that the Massachusetts law has proved to be a mixed bag, with hundreds of thousands of residents still uninsured despite the mandate. A consensus was born that the mandate was the key to an odd-bedfellows coalition of Democrats and Republicans, conservatives and liberals, progressive activists and business leaders.

This consensus is largely mythical. Republicans—including Mitt Romney, who supported the mandate as governor of Massachusetts—have raced away from the idea faster than a speeding bullet point. Instead, top Republicans (and yes, that includes John McCain) are calling for the encouragement of Health Savings Accounts and new tax breaks for individually purchased insurance—a far cry from even the relatively minimal Massachusetts approach of requiring that people obtain coverage and regulating insurance to ensure its availability.

Or consider California, where reform efforts fell apart last year. There, the individual mandate turned out to be not the key to compromise, but a major sticking point—with many of the strongest supporters of reform reasonably worried that cash-strapped workers would be compelled to spend a huge share of their income on private insurance that provided them with little real protection.

What’s clear from the abortive California battle and the checkered Massachusetts experience is that the individual mandate is no silver bullet, in policy or political terms. On its own, an individual mandate is either cruel or chimerical, forcing people to buy bad insurance that costs too much or failing to achieve its goal of universal coverage. Insurance needs to be affordable, and enrollment easy and automatic, for an individual mandate to work.

And thankfully, that’s the role the individual mandate plays in Senator Clinton’s plan. For all the shrill back and forth, both Clinton and Obama have focused their proposals on requiring employer contributions, signing up people for subsidized coverage through employment and public programs, and creating a new set of insurance options for those without workplace insurance, including a Medicare-like public insurance plan that can provide guaranteed coverage inexpensively.

All this is wise. It reassures Americans that they can continue to be covered by workplace insurance if their employer provides it, while also ensuring they have access to an affordable guaranteed plan—a plan similar to, but more comprehensive than, the popular Medicare program. Moreover, this approach can restrain premiums much more effectively than proposals that simply rely on private insurers, as does the Massachusetts plan. And if done right, it can automatically cover nearly all Americans through the workplace, as is true for most working-age Americans who have private insurance today.

Thus, the mandate melee obscures the truly important features of Obama’s and Clinton’s plans—how they would enroll people, how they would ensure premiums for coverage were low, and how they would keep costs down over time. Neither of the candidates has really answered these questions. Obama, for example, has not forthrightly endorsed so-called automatic enrollment through the workplace, in which people are required to opt out of coverage rather than opt in. And both plans exempt small businesses from the requirement that they must offer coverage or contribute on behalf of their workers. Given that most of the uninsured work for small firms, this exclusion could turn out to be as much of an obstacle to universal coverage as the Obama plan’s lack of a mandate for adults.

But the policy objections are somewhat beside the point. The deeper problem is that Democrats are once again arguing about the least salable aspect of their vision for reform. And they’re fighting over small internal differences, instead of taking on the starkly divergent Republican vision on health care. This doesn’t just mean missing the real challenges that reformers confront. It may mean missing the chance to finally address an issue that has bedeviled Democrats for decades.

Hillary's Turn

Jacob S. Hacker — Mon, 24 Sep 2007 08:51:00 -0700

Sen. Hillary Clinton's health plan received a warm reception when it was released September 17. Ezra Klein of the American Prospect, Jon Cohn of The New Republic, and Paul Krugman of The New York Times each offered praise. Even resident Times conservative David Brooks opined that the plan was "a huge step forward from 1993. It's better than the GOP candidates' plans." Rich Lowry of National Review admitted, "She re-enters the health care debate from a position of strength."

To be sure, there was the expected grumbling from supporters of single-payer national health insurance, and the predictable overheated attacks from the Republican presidential contenders. All in all, however, the launch was about as successful as a policy debut could be, erasing for a moment the bad memories of the early 1990s reform debacle that has come to be seen as Senator Clinton's main legacy on the issue.

All this raises an obvious question: Why should we expect anything different this time? Is this moment more auspicious than when Clinton last battled for this issue? And if so, why?

Actually, the possibilities for reform are greater today. That's one reason I've spent much of the last few years promoting an approach similar in crucial respects to those embraced by John Edwards, Barack Obama, and Clinton.

For one, the context has changed. Not only are the problems in U.S. health insurance far worse, but there's also the prospect for a more effective reform coalition than we saw 14 years ago. This coalition would include not just unions but also business leaders -- or, at least, it wouldn't attract the unified opposition of business leaders. No less important, reformers have updated their strategies in important ways, and none more so than Hillary Clinton.

