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Public Enemy

The debate over health care reform is full of controversies, but none has received as much attention as the call to create a public insurance option. The idea, in a nutshell, is to create a true government-run insurance program--something that looks vaguely like Medicare--in which people can enroll voluntarily. The proposal found its way into the platforms of the leading Democratic candidates, including Barack Obama, and eventually into memos circulating on Capitol Hill. Along the way, it's somehow become the litmus test for reform on both sides of the ideological spectrum. Liberals see it as an essential element of any package, the very definition of "real" health care reform. Conservatives are equally adamant that a public plan would be disastrous--enough to make reform itself worth opposing.

In reality, this conception of the public plan is not quite right. The only litmus test of reform should be whether it achieves its goals: making sure everybody can get timely medical care without experiencing financial ruin; reducing the cost of care overall, so that it no longer imposes such a serious economic burden on individuals and on society as a whole; and improving the quality of care, so that it focuses on prevention and actually makes people better once they are sick. How we achieve these goals is far less important than whether we achieve them.

So the proper question to ask about a public plan is whether it's necessary to meet those objectives. Various industry groups, most notably the insurance industry, say no. Conservatives, including those sincerely determined to improve health care, agree. And whatever the biases of each group, they are technically correct. It is possible to create a high-functioning universal health care system without creating a public insurance option. And the proof, ironically, comes from the very place conservatives love to disparage: Europe. Two nations, the Netherlands and Switzerland, have health care systems that provide convenient, high-quality care to all citizens--for much less money than Americans pay now. And they do so exclusively through private insurance. If it were possible to re-create those systems here, the United States would be in good shape.

The problem is that it's nearly impossible to re-create those systems, in which government regulation is far more aggressive than anything American policymakers are contemplating. Swiss insurers can't even make profits from the basic benefits package; Dutch health care has heavy price controls. Both countries also have stronger traditions of social solidarity and corporate responsibility. The rules work, in part, because insurers feel duty-bound to follow them.

American insurers have no such tradition. On the contrary, the history of American health care is replete with examples of insurers--like all industries--trying to maximize their profits, often in ways that leave Americans without the financial protection or medical care that they need. In the mid-twentieth century, it was the entrance of for-profit insurers to the market that set off the chain of events that led to the situation we have today--a situation in which people who have pre-existing medical conditions frequently cannot afford to buy coverage on their own. And, in recent decades, it was the transformation of managed care into a for-profit industry that left Americans with medical needs at the mercy of insurers that sometimes made clinical judgments based on profits and losses.

In principle, effective government regulation can curb this behavior. In practice, insurers have demonstrated an uncanny ability to circumvent regulations. Just ask the senior citizens duped by deceptive marketing of Medicare supplemental insurance over the years, or the many working-age Americans who bought private insurance on their own and filed a claim, only to have their carriers rescind coverage retroactively after deciding there was some hidden preexisting condition in their distant medical histories.

In this sort of world--the world of American health care as it exists, rather than how it seems in some idyllic conceptions--the case for a public insurance plan is strong. Very strong. Government can decree that its insurance program provide coverage to anybody who seeks it--and that it cover all necessary medical services, without secret gimmickry to wring profits from treatment denials. The government can offer coverage cheaply, by taking advantage of its bargaining power and economies of scale. And, insofar as the goal of reform is to reduce the cost of care in the long run, by attacking the medical habits that encourage excessive or ineffective care, the government can make sure the public plan pays for services in ways that promote the most effective treatments.

The hackneyed critique against a public plan draws analogies to Medicare--a strange argument, insofar as Medicare is a highly popular program that stacks up favorably to its private sector alternatives. The more intelligent criticisms focus on whether a new public program would set prices too low, starving providers of resources and disrupting care, or take unfair advantage of access to taxpayer money in order to underprice private insurers and drive them out of business. But these are reasons to build in safeguards--safeguards that the leading advocates for a public plan have already embraced. They are not reasons to water down the idea beyond recognition, let alone ditch it altogether. The public plan may not be the essence of reform. But it certainly should be part of it.

By The Editors