Failure is an Option

Failure is an Option
By: Jacob Laksin
Tuesday, August 18, 2009


The White House’s plan for a government-run public insurance option goes down in defeat.

In intensive care and unlikely to survive: That’s as good description as any of the terminal state in which one of the Obama administration’s signature health reform proposals now finds itself.


As recently as this June, President Obama insisted that a government-run insurance program, the so-called “public option,” was a core component of his plan to overhaul American health care. But with public support plummeting for the president’s stewardship of the health care issue, town halls across the country abuzz with an energized grassroots opposition, and even some Democrats expressing qualms about the public option, the administration has been forced to fall back from its position that health insurance must become the latest in the growing list of the federal government’s responsibilities.


The first sign that the administration was in retreat came this Saturday. While touting his health care reform in Grand Junction, Colorado, President Obama sounded a diffident note, asserting that the “public option, whether we have it or we don’t have it, is not the entirety of health-care reform” but “just one sliver of it.” In the context of his earlier statement, this June, that “Americans should have the choice of a public health insurance option operating alongside private plans,” the president’s new stance seemed to signal a faltering commitment to the government-run plan. That impression was reinforced the next day, when Health and Human Services Secretary Kathleen Sebelius told CNN that the public option “is not the essential element” of president’s health care plan.


The administration’s concession is not entirely voluntary. A dizzying succession of polls – including last week’s Marist poll, which found that some 45 percent of Americans disapprove of the president’s handling of health care, including a swelling swath of independent voters – suggest that the president has lost traction on the make-or-break issue of his first term. The same message has been sent by the now-famous health care town halls across the country, which threaten to do for ObamaCare what this spring’s Tea Parties did for the administration’s economic stimulus package: ignite a genuine and broad-based political movement that drags down the president’s once-unassailable appeal and creates electoral problems for his Democratic allies in Congress.


By no intent on the administration’s part, the public option became the catalyst for this civic insurgency. Yet that was not completely unexpected: For many critics, the government-run insurance program represents the worst of the policies floating around Washington as the prospect of health care reform looms – a fundamentally bad idea that could set the stage for worse to come.


Not the least of the public option’s flaws is conceptual: Simply, it would do the opposite of what the administration has promised – namely, foster competition among private insurers and create a more affordable insurance market for Americans. As many health care experts have noted, the actual effect of a public plan would be to crowd out private insurers, stifle competition, and force more Americans into a government-run plan. With taxpayer funds at its disposal, a government program would be able to operate at a loss – a luxury unavailable to private insurers, who would have to increase premiums to compete or else go out of business.


Bolstering these concerns, a July analysis of the public option plan in the House health care bill (the American Affordable Health Choices Act of 2009), by the Lewin Group, found that nearly 104 million Americans would end up in the government plan if some version of the legislation were passed, while 83 million would lose private coverage. For the millions who ultimately would have to give up coverage under the government plan, the public option would be anything but optional.


Yet another concern was that the public option was merely the tip of a more massive – and radical – legislative iceberg: the introduction of a universal “single payer” system on the model of Canada’s. Rep. Barney Frank did nothing to discourage those suspicions when he confessed, in effect, that the public option was a Trojan Horse for single-payer health care. Democrats didn’t have the votes to pass a single-payer program, Frank admitted, but if “we get a good public option it could lead to single payer and that is the best way to reach single payer.” No wonder opponents were up in arms.


The administration’s response to such concerns was underwhelming. During a June press conference, Obama acknowledged that “there can be some legitimate concerns on the part of private insurers” that the public plan could be “subsidized by taxpayers endlessly.” But the president never explained away this risk, instead deferring to supporters who promised that it was nothing to worry about: The costs of the public plan would be covered by enrollee premiums, not taxpayer dollars, and there was no danger of the government subsidizing its own program.


But as the Cato Institute’s Michael Tanner has pointed out, to believe that the federal government would not prop up its own program is to ignore history. Medicare, the model for the public option, is a case in point. When it was first created in 1965, premiums paid for 50 percent of the cost of physician services. That number ultimately fell by half. Taxpayers were left to pick up the tab.


The Medicare example is instructive for another reason, as well. Had it become law, the public option would have been administered by the Department of Health and Human Services, the same agency that now oversees Medicare. As a troubling preview into the future, consider that, according to the Heritage Foundation, Medicare is facing a debt burden of nearly $30 trillion over the next 75 years.


With the president’s move away from the public option this week, that prospect may be less likely. It’s too early, however, to say that the public option is truly dead and buried. Though increasingly unpopular even within Democratic ranks – some Senate Democrats have objected that the plan is unfair to private insurers – the public option still enjoys widespread support on the activist Left, and the administration is already catching flack for even suggesting that it could be dropped from consideration. Whether this is significant will depend on whether the president is prepared to alienate the self-styled “Democratic wing of the Democratic Party,” whose onetime figurehead, Howard Dean, announced just this week that he won’t support “health reform without” the public option.


That political calculation may explain why the administration has moved to muddle its current position on the public option. For instance, shortly after Kathleen Sebelius dismissed the necessity of the public plan, White House health reform communications director Linda Douglass released a damage-control statement assuring that “nothing has changed.” The president, she wrote, still “believes the public option is the best way” to bring about a cheaper, more competitive health care market. So far, at least, that qualification has not satisfied critics on either side of the political divide.


But even if the administration has abandoned its goal of a public option, the danger remains that it could enact a government-run health care program in a different guise. Thus the emerging talk of non-profit insurance cooperatives. Run by nonprofit insurers, these co-ops are being sold as a compromise approach that meets critics and supporters of the public option halfway.


Behind the appealing concept, though, may be a less appealing reality: The co-ops would be government programs in all but name. As the Pacific Research Institute’s Sally Pipes tells Front Page’s Jamie Glazov, “The co-ops would be regulated by a federal-governing board set up by the feds who would determine what benefits must be included in a health insurance plan, what premiums would cost, and setting of rules.” It’s no coincidence that Democrats like Montana’s Max Baucus have supported a national co-op “that accomplishes the objectives of a public option.” For backers of a public option, the fashionably named co-ops may be a stealth means to the same end.


Still, there is one very good reason to think that in its most politically unpalatable form, the public option is indeed a goner: it simply does not have enough votes to pass the House and the Senate. There remain abundant reasons to be alarmed about whatever legislation does emerge from Congress – especially its expected trillion-dollar price tag and the possibility of a health care mandate for businesses and individuals that has proven such a failure in Massachusetts. But the worst feature of ObamaCare may be a thing of the past. For now, the administration has simply run out of options.

Jacob Laksin is managing editor of Front Page Magazine. His email is jlaksin -at-

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