Obama, Clinton and the new public-option debate

Paucity of competition in some state exchanges opens door to revisiting public health plans

THE ERA OF Democratic silence on strengthening and improving the Affordable Care Act is officially over. President Obama’s tour de force review of the ACA’s successes in the new Journal of the American Medical Association is also important for his identification of key ACA improvements needed on insurance affordability, Medicaid, prescription drug prices and more. I note his call for a “public option” health plan to spur competition in states with low numbers of health insurers participating in state ACA exchanges/marketplaces:

“…[I]n the original debate over health reform, Congress considered and I supported including a Medicare-like public plan. … Now, based on experience with the ACA, I think Congress should revisit a public plan to compete alongside private insurers in areas of the country where competition is limited. Adding a public plan in such areas would strengthen the Marketplace approach, giving consumers more affordable options while also creating savings for the federal government.”

Serendipitously, Hillary Clinton is now actively promoting the public option in her White House run, partially to woo backers of her Democratic opponent, Sen. Bernie Sanders, and also because she has supported this idea since 2008:

“To make immediate progress toward that goal, Hillary will work with interested governors, using current flexibility under the Affordable Care Act, to empower states to establish a public option choice.”

What does the “public option” mean and why now?

The idea is for the government, federal or state, to establish its own health insurance plan to be made available on a state health exchange website as an alternative to the private health insurance choices, “like Medicare,” as proponents like to say. In 2009, many Medicare-for-All single payer advocates unsuccessfully backed the public option as a politically viable alternative during the legislative process leading to the ACA’s passage.

The public option got into the House version of the ACA that passed in November 2009 and was intended for inclusion in the Senate bill until then-Sen. Ben Nelson, Democrat of Nebraska, in December declared his crucial non-support for any bill that included a public option. At that point, the provision was dropped from the Senate bill which passed on Christmas eve 2009. The Senate bill, sans public option, became the law that Obama signed on March 23, 2010.

Now the public option is back, though with a crucial difference between the Obama and Clinton proposals. Obama, recognizing that the ACA provides no provision for a federal public option, asks Congress to amend the ACA to have the feds establish one in state exchanges with little or no insurance competition – about 12 mostly rural states. Clinton, recognizing the difficulty of getting this through even a Democratic-controlled Congress, proposes working with governors to permit states to establish their own public option plans using a little-known ACA provision, Section 1332, which allows states to develop alternative programs to the exchanges as written in the ACA.

There are problems with both paths. Let’s start with Clinton’s. Key question: what governor, Democrat or Republican, in his or her right mind, having witnessed the catastrophic experience in states that set up their own exchanges (i.e., Massachusetts, Maryland, Vermont, Oregon, Minnesota), would choose such an expensive and risky proposition? Not only would a state assume potentially huge financial obligations and risks, but the governor would be blamed for every premium increase every year, forever. One day of applause for an unending stream of complaints and controversy. It’s so much easier to complain about insurer greed. “Governor, do we really need this headache, too?” implores the earnest chief of staff.

Obama’s pathway is also challenging. First, the chances that a Republican-led House, the overwhelming 2017 likelihood, would endorse a public option is zero. Second, chances are little or no better in the Senate. Under the best of circumstances, in 2017 Democrats will not have 60 Senate votes, and it is hard to imagine any Republican supporting this option. At least several Democrats would oppose a public option as well.

Obama and Clinton’s rationale for the public option debate now is strong. Exchanges in about a dozen rural states now, or may soon, have only 1 or 2 participating plans. (Republican opposition to supporting the ACA’s cooperative insurance plans helped to guarantee this, as did their ill-intended and hypocritical opposition to ACA risk adjustment and reinsurance.) A public insurance option is a viable and sound public policy alternative in the current context.

Meet the Author

No one, though, should underestimate the practical and political obstacles to achieving this.

John E. McDonough is a professor of practice at the Harvard TH Chan School of Public Health. He blogs at healthstew.com.