Saturday, October 31, 2009

Costly Public Option

It’s rude to say “I told you so,” but a CBO study has now said that the “public option” will not only not “hold insurance companies accountable” and drive down rates, but will actually charge higher premiums than private insurance. Digby at Hullabaloo says that the CBO “won’t tell you why” and accuses the CBO of “baking” the numbers, but they actually do say why, just as they do with all of the studies they release.

And guess what: it’s in no small part the very same reason that I predicted in “Magic and the Public Option” back on the 20th.

The "public option" is not only being touted as lower cost, but it is now being claimed that it will pay for all of the things that private insurance is refusing to pay for. That being the case, how is it going to charge lower premiums?

And from Ezra Klein in the Washington Post,

"…because the public option is, well, public, it won't want to do the unpopular things that insurers do to save money, like manage care or aggressively review treatments. It also, presumably, won't try to drive out the sick or the unhealthy. That means the public option will spend more, and could, over time, develop a reputation as a good home for bad health risks, which would mean its average premium will increase because its average member will cost more."

So, sorry but, “I told you so.”

Lawrence O’Donnell had two guests on Countdown last night who tried to say that the problem was that Congress was structuring the “public option” such that HHS would negotiate the rates that it would pay to providers and that it would be too small to have adequate negotiating power. There may be some truth in that, but it doesn’t overcome the issue that the CBO described as driving the rates up.

And, of course, no one is talking about the 800-pound gorilla in the room. Those “cost control measures” that the public option won’t be doing? Well, the reform is making many of them illegal for private insurers to do as well, and no one is concerned that without those controls the premiums for health insurance of all types will absolutely have to increase.

The problem is not in the details, here, the problem is fundamental. Congress is trying to reform health care delivery by tinkering around with health insurance regulations and not addressing the health care delivery system itself. There are no details which can make that approach work; whatever they do and however many pages they write trying to do it, it simply is not going to succeed.

It's like trying to make a worn out clunker car with 300,000 miles on it function better by giving it a new paint job. It looks good, but has no practical effect.

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