The Public Option Has a Problem…

…and no, it isn’t Joe Lieberman.

Slate Magazine has an article pointing out that the Congressional Budget Office (CBO) has found that "[A] public plan paying negotiated rates … would typically have premiums that are somewhat higher than the average premiums for the private plans in the exchanges."

What? I thought the public option was good to go. Now, this quote will be all over the air waves and the blogosphere (it already is) which will put more pressure on Congressional and Senate weenies moderates to capitulate on this important and necessary aspect of healthcare reform.

But not all is lost. The CBO is also clear that a public option will be more efficient than the private sector and will force overall prices down. The trouble is that the insurance industry are experts at not paying premiums especially for those who are very sick. This is the time honored way to keep costs down and profits high. The government-run option will tend to take all comers and pay a higher benefits to a larger proportion of its members. Consequently, the public option will tend to attract the people with serious health risks and those who cannot afford to take a chance that Blue Cross will deny payments. This means that the pool of members in a public option will tend to have more expensive needs than the private industry, which will tend to drive up premiums. As premiums go up, those who are healthier will flock to private insurers exacerbating the problem.

The trouble then is not a flaw in the public option, but in the fact that congress is requiring that the public option run completely as an insurance group that will require no governmental help. If that is to work, the government needs to insure that the insurance companies take users with pre-existing conditions and pay out premiums to one and all.

…well, Joe Lieberman is still a problem.


2 Responses

  1. A better way to phrase that is that, by the CBO’s admission, the only form of health insurance that actually insures you will be government health insurance.

    The extra you pay is so that you can be sure it works. Insured, even.

  2. That is true. I would like to see a single payer system, but I suspect it will take a while, maybe decades, to happen.

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