***

Much looked good for health reform in 1993. For starters, the issue had been catapulted to the top of the political agenda by a national recession, growing corporate angst over rising medical costs, and the surprise victory of an unknown Democrat, Harris Wofford, in a special 1991 Senate election. In response, President George H. W. Bush had proposed a major plan, and leading Republicans, including Senate Minority Leader Bob Dole, had released their own alternatives. Meanwhile, Bill Clinton had run for president talking about this issue, and the 1992 election had ushered in unified Democratic government for the first time in 12 years. Lastly, polls showed great public interest in the issue, and at least superficial support for major change. No wonder so many believed the time had finally come for serious action.

So what went wrong? By my reckoning, four crucial factors doomed the Clinton plan, and ultimately any meaningful reform initiative. First, the recession lifted and health care costs moderated, encouraging many corporate leaders to back away from action. Second, and even more important, conservative Republicans, led by Newt Gingrich, mobilized to use the issue as the springboard for capturing Congress. To make matters worse, the Clinton administration made a series of crucial missteps--the third factor and one I'll discuss shortly. Fourth and finally, amid the growing controversy over what should be done, many Americans became fearful that, for all the problems with the current system, reform would hurt their present coverage.

None of these barriers has disappeared. Indeed, Republicans are, in general, further to the right on health care today than 1993. But the pressure for change is greater. Health costs have escalated dramatically since the mid-1990s, straining both private and public budgets and encouraging more and more employers and workers to forgo insurance. Personal bankruptcies caused by medical costs, rampant uninsurance and underinsurance, runaway medical debt, crippling benefit costs for employers -- all these problems have grown far more prevalent and troubling. In his speech before Congress in 1993, President Clinton said, "This health care system of ours is broken, and it's time to fix it." If it was time then, it is well past time today.

These problems are not just getting worse, they increasingly affect the middle-class. Again, this was true in the early 1990s, but it's more true today. Over a two year period, a shocking one out of three non-elderly Americans goes without coverage. A recent survey by Consumer Reports found that nearly half of adults younger than 65 -- most of them insured -- are "somewhat" or "completely" unprepared to cope with a costly medical emergency in the coming year. The median household income of underinsured respondents was almost $60,000, and nearly a quarter lived in households making more than $100,000. The recent census report that showed the number of Americans without health insurance setting a dubious new record in 2006 -- 47 million, up from 44.8 million in 2005 -- also showed most of that rise occurring among middle-class families. Coverage for the poor has expanded since the early 1990s, but the employment-based framework on which middle-class workers rely is crumbling. That means a politically crucial segment of the voting population is increasingly exposed to the hassles and anxieties of inadequate coverage and ruinous medical costs.

But American politics is never simply about solving agreed-upon problems, even when they affect large segment of the middle class. So two additional factors might hasten this reform. First, corporate America may well be ready to acquiesce to major changes. The last decade has seen business pull out every trick in its arsenal for controlling costs--to little avail. Now, the only surefire way to cut costs is to cut coverage and shift risks onto workers, which is not just unattractive to most businesses, but also likely to stoke public interest in major reform.

Second, those interested in reform have returned to their field of dreams with greater sensitivity to some of the political risks--particularly the fear of Americans that their current coverage, however substandard, will be hurt or taken away without something better taking its place.

It's worth emphasizing that Americans are--and were in 1993-94--eager to see our system reformed. Moreover, they're more supportive of government action than you might think. But the Achilles' heel of reform efforts is that most Americans do have some source of insurance most of the time. Against this backdrop, the easiest way to kill reform is to say, "Oh yes, I support change, but this change will destroy what you have, this change will make you pay more for less."

***

All of which brings us to Senator Clinton's new plan. While clearly a work in progress, it is unmistakably the reflection of long and hard strategic thinking. (Full disclosure: I offered advice to the campaign, and was gratified by their responsiveness.) And though Clinton's plan is extremely ambitious relative to the Democratic presidential plans of the last two presidential elections, it is notably cautious relative to what President Clinton proposed in 1993.

Most journalists have described the essence of the Clinton plan as an "individual mandate," a requirement that everyone have health insurance. But the individual mandate is only one of three key elements. Revealingly, in her speech releasing the plan, Clinton talked about the new choices she'd provide and employers' responsibilities to help pay for coverage before she even got to the individual requirement.

Which is a good thing: Because an individual mandate by itself is neither a popular nor an effective route to affordable quality care for all. In isolation, an individual mandate is either cruel or chimerical, forcing many to buy coverage they really can't afford or failing to achieve its goal of universal insurance. An individual mandate works best as an auxiliary precaution, a way of encouraging people to obtain insurance after they have been provided with low-cost options and their employers have been required to share the cost with them. Thankfully, that's the role it plays in Clinton's new plan.

Rather than the individual mandate, the essence of Clinton's plan is a new menu of health plan choices--which, crucially, will include a new, comprehensive public insurance plan as well as private options. More than either Edwards or Obama, Clinton has revealed a dirty little secret of our current system: It provides few Americans with anything like the range of choices that our idealized image of private markets suggests. American health insurance is like a supermarket where the doors are closed to a substantial minority and the rest get to shop in only one aisle -- if they're lucky.

