Public Option Waffling Enrages Left Wing

(MoneyWatch)  Now that the Obama Administration has signaled its willingness to back off from a "public option" and accept nonprofit cooperatives in its place, the left wing of the Democratic party is going ballistic. Former Vermont Governor Howard Dean has said reform is dead without the public option, and Ariana Huffington recently wrote on the Huffington Post that the Administration's retreat on the public option and on having the government negotiate prices with the drug companies means that reform has already died.

Caught between this "progressive" backlash and solid conservative opposition to the idea of a public option, President Obama and Congressional Democrats, including House Speaker Nancy Pelosi, say that they still support a public plan. But it's clear, as Sen. Kent Conrad (D-ND) pointed out last weekend, that there aren't enough votes in the Senate to pass it.

What version of the coop idea will garner enough votes to be adopted as part of reform legislation is far less certain. A coop could simply be a consumer-owned insurance company, or it could be a group-model HMO in the mold of Group Health Cooperative of Puget Sound in Washington State. In either case, however, the coop approach faces big obstacles, including building provider networks in markets dominated by the private insurers. Even if a coop could gain traction, there's no reason to think that it would have any impact on the growth of health costs.

The same is true of the public option. As embodied in current House and Senate bills, the public plan would neither contain costs nor create additional competition for the big insurance companies. The crucial missing element: the bills would not compel doctors and hospitals to be in the public plan network as a condition for Medicare participation. Unless the government can force physicians to participate in a public plan and to accept Medicare rates, as I have noted before in this space, the public plan will be unable to undercut private insurers on price. It will have to negotiate rates with providers, and it will try to pay out as little as possible on claims, just as private insurers do.

In its original form, the public option was never about competing with the private plans on a level playing field. It was a bone thrown to the supporters of a single-payer system, which has otherwise not gotten a hearing in the health-care reform debate in Washington. And the disappointment of left-wingers at the President's backtracking on the public option can be traced to their hope that it would eventually lead to a single-payer system. In fact, when John Edwards ran for President, promoting a healthcare agenda very similar to the current Democratic one, his campaign said, "Over time, the system may evolve toward a single-payer approach if individuals and businesses prefer the public plan."

That's not going to happen under the current political regime. It's not just because of the power of the insurance and drug lobbies--although they certainly are having an effect. It's because Americans are not ready for a government takeover of healthcare.

So it's time for the progressive allies of reform to face the fact that they're not going to get what they want. But that is no reason for them to pick up their marbles and go home. If they are farsighted, they will realize that the reforms now being advocated in Washington, while far short of what we need, will advance us on the road toward real reform, which will require an entirely different kind of government intervention.