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Writing about the “ersatz public option”, Robert Reich pointed out that private insurers, Big Pharma, Republicans and “centrists” wouldn’t hear of Medicare for all 300 million of us–too much like Canada.

So the compromise was to give all Americans the option of buying into a “Medicare-like plan” that competed with private insurers. Who could be against freedom of choice? Fully 70 percent of Americans polled supported the idea. Open to all Americans, such a plan would have the scale and authority to negotiate low prices with drug companies and other providers, and force private insurers to provide better service at lower costs. But private insurers and Big Pharma wouldn’t hear of it, and Republicans and “centrists” thought it would end up too much like what they have up in Canada.

So the compromise was to give the public option only to Americans who wouldn’t be covered either by their employers or by Medicaid. And give them coverage pegged to Medicare rates. But private insurers and … you know the rest.

He covers each succeeding compromise, concluding with this description:

It’s a token public option, an ersatz public option, a fleeting gesture toward the idea of a public option, so small and desiccated as to be barely worth mentioning except for the fact that it still (gasp) contains the word “public.”

Sunday evening, I participated in a conference call with Jon Walker of Firedoglake. If you’ve been reading any of the FDL health care updates posted here daily for the last several weeks, you know the name. Walker knows the health care turf. And various remarks he made about the public option indicated that, although he might not go as far as Reich did, he’s well aware of how anemic the public option is. So I asked him whether he thought having it in the bill was of any account and whether the weak cost controls in the bill would end up costing the Democrats in future elections. He said that a strong public option would have saved the government $110 billion and consumers $200 billion over the next ten years. So Walker is bemused by the fact that conservatives and “moderates” keep insisting on cost control but refusing to support the one obvious means for that–a robust public option. He hasn’t seen a senator yet step up with actual proposals for serious cost controls. Mark Warner of Virginia says he plans several such amendments. We’ll see whether he, or any other senator, proposes real measures.

As far as what dramatic steps are needed, he points out that in every country that isn’t single payer, a single rate setting agency exists. Either the government decides what a given MRI will cost or a coalition of insurance providers and health care providers decides. Procedures in this country cost 30 percent to 100 percent more than they do elsewhere, partly because of the incredible waste of having a thousand different health care providers negotiating with dozens or hundreds of different insurance companies.

Another big improvement we need is risk adjustment.

Risk adjustment means transferring money from insurers whose clients are healthier than average to insurers whose clients are less healthy, enough to neutralize the effect of varying health status. If it worked perfectly, insurers would have no incentive to seek out the healthy and drive away the sick because they would receive the same amount for each.

Obviously, Walker assumes the bill is worth passing, flawed though it is. I asked him what argument he would make in favor of the bill, even though it lacks adequate cost controls.

His answer:

The important thing, I feel, in health care, is to be moving in the right direction as opposed to moving in the wrong direction, to make a commitment to insure people. You’re never gonna get quality health insurance in a market system without a strong risk adjuster, because there will always be … unless you make it impossible to make money by trying to drop sick people or you make it just not profitable to drop sick people, it’s always going to be the go-to for insurance companies. They’re not going to figure out how to make things cheaper, they’re just going to figure out how to have better people to insure.

That’s the problem with the public option right now in the current bill. (Inaudible) will actually be five percent cheaper. It’ll actually do a five percent better job than private insurance, but since it will be the only insurance company not gaming the system, it will have to charge a four percent higher premium.

If insurance companies weren’t intent on merely gaming the system, they could be saving all of us and themselves a pile of money. They could, for example, get together and create standardized information systems. As it is, doctors often have to devote a third of the costs of their practice to dealing with insurance companies. Those costs would plummet if every insurance company required the same set of information in the same form. And anything that saves the doctors money enables them to charge less so that insurance premiums could be lowered. Right now, however, WellPoint and Aetna have no incentive to set about such a reform.

Jon Walker knows that they’ll expend their energies, under the coming plan, finding ways to reject the sickest people.

So that is very critical, having that [public option] as a big component. Having the public option there, if you can get the risk adjusters working right, I really think the public option will get a lot of customers. I think it will expand. Having it in place, even if it’s relatively small and only somewhat cheaper, it will be a good go-to tool when we actually get to the cost containment battle down the road.

My biggest fear is that we might not have the beginnings of a progressive solution in the reform bill so that cost containment solutions going down the road will be less generous care, less things being covered, you know, that kind of pathway.

I asked Walker if he had any feeling for when further reform might begin.

The second stage … well,our current system–it’s funny you should keep talking about strengthening it–the current system is headed for a collapse of some type. You know. It might even bring down the whole economy with it, it might not. But you can’t have health care costs grow at, whatever it is, eight percent a year. You know, we can’t, as a nation, have 35 percent of all our money being spent on health care. That just can’t happen, especially when all the other industrialized countries are spending half that amount. So something will have to be done and my hope is that progressives will try hard to get the things in place that will be, when we actually have the fight for the cost containment, we’ll have the progressive infrastructure in place to (inaudible) progressive solutions (inaudible). And that’s why I think it’s great to have a public option in there. If you have a public option with very little overhead and all these private insurance companies with much more overhead, that helps make a strong argument for a minimum medical loss ratio as a cost containment move.

So, yeah, you know, I don’t know how that next fight’s going to happen. Hopefully it’ll go our way. But if the progressives don’t win this current “health care battle”, including the public option, I don’t see them having any political power moving forward.

I emphasized that last sentence with boldface because it’s the culmination of his logic. Robert Reich thinks the compromise has gone so far that the public option is worthless:

But what more can possibly be compromised? Take away the word “public?” M
ake it available to only twelve people?

Walker, on the other hand, considers that, though the public option is weak, it is, paradoxically, huge. And we must have it.

Update: Firedoglake is pushing a petition to tell Reid we want that public option:

“The power to pass a public option is yours alone.  Don’t let corrupt Democratic senators owned by insurance industry lobbyists kill the public option and majority rule.  Get them in line, or use reconciliation to pass a public option with a majority vote.”

Go ahead and sign it.