THE PUBLIC PLAN -- YET MORE!

Jeff Goldsmith has a new piece on the Health Affairs blog listing reasons why he opposes the public plan. It's worth reading whether you agree or not.

Here are my own reactions:

I agree with Jeff’s conclusions about the risks of a “purely public” plan for both political reasons (it has become a lightning rod for anti-reform sentiment) and pragmatic reasons (it could destabilize the private insurance structure). However, a number of the points that he makes need some comment.

The Lewin estimate of public plan premiums 30 percent below those of private plans is almost certainly exaggerated, due to its dependence on raw payment rates. The 30 percent figure is at odds with the experience of Medicare Advantage, in which the average differential is only 14 percent and some plans’ initial bids are below FFS projections. It also overstates private sector administrative costs (insurance exchange pools should be similar to large groups) and understates or ignores differences in utilization due to private plan UR and other controls (a point that Jeff makes in the context of his remarks about the Kronick paper).

Kronick’s spending growth numbers, taken from CBO data, seem to be at odds with CMS national health care expenditure figures and also (as he notes) with other researchers’ figures. And, as always, it is possible to select a different span of years for data analysis and reach a different conclusion. Even assuming that the CBO growth rates are accurate, some part of the differential may be due to differences between the two populations and the resulting medical trends in the care provided.

One risk not mentioned by Jeff is that of implementing a public plan in combination with a play-or-pay mandate (still the political favorite, in various guises). The more financially attractive the public plan, the more employers who will dump their group coverage. Since almost all play-or-pay proposals assume that players’ premiums will be higher than payers’ payments, the result is likely to be a further shortfall in reform funding.

In spite of my agreement with Jeff’s basic conclusion about the risks of a public plan, I found his suggested alternative options a little puzzling. Allowing the over-55s to buy into Medicare sounds like a public plan to me, while expanding SCHIP puts more pressure on private plans that already charge below market rates for SCHIP eligibles. It’s hard to disagree with his recommendation for on-line enrollment in an insurance exchange, but the real savings from an exchange will come from price competition, not IT (and as a former CIO, I wouldn’t want to bet health care reform on a government-inspired electronic exchange).