The Rebirth of the Public Option Debate- What is it and Why now?

What is the “Public Option”

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 in the midst of 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 Barack 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 thereafter 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 obviously 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 an option to be included on a state by state basis, with each state capital deciding if a public option should be included in their own 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, feared by conservatives and hoped-for by the most progressive members of Congress – 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 was dropped.

As a consequence, ACA exchanges have not included a “Medicare” type alternative to private insurance plans for these last 5+ years.

The Public Option Rises from the Ashes

In the midst of our current election cycle, 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 exactly what we are seeing 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.”

Is Hillary Courting Bernie Voters?

I have to say that this occurring right now can’t be fully attributed to the wooing of Bernie voters- 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). All that being said- raising the Public Option now certainly in 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. In fact- 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.

Want to Know More?

* Why does America link employment with health insurance, and why are we the only country to do so? It really 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.

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 was published in Health Affairs in June 2010. I highly recommend this article to anyone interested in learning more.