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More Public Option Compromise

The news of the day out of the Senate is a development in the ever changing public option ‘compromise’. Where the previous version created a non-profit ‘option,’ the new flavor of the day would allow the Office of Personnel Management (OPM) to choose existing non-profit national plans that meet national standards to be offered on EVERY state Exchange. The OPM would act as an aggressive purchaser (as it does with the federal employee health plan) of higher quality and efficient plans. Though skeptics argue that such a plan would not accomplish original goals of truly keeping private insurers honest, national non-profit organizations could provide significantly more competitive clout that state-based public options. The OPM also has extensive experience in managing the FEHBP, though like the private market has not been able to stem premium cost growth. Given greater negotiating authority though, the OPM could act as a regulative body in the Exchange to push efficiency and cost-containment in order to drive down costs.

Ezra Klein has some other ideas that reform advocates could push for to improve the bill in return for concessions on the public option:

1) Medicare buy-in: The older you get, the tougher it is to find affordable insurance. Private insurers avoid you like the plague or jack your rates sky-high. Some of that will change with health-care reform. Insurers won’t be able to reject older Americans outright, for instance. But they’ll still be able to charge them quite a bit more than younger Americans pay. (Attracting significant attention)

One way to ease the situation for older Americans would be to let them buy into Medicare. Medicare negotiates far better rates than private insurers, making it a potentially cheaper option. Moreover, folks over 55 will be in Medicare fairly soon anyway, so this allows for not only better insurance, but more continuity in insurance, which means more continuity in doctors, preventive treatment, etc. This idea was present in Max Baucus’s original white paper, and even in Howard Dean’s 2004 health-care reform plan. It’s due for a comeback.

2) Medicaid expansion: The House health-care reform plan lets Medicaid cover folks up to 150 percent of the poverty rate. The Senate bill hits only 133 percent. Bringing the Senate bill into line with the House bill would ease the financial burden — and assure more comprehensive insurance — for the very poorest Americans, who are most in need of help anyway.

3) Subsidy expansion: The Senate bill costs about $850 billion, and most observers agree the subsidies are too low. An easy compromise would be to resuscitate the president’s idea to cap itemized deductions at 35 percent of income (actually, he wanted 28 percent of income, but never mind), which would raise a bit more than $100 billion, money that could go to expand the subsidies.

4) Tighter regulation of insurers: This could take a number of forms. Allowing less discrimination around age and geography could be one. Another would be a tight cap on the so-called medical loss ratio, which is the amount of money that goes toward paying claims, as opposed to the amount of money that goes to profits, compensation, advertising,and everything else. The bill, for instance, could force insurers to use 87 percent of every premium dollar to actually pay for medical care, which would force the plans to act more like liberals want the public option to act.

5) Open exchanges: Chartering national non-profits to compete with the for-profit insurance market isn’t a bad idea, but it’s not going to have much of an effect if less than 10 percent of the population is allowed to purchase from them. That, however, is the current situation, as the exchanges are locked to most Americans. Opening them to larger businesses would be the first step toward creating a more competitive insurance market, and allowing something along the lines of Ron Wyden’s Free Choice amendment, which gives individuals who don’t like their employer’s insurance the ability to take their money and choose something better, would be the second.

Jonathan Cohn has more:

Improve the subsidies and/or affordability protections: Relative to the House bill, the Senate bill provides less overall financial assistance to people buying insurance. It also guarantees less comprehensive insurance. The Senate bill settled on its numbers in order to reduce the size (i.e., the price) of the overall bill. But if it were willing to put just a little more money on the table, it could bring the subsidies and affordability closer to the House levels.

Let states go early: One of the bill’s biggest flaws, as policy and politics, is the long delay between enactment and implementation. The Senate moved its implementation date back one year–to 2014–in another bid to save money. Princeton sociologist and health policy expert Paul Starr has suggested making federal funds available to those states that are prepared to start their insurance exchanges earlier. Doing so would give people assistance–and a reason to believe in reform–a lot more quickly.

Go back to industry to get more money: It’s pretty clear that the drug industry got off easy in its deal with the Finance Committee and the White House. The Senate could revisit that arrangement–and the hospital industry deal, too. It could also ask the device industry to put more money on the table. In each of these cases, revising the existing deals could produce legislation that not only frees up money but also speeds improvements to the health care system itself.