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US as a health plan provider? Reform idea losing ground.

A 'public option' is popular with the left – and is supposed to serve, too, as a brake on medical costs. But charges that it is unfair to private insurers appear likely to sink it.

By Staff writer / August 13, 2009

Pharmacist Sonya Safaie catches up on record keeping at a Safeway Pharmacy in Great Falls, Virginia, on July 29.

Hyungwon Kang/Reuters/File

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Is the "public option" dead?

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President Obama favors inclusion of a government-run insurance plan – a "public option," for short – in health reform legislation. The president and his allies say such a plan is needed to help contain medical insurance costs and ensure that people in all parts of the country have adequate insurance choices.

But the public option has attracted strong opposition from Republicans and other critics who say it would be unfair competition for the private sector and could drive today's insurers out of business.

Some analysts now say that the future for the public option looks bleak. It has been rejected by key players on the Senate Finance Committee, for one thing. For another, Mr. Obama has not actually insisted that it must be part of any health bill he will sign.

"There's a lack of support for it, even in a significant portion of the Democratic political caucus," says Thomas Miller, an American Enterprise Institute fellow who served as health policy economist for Congress's Joint Economic Committee.

Theoretically, a government health insurance plan would introduce an element of competition into a marketplace that in many areas of the country is dominated by a few big players.

With nonprofit status, this public option might have lower costs and thus be able to offer consumers lower prices, keeping private competitors honest. Again, that is the theory.

The House health reform bill currently includes a public option provision, as does the version of Senate legislation produced by the Health, Education, Labor & Pensions Committee.

But the Senate Finance Committee, which is struggling to pull together a health reform bill with at least a modicum of bipartisan support, appears set to reject the public option, due to opposition from GOP and centrist Democratic lawmakers. Instead, its bill is likely to offer a an alternative plan: customer-run health insurance cooperatives.

And at his town hall meeting in New Hampshire on Monday, Obama said only that he thinks a public option is a "good idea." Properly constituted, a public plan would provide customers a baseline for what basic insurance should cost, said Obama. He noted that some critics believe any such plan would inevitably push private firms to the sideline.

"I think that's a legitimate concern," said Obama. "I disagree with it, but that's a legitimate debate to have."

But with the legislative year fast ticking by, and Senate Democrats still struggling to produce health reform legislation that could pass the chamber, not a lot of time is left for policy debates. In an opinion piece published Wednesday in The Washington Post, Democratic strategist Paul Begala noted that Democrats might soon have to choose between the bill they want and the bill they can get.

Leaving out a public option would be a "bitter disappointment," writes Mr. Begala. But he implies that it might be one of the disappointments that liberals will have to accept, if they want to see any legislation at all.

"Aside from race, healthcare is the most difficult domestic issue of the past century," according to Begala.

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