Clinton's plan would open the supermarket doors to all and expand the range of choices for many. The basic idea is that larger employers would be required to either offer good coverage or help finance coverage for their workers through a new national insurance framework, which Clinton is calling the "Health Choices Menu." Individuals without ties to the workforce could buy coverage through the Health Choices Menu as well. Though Clinton wouldn't require small businesses to cover their worker or help finance coverage, she would offer tax breaks to encourage them to offer insurance, and their workers would be able to sign up for highly subsidized coverage from the Health Choices Menu just like other workers

Perhaps the most welcome element of the Health Choices Menu is that it would include, alongside a range of private plans, a public insurance option modeled after Medicare. This is welcome because allowing people to choose a Medicare-like plan provides an option few Americans now have and because public insurance has some major virtues -- including low administrative costs, open choice of physicians and huge capacity to bargain for lower prices. It's also somewhat surprising that the Clinton campaign emphasized this idea, because while I have been promoting this approach and both Edwards and Obama have embraced it, it may provoke some conservative attacks. Moreover, this idea was explicitly rejected by President Clinton's advisers back in 1993--one of whom described providing a Medicare-style option as "an exceptionally clever way of undermining the entire strategy" embodied in the 1993 plan.

Yet, in this respect and others, Senator Clinton has departed from the approach she sought to sell to Congress nearly 15 years ago. Hillary Clinton circa 1993 was trying to convince politicians and the public that most workers should be getting their coverage through new regional organizations that would encourage people to switch to tightly managed HMOs and impose caps on how much health plans could charge. Hillary Clinton circa 2007 is talking about building on what works in the present system while fixing what doesn't, letting people have more choices, and providing new resources to make those choices affordable.

Both plans look big and ambitious. But, in a variety of respects, the new Clinton plan is more politically savvy and sensitive to the institutional barriers to reform than was the ill-fated 1993 initiative.

***

Will that be enough? The high-profile rollout suggests that Clinton is already looking toward the general election. And Clinton is the clear front-runner -- both for the Democratic nomination and for the presidency. But much can change in a year, and neither a Clinton victory nor a Democratic victory should be taken for granted.

Then there is the difficult task of building a reform coalition in Congress. It's clear that any reform plan will face the threat of a Senate filibuster, meaning it will need sixty Senate votes to succeed. And while there are ways around the filibuster--the budget process, reforming Senate rules--none is particularly attractive. In 1993, President Bill Clinton pursued a strategy that ended up alienating both congressional liberals and congressional conservatives. In 2010, President Hillary Clinton, or any other Democratic president, will have to do better to have any chance of success.

The main challenge is not to develop an even more detailed health plan--which could and should be left to Congress. In 1993, in part because President Clinton received advice to this effect from congressional Democratic leaders, the Clinton administration set up a massive internal process to refine the plan that had been decided upon during the campaign--a process that took up valuable time and short-circuited congressional and interest-group bargaining. Whatever Democratic leaders say, a new Democratic president should follow the route President Bush did on tax cuts in 2001: Develop the broad outlines, then leave it to Congress to broker the deals.

The real challenge is to bring Democrats together around a reform vision that can attract Republican moderates, and then to cross-pressure those moderates, and wavering Democrats, by mobilizing the support of the public and important allied groups. In uniting Democrats, Senator Clinton will inevitably have to clarify some aspects of her plan. She will also need to address the concerns it is likely to raise among more liberal members of the party - concerns that go to the heart of the plan's effectiveness and intent..

For example, is the exemption of small businesses from the requirement that they help finance coverage really consistent with affordable coverage for all? How will people sign up for coverage if their employer doesn't offer it? Will employers manage enrollment and withholding of premiums as they do now? Can workers whose employers offer good coverage be allowed to opt out of it and enroll in one of the new choices that the federal government will offer--which could wreak havoc with employment-based plans? Does it make sense to preserve separate health programs for low-income Americans at the state level, when a new national framework is in place? And will the Clinton approach really use the new public option to its fullest advantage, as means of improving quality and controlling costs--or merely treat it as an afterthought?

These may seem like dry policy questions, but they are politically crucial for assuaging the concerns not just of the public but also of the committed reformers who have tirelessly fought for the goal of universal coverage during the long years when that goal seemed out of reach.

A conceit of some commentators is that compromise means promoting a lowest-common denominator reform plan out of the box. But this is a grave mistake, and so far Clinton has resisted making this error. We have seen such grand compromises in the past: insurance portability, health insurance for poor kids, Medicare drug coverage that appeals to both the right and left. And if we have learned anything from these episodes, it is that while something is better than nothing, something that will truly achieve the broad goal of health security is much better than something that will spend precious financial and political capital to move us only haltingly in that direction.

Cross-posted at The Huffington Post