A Public Option Primer

(CBS/AP/iStockphoto)

As Senate Majority Leader Harry Reid prepares to bring a health care bill before the full Senate, Democrats' efforts to reform health care could seemingly implode over the so-called "public option," the proposal that has drummed up the most controversy over the course of the debate.

At least one member of the Democratic caucus -- Sen. Joe Lieberman (I-Conn.) -- has threatened to bring the bill down over the plan to create a government-run insurance plan, or "public option." Liberals, meanwhile, say it is an essential part of the legislation that is needed to give private insurers real marketplace competition.

The facts needed to keep the debate in perspective are easily forgotten. Here are a few points to keep in mind about the public option:

• Very few Americans would sign up for the public option. In the Democrats' legislation, the public option would only be available to consumers who are eligible to shop in the "health insurance exchange" they would create. The exchange would only be open to people who buy individual health insurance plans or to people who work for small companies. The nonpartisan Congressional Budget Office estimated last week that only about 30 million people would join the exchange; of those 30 million, only about 6 million would choose to enroll in the public option.

"The public option is a significant issue, but its place in the debate is completely out of proportion to its actual importance to consumers," Drew Altman, president of the nonpartisan Kaiser Family Foundation, told the Associated Press. "It has sucked all the oxygen out of the room and diverted attention from bread-and-butter consumer issues, such as affordable coverage and comprehensive benefits."

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• The public option would be paid for entirely by premiums. Lieberman and others have said they oppose the public option because of the burden it would impose on taxpayers. The measure should not add any additional taxpayer burden, however.

"The public plan would have to charge premiums that covered its costs, including the costs of paying back start-up funding that the government would provide," the CBO wrote (PDF) of the House health care bill.

The House bill also includes a "no bailouts" provision which states, "In no case shall the public health insurance option receive any Federal funds for purposes of insolvency in any manner similar to the manner in which entities receive Federal funding under the Troubled Assets Relief Program of the Secretary of the Treasury."

• The public option impacts the government cost of the Democrats' health care plan. Even though the public option would be entirely financed by premiums, it will still impact how much of a financial burden health care reform imposes on the federal government, according to the CBO. That is because the level of subsidies the government would pay out to help Americans purchase insurance would be based on the price of health care plans on the market.

"Including a public plan would probably have two small effects on the premiums of the private plans against which it is competing, both of which would tend to lower federal subsidy payments through the exchanges to some degree," the CBO wrote in September. The CBO wrote the public plan could lower premiums of private plans by providing more competition and also by attracting "enrollees who, overall, are less healthy than average," thereby lowering the cost of covering consumers in the private market.

The CBO more recently concluded that a public option that negotiates payment rates with medical providers would have slightly higher premiums than private plans -- so it may not save the government as much money, in terms of how much would be spent on premiums. However, the CBO maintained their assertion that the public plan would "attract a less healthy pool of enrollees."

[reveal4]

The public option will be slightly higher priced than average health insurance plans. This will provide disincentive for folks to sign on with the public option. Those who are currently being charged higher, exorbitant premium costs by private insurors and enroll in the public option will pay less than currently. The premiums for these folks will be lower in the public option rather than in the private insurance market. Disincentive for average health insurance customers to enroll in the public option along with lower costs for those folks being charged exorbitant rates in the private sector equals a more than satisfactory plan. Private business is protected and those who need the public option will receive the care they need at lower costs. Those who have been dropped from private insurance, the uninsured, poorer folks, and small business will benefit from the public option while private health insurors are protected from losing customers to the public option. How's that for threading the needle? Nice work! Let's get it done!

[jschmidt27]

and you know all of this how? If the public option is costing more than the average insurance plan, why should they pay a higher price. This is not competition. Why not adopt the Swiss system which doesn;t use a public option. It forces a basic non profit plan to be offered by profit making companies. They make the profit on higher priced plans. Govt should not be involved in medical care coverage. Even medicare was a mistake. It will go bankrupt.

[reveal4]

The CBO says inclusion of the public option will decrease premium costs in the private health insurance market. High risk individuals will be covered by the public option, thus removing these folks from private insurance rolls. This will decrease costs for the private market health insurors. Also, the health insurance companies will see a large influx of new customers, mostly younger and healthy customers who the insurance companies will see as profitable. An influx of new, profitable,healthy customers along with a decrease of high risk policies will result in higher profitability for the private market. The result... lower premiums for American private sector health insurance customers.

[jschmidt27]

Just another ponzi scheme. The Dems favorite social funding scheme.

[jschmidt27]

Kansas- the estimate is only 2% of the people will be insured by the public option which is 6 million. What kind of competition will that provide. Nothing. But the govt will setup a huge organization to offer it. Now Medicare is a mess. At the current rate it is being paid into with taxpayer money, it will still be bankrupt in a few years. But you evidently call that a viable program. All of these plans are built like ponzi schemes with SS being the biggest. The best way to encourage competition is to allow insurers to compete across state lines. There also should be a claims clearinghouse which processes all claims- sames forms- sames processing. That cuts admin costs for the insurers, doctors and hospitals.

[reveal4]

jschmidt...You have posted endlessly about the threat of competition that the public option would present for private insurors. You have been endlessly concerned that the pubolic option is a first step toward single payer. Now you post..."only 2% of the people will be insured by the public option.What kind of competition will that provide?"......You have been endlessly upset over competition from the public option for private insurors...and now are upset the option does not provide enough competition to private insurors.

[jschmidt27]

Reveal-What is the point to setup a public option if only 2% use it. It will not provide competition. But I believe the Dems will allow a bail out of it and lower the cost which will lead to a single payer system. This is not a public system that is needed especially when the govt never runs anything right.

[jschmidt27]

I can't believe that the people won't believe that the first chance the Dems get, they'll be throwing money at the public option to make it less expensive than any other plan. The want the single payer system and that is the way to get it. They'll change the clause to bail it out the first chance they get.

[rightbehind]

To make it a good public option it should be available to all that want it. It's time to end the phony baloney republican created private health care insurance market. It eats up 1 of every 3 dollars spent and provide no service to the patient. The might as well go single payer at this point. More than 60% of the nation wants it.

[kansas1946]

As usual the lying Republicans have mucked up this public option issue beyond any semblance of reality. Number one, no insurance reform will work without a public option. It has to be there to force insurance companies to compete. And don't tell me that they compete with each other because that is BS. The public option is for
people who can't afford private insurance, and that is most Americans who don't work for a company that offers it.
Second, many of the people that would buy it are already on medicaid and that certainly is public option at NO cost to the insured. Just cost to the taxpayer.
Third, every senior citizen in this country is on Medicare, a public option, and since the lying Republicans keep telling us that no one will get decent care with a public option, why don't they ask grandma if she wants to give it up. Anyone over 65 that is opposed to a public option is a hypocrite with no morals.