THE PUBLIC PLAN OPTION: Health Affairs ROUNDTABLE

Health Affairs blog recently posted the transcript of a roundtable discussion of public plan issues, featuring Len Nichols (New America Foundation), Stuart Butler (Heritage Foundation), and Jacob Hacker (University of California, Berkeley), with Health Affairs’ John Iglehart and Chris Fleming as co-moderators.

Most of the participants’ comments were predictable, given their prior public statements, but made rather more interesting by the discussion format that forced them to respond (at least sometimes) to criticisms of their positions.

Hacker was a strong proponent of a Medicare-like public plan, Nichols reiterated his proposal of a couple of weeks ago for a public plan similar to existing self-funded state employee plans, while Butler described the whole idea as “a nuclear minefield on the road to getting agreement on universal coverage.”

The transcript made one thing clear: there was no “Ah-Hah” moment when any of the participants produced a proposal that responded to the others’ concerns.

Hacker emphasized that a public plan was essential since “the private insurance market, even if regulated, is not going to have enough pressure on it to provide affordable quality care without a public plan competing with it,” but failed to explain exactly how this could be achieved without giving a government-sponsored plan an unfair advantage in a government-regulated competition.

Nichols pressed the advantages of self-funded plans administered by insurers, but failed to quantify the extent to which such plans—which typically utilize the insurers’ own networks—would serve as effective controls over the same carriers’ insured products.

Butler condemned the public plan concept as being incompatible with a level playing field, but failed to explain how private plans would control increases in provider rates without a public plan comparison.

So, given these divergent opinions, is there some compromise that would ensure true competition without threatening the future of the health insurance industry and risking the failure of reform legislation?

One possibility might be to combine one of Hacker’s roundtable suggestions—to give private plans the right to pay providers using the public plan’s rate structure—with some form of delayed-action trigger.

In this model, private plans would be able either to pay providers at rates set by the public plan or to negotiate their own contractual agreements. The trigger implementing the public plan could be tied to average insurer premiums (do they exceed a level set by government actuaries?), or to premium increases (do they exceed CPI increases?), or simply to time (perhaps with the public rates implemented only in year two or three of the reform structure), and could be either regionally- or nationally-based.

A second possibility is to establish “public plan rates” without necessarily implementing a public plan. This should further remove insurers’ objections, and provide a structure comparable to that of the much admired Netherlands system, where price competition among insurers has been especially effective.

In either case, tying a public plan to a trigger should alleviate some of the publicly-expressed concerns of insurers, but still provide an effective mechanism to control insurers’ desire for profitability, while the establishment of public plan rates—regardless of plan implementation—would impose similar controls over providers.