"Medicare for all who want it" raises the kludge question

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Given the "triple veto" imposed on legislators by the U.S. Constitution, U.S. policy is doomed to kludge. Policy design that's logical and internally coherent often can't survive the legislative process.

On the healthcare front, it's been evident since the early aughts that the logical, feasible, appropriately incremental way to improve access and control costs without throwing multiple healthcare industries into chaos and swiftly transitioning 150 million people out of employer-sponsored insurance is to offer a public plan on affordable terms to both employers and employees -- leaving employer insurance to either compete effectively or die on the vine.

Early iterations of such a "public option" included Helen Halpin's CHOICE program (2003), Rep Peter Stark's Americare bill (2006),and Jacob Hacker's Health Care for America plan (2007). All of these enabled any individual to buy in on an income-adjusted basis regardless of whether her employer offered insurance, and gave employers the option of paying into the public plan (e.g., via a payroll tax) rather than offering their own plans.  Instead we got the ACA -- with subsidy eligibility limited to those without access to employer insurance deemed "affordable" (by dubious standards), inadequate subsidies, and dependence on the whims, pricing, negotiated provider payment rates and plan designs of private insurers.

Now we're back to the future with the Medicare for America Act, introduced in late 2018 by Reps Rosa DeLauro and Jan Schakowsky and reintroduced last month. Medicare for America offers a revamped "Medicare" on affordable terms to any citizen or legally present noncitizen who opts in.

The kludge question: Does offering a truly comprehensive and affordable plan on affordable terms to anyone who wants it necessarily entail ending our existing mammoth and Byzantine public health insurance programs, Medicaid and as-currently-structured Medicare? Medicare for America's creators answered "yes."

The public option is inside out

The public option is back in the ether, though it's hard to see a path by which it may walk this earth. Hillary Clinton has reiterated her verbal support for it as part of her package of Bernie mollifications. Obama has also floated a kind of public option ghost, to haunt only those ACA markets where competition is scarce. Democratic yearning is in high gear.

The public option is designed to mitigate the fact that a private, subsidized insurance marketplace expands the very sector of our healthcare system that pays healthcare providers the highest rates. While a "strong" public option would pay Medicare rates, private insurers typically pay probably more than 150% of that, at least in the employer-sponsored market (many do pay less, some much less, in the ACA marketplace).

Insurers understandably don't like a public option because it would put them up against a competitor that pays less for the care they retail than they typically do. That would seem, in many ACA markets, an impossible task. Competition can't force insurers to charge lower premiums when premium revenue is less than medical payments, as it is in some ACA markets.  Competition is great if it pushes insurers' medical loss ratios from 80% to 85%; it's futile if it pushes them from 87% to 92% or 102% or 120%.

Thus a public option is pushing on a string -- or at best, pushing insurers toward ever narrower networks.

Perhaps what's needed is for the government to set affordable rates, or take bids within a given rate range, and invite the insurers to compete on that basis. That's how Medicare Advantage works, and also how Medicaid managed care programs work, with some important differences in how bidding is structured.