Cutting the Gordian Knot: Why a “Public Option” Won’t Work

A friend of mine is adamant in his belief that the American
health care system simply cannot be fixed to operate with some semblance of humanity
and rationality. Bill has become convinced that “it will never, ever work.”
What does it matter if other health care systems in other countries are less
crazy, cruel, convoluted, or costly? He is convinced we are FUBAR and cannot
get to anything better from here.

This seems to me a nihilistic, despairing, and illogical
view. Yet, Bill is right that strong, interlocking structures hold the existing
order in place.

So many promising efforts in the past to reform things have
been distorted, stymied, and twisted, and have not improved matters. The
HMO movement comes to mind. Originally non-profit and medically-focused, it changed
into something quite different, angered patients and doctors, and was a
striking failure.

If the healthcare system is to be radically improved, it won’t
be easy, and figuring out how to weaken structural forces that buttress the
current system is a crucial part.

With this in mind, let’s consider the currently popular goal
of “Medicare for All.” The most popular “compromise” path – now espoused by
every candidate in the Democratic field but Sanders – involves adding a “public
option” to current ACA plans alongside private insurance. Pete Buttigieg and
now Elizabeth Warren have rhapsodized about how this would provide a “glide
path” to real single-payer reform, because people would prefer the “public
option” to private insurance plans.

But, giving people the choice between public and private
health plans simply won’t work. Real single-payer eliminates an unneeded,
expensive middleman – the insurance companies. A “choice” leaves the insurance
companies – and the additional layer of complication and expense they add –
firmly in place.  If true single-payer is
implemented, administrative overhead would be reduced, because hospitals and
doctors wouldn’t have to deal with dozens of differing insurance plans and
their varied requirements. One set of billing procedures, forms, one drug
formulary and rules, etc. would majorly lessen overhead. Adding a new “public
plan” would only increase complexity, not reduce it.

A “public plan” that exists alongside private plans also
will not have the leverage to reduce medical prices, including pharmaceutical prices,
that the government would have in a true single-payer system. Without the cost
savings from overhead reduction and better pricing, the public plan will not realize
any of the potential gains that could enable substantial systemic improvement.

Crucially, if some are on private plans and some on public,
adverse selection is certain to occur. Insurance companies will game the system
as much as possible to retain the best risks and offload the medically needy
onto the public plan. Even before such games get into play, if people who work
for large employers keep their current plans, those people have a more
favorable risk profile than the population at large. Warren’s means-tested
initial transition plan extends coverage to those below 200 percent of the
poverty level – are these going to be good risks? So, the public plan will be
saddled with a population that will inevitably be costly.

For all these reasons, after implementation, the public plan
won’t be in a good position to present a favorable profile compared to
the cream-skimming private plans, which will offer sets of benefits designed to
attract younger and healthier people. This will raise the cost of the public
option and together with the lack of administrative savings, will be a financial

The government will pick up more of the tab for the sick; people
will NOT prefer the “public option” to private insurance; and the leaders of
the insurance companies, pharmaceutical companies, and hospitals will continue
making our healthcare “system” complicated, expensive, and corrupt. The suffering it
imposes will continue. And my friend Bill will be confirmed – again – in his belief
that American healthcare will “never, ever work.”

The truth, of course, is that American healthcare does
work, superbly, for its overarching purpose – to make money for capitalists.
At that, it is indeed the very best in the world. But if we want it to work for
other purposes, we have to cut the Gordian knot, rather than try to untie it
gradually. The rapid, drastic, and successful implementation of the National
Health Service in Britain after World War II affords an example.

can’t leap a chasm in two bounds. So what does [Warren] suggest? Break the leap
into two bounds so that M4A falls down the damn chasm never to make it to the
other side.

“Getting to the other side” is possible – but it can’t be
done in the way proposed.