The Long History of the Public Option- What is it and Why Now?

I know I promised the third segment of my “What to Expect in 2020” series this week– and I apologize to those of you on the edge of your seats in anticipation of “What to Watch for From the Executive Branch.” (that was a joke)

However, given the fast approach of Super Tuesday and the emphasis on healthcare in the Democratic Primaries- I thought it timely to republish what I wrote about the Public Option July 21, 2016 (Fontenotes No 25) during the last presidential election.

The Public Option is now the platform of every Democratic candidate in the field except Bernie Sanders* (who famously espouses “Medicare for All”). Some, like Amy Klobuchar, have always been for the Public Option as a “step toward Universal Care.” Other contenders may call it different names, but they all (including Elizabeth Warren) now advocate building on the ACA by adding a Medicare-type option to the private insurance mix.

What is the Public Option, and why does it keep returning every election cycle?

As you will soon see, there are many varieties of details within the Public Option debate, but all forms of the concept “would create a federal health care plan, something like Medicare, but for persons under age 65. Individuals and small businesses would be able to buy such a plan just as they would purchase a health care plan from a private insurance company.”

The idea is to add a government-run competitor into the private insurance company mix within the ACA Exchanges (or “Marketplaces”) where people are increasingly purchasing their health insurance coverage. Presumably, this would help to control costs within the pool of available policies.

The Birth of an Option

The idea of a public option began as a state initiative in California back in 2001. A state-wide virtual marketplace for purchasing health insurance- similar to the “Exchanges” every state now has under the Affordable Care Act [ACA]- was being considered in California, and the question was whether one of the options available to the public should be a government-run, Medicare-type option.

The arguments for and against a public option competing with private insurance plans in the California marketplace were deeply held and very similar to arguments that resonated later when the issue became part of the development of the ACA. For now- suffice it to say that amid the controversy, it died in California.

The 2008 Presidential Election

The exponential increase in health care expenditures, combined with other problems of access and quality in the American health care system, made health care reform a pivotal issue in the Democratic primaries leading up to the 2008 election.

John Edwards was the first to revive the Public Option from the earlier California debate, but both Barak Obama and Hillary Clinton adopted the measure as well. All three of the final 2008 Democratic presidential candidates were quite similar in their proposals.

The ACA Battle- 2009

When President Obama made health care reform the first major legislative priority of his administration, the public option was part of the initial plan. But soon after that, it became one of the most hotly contested issues within a hotly contested legislative battle- and the fight was not “red” vs. “blue”- but within the Democratic party itself. (Republican members of Congress were universal in their rejection of the idea.)

Some advocates for the Public Option wanted it to be available in the ACA Exchanges but limited in availability- particularly to some employers. Small businesses needed the assistance, but if larger employers were allowed to participate in the exchanges, and have access to a (presumably) lower cost government-run alternative, the fear was it would destroy the employment-based insurance system that had served our country since World War II.

Another point of contention was whether the public option should be a country-wide federal program or a decision to be made on a state by state basis, with each state capital deciding whether to include a public option in their insurance exchange.

Public Option advocates also could not agree on pricing and the degree of cost control for inclusion within the ACA plan. Some advocates wanted to reimburse physicians, hospitals and other providers at Medicare rates plus 5%, others wanted the Public Option plans to be able to negotiate rates on a more local level. The range of anticipated savings (from the CBO) ranged from $110 billion over ten years for the Medicare plus 5% plan, versus $25 billion under the negotiated rates proposal.

All the while Conservatives in Congress feared either plan would raise the deficit and collapse the insurance market itself.

More than any detail, what really derailed the Public Option for the ACA was the possible ultimate end result- that it would eventually lead to a single-payer, government-run health care system. It was unease and disagreement about that possibility that could not be settled in 2009. What is the proper role of the federal government in health care, and when is “Big Government” too much?

With Republican opposition unified and consistent, and particularly with the death of Senator Teddy Kennedy, the number of votes necessary to pass the ACA in the US Senate was not assured. When Senator Joe Lieberman threatened to filibuster any bill including the Public Option (hint: where is the Insurance Capitol of America?), the idea died.

As a consequence, ACA exchanges have not included a “Medicare” type alternative to private insurance plans for these last 3 years. [Editor’s Note: now 7 years]

The Public Option Rises from the Ashes- 2016

In the midst of our current election cycle, (remember this was written in 2016) we now have the opportunity to review the successes- and failures- of the Exchanges of the ACA.

The Exchange CO-OPs (nonprofit, member-controlled health insurance plans) – which were a very weak addition meant as an alternative to the public option in the last gasps of the ACA battles, have now failed in more than half of the nation’s insurance exchanges. (A big topic we can discuss in a future Fontenotes.)

In the meantime- the number of insurance companies participating in the exchanges has dwindled in many states, and as we all too painfully are aware, the cost of policies in the exchanges has undeniably increased.

Under these circumstances, it should be no surprise that the Public Option debate has returned as the 2016 Presidential election heats up.

In fact, in an excellent post-mortem written on the ACA battle over the Public Option in Health Affairs (June 2010), the authors predicted what we see now:

“Even though comprehensive health care reform has been enacted without a public option, the proposal could reemerge if the public becomes dissatisfied with the progress of health reform.”

Hillary’s Position on the Public Option (Circa 2016)

Hillary wanted the Public Option in 2008 and has had it listed as a priority on her 2016 campaign website since at least May of this year (and presumably since her website first went live). Highlighting her position is a clarion call to the progressive wing of the Democratic party.

But Hillary Clinton raising the Public Option debate has (again) caused some friction within her party. There has already been pushback from Centrist Democrats appearing “reluctant to join their party’s embrace of a public option for ObamaCare.”

If the 2009 debate over the Public Option is any indication, we are only beginning to see how this subject may rattle the Democratic party, and the election itself.

Now Back to February 2020

What is of interest to me this election cycle is not that the Public Option is back again- but how Center-of-the-Road it has become!

The progressive branch of the Democratic party now dismisses the Public Option as a “tailor-made” vehicle to “divide, depress, marginalize, and exhaust any political will for single payer before we’ve even begun the final fight.” [quote]

At the same time, many Republicans are now open to the Public Option solution, which should not be surprising when ObamaCare is “more popular than ever,” and only 3% of registered Republicans cite repealing the ACA as their top health care priority.

It Is Time to Chose

It is easy to get lost in the day-to-day gyrations of this election cycle. Health Care is notoriously complicated, and the most important issue for 36% of Democrat voters (and 30% of independents).

The choice before we have before us in 2020 is not new. We have been on this merry-go-round for more than two decades. At some point- we need to choose how to “fix” American health care. Enhance the ACA with the Public Option? Go for Medicare-for-All? Try to defeat both and keep our system as close to the status quo as possible? That choice is coming due in November.

* One more fun fact: Bernie Sanders was an advocate for the Public Option in 2009- to “keep insurance companies honest.” Read about that here.

Want to Know More?

1. Why does America link employment with health insurance, and why are we the only country to do so? It is an “accident of history” involving World War II! If you want to find out more, I suggest NPR’s review of that fascinating topic or the Wall Street Journal’s review of the same.

2. Throughout this Fontenotes, I have relied extensively on an article about the history of the Public Option and the debate that waged in 2009– which published in Health Affairs in June 2010. I highly recommend this article to anyone interested in learning more.