Spotlight: A Public-Insurance Option

As the debate over health care gathers momentum, attention is focusing on proposals for a new, government-administered health-insurance program to help lower costs. President Obama said on June 23 that the so-called public plan "makes sense" as part of an overall health-reform package; on Capitol Hill, lawmakers are sparring over its pros and cons. Democrats--who favor a public option--can't agree on a plan among themselves, while across the aisle, Republicans are warning of creeping socialism and health-care "rationing." Hold on tight: this battle is just beginning.

PUBLIC PLAN

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THE UNINSURED 47 million (15.8% of Americans)

THE INSURED

The benefits ...

LEVERAGE

A public plan with millions of members could use its large market share as a negotiating tool to get doctors and hospitals to accept lower reimbursement rates for individual services.

PORTABILITY

A nationwide public plan could let Americans keep their coverage when they moved, changed jobs or weren't working--not always the case with private insurance.

LOWER OVERHEAD

Freed from marketing expenses, broker commissions and profit margins, a public plan could have lower administrative costs, which may mean lower premiums.

DATA COLLECTION

As with Medicare, a public plan could allow uniform and large-scale reporting of health-care procedures and costs--data that could be used to improve efficiency.

... and pitfalls

Insurance companies say a public plan would have "built-in advantages" that would allow it to "take over" the insurance market.

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Top 5 Insurers 2008 Market Share United Health Group 11.8% WELL POINT* 8.9% KAISER PERMANENTE 7.6% Aetna 4.2% HUMANA 4.1%

*Parent company of Blue Cross/Blue Shield

Doctors and hospitals say a public plan that forces them to accept lower payments would shrink their incomes dramatically.

Republicans worry that a public plan would amount to a "government takeover" of health care that would bureaucratize the doctor-patient relationship.

The Players

HOUSE TRI-COMMITTEE This alliance of three committees released a draft bill June 19, including a public plan financed by premiums. It would initially reimburse health-care providers using Medicare's lower rates.

Waxman Rangel Miller

SENATE HEALTH COMMITTEE In a June 9 legislative draft, space designated for details of a public plan just read "policy under discussion." Dodd and Kennedy favor a public-insurance plan.

Kennedy Dodd

SENATE FINANCE COMMITTEE No formal draft has been released, but a 10-page outline leaked on June 18 included consumer-run insurance "cooperatives" as a public-plan alternative.

Baucus Grassley

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Amount of government involvement

How it might look: four models

MEDICARE-BASED Providers would be paid the same rates as from Medicare. Premiums would be the lowest of any model, but government costs would be the highest.

SELF-SUSTAINING Premiums collected would cover the cost of claims. Patients would pay more than under the Medicare model but less than for private insurance.