A Public Plan in Health
Reform?
The Alliance for Health Reform
April 27th 2009
Stuart Butler
The Heritage Foundation
What problem is a public plan
supposed to fix?
Supporters want to:
• Assure a “safe harbor” for certain populations
• Provide a benchmark plan to assure public confidence in
a competitive model
• Broaden choice
• Have a tough competitor to goose private plans
The Bad Cop Version
(Davis, Holahan, Hacker)
• Modeled on Medicare
• Payment rates “same or perhaps somewhat
higher than Medicare” (Holahan)
• Use purchasing power of government to control
costs
The Good Cop Version
(Nichols/Bertko)
• Help raise the public’s comfort level with private plans
• Not based on Medicare – don’t use Medicare or other
prescribed rates, providers can negotiate etc
• Modeled on state self-insured plans
• Exactly same regulations as private plans, Same reserve
funds rules etc.
• No federal financing advantage for the public plan
The Common Theme
Public and private plans will compete
on a level playing field
You betcha!
The Dilemma
• If you have exactly the same rules, why
have a public plan?
• But if different rules, can you avoid the
deck being stacked?
“Public Plan,” California Style
Health Benefits Overview
“CalPERS offers three types of health plans:
• Preferred Provider Organizations (PPOs)
• Health Maintenance Organizations (HMOs)
• Exclusive Provider Organizations (EPOs) (limited to
members in certain California counties).”
Source:
http://www.calpers.ca.gov/index.jsp?bc=/about/benefitsoverview/health/benefits-overview.xml
Problems with the level playing
field vision
• The giant sucking sound (See Lewin data on employer
dumping)
• Can Congress be a team owner but also oversee the rules
of the game with impartiality?
• The Nichols Requirements:
– Must be a wall of separation between entity governing public plan
and Congress
– Congress must restrain itself from interfering with public plan
management
– Must be systematic cost-shifting
– Must be no special access to the Treasury
An alternative solution
“If you don't have health insurance, you'll be able to get the same
kind of health insurance Members of Congress get for themselves.”
Barack Obama
• FEHBP has no public plan – has private national plans
• Federal employees seem comfortable with competing private plans
• Government (health exchange) sets rules on information, solvency
etc. but has no plan
– Better for reform: state exchanges and risk adjustment with federal
certification
• FEHBP negotiates with national plans
– Better for reform: negotiated benchmark plans for each state