What’s prompting the debate?

The United States spends about twice as much as the rest of the industrialized world on health caremore than $2 trillion a yearfor relatively lousy results: We are 25th in the world in infant mortality, 23rd in life expectancy and, according to Dean Harris of the UNC School of Global Public Health in Chapel Hill, last among the 19 leading industrialized nations in preventing avoidable deaths.

Yet the U.S. is the only industrialized nation that doesn’t provide health care to every citizen as a fundamental right. Instead, some 47 million Americans lack basic health insurance, a number ballooning in the current recession.

According to Doctors for America (DFA), a reform group, inflation in the health care sector has outpaced the growth in national income by an average of 2.5 percent a year since 1970. The result: a grotesque system that richly rewards its top brass while providing excellent care only to those who can afford to payor whose companies will pay as a tax-free form of compensationfor increasingly exorbitant insurance plans.

What’s in a “strong” public plan?

At first blush, the three goals of health care reform may seem to conflict. How is it possible, as President Obama proposes, to improve the nation’s health outcomes, cover all or most of the 47 million Americans who don’t have health insurancewith sliding subsidies for the many who can’t afford it on their ownwhile reducing the nation’s total bill for health care?

Obama, in a June 2 letter to Sens. Ted Kennedy and Max Baucus, chairs of the two Senate committees at work on reform, argued that the three goals are complementary and must be tackled together. Health care experts agree.

The key, they say, is that government-run insurance plans can drive down everyone’s bills, public and private, resulting in net savings over time.

One reason, says Jacob Hacker, a leading analyst who teaches at the University of California at Berkeley, is that on their own, private insurance companies are spending a lot of money marketing products to the healthy (companies with young employees are especially prized) while avoiding or overcharging the people who need health care mostincluding many with pre-existing conditions.

A basic tenet of reform, therefore, which most politicians now support, would require all insurers, private or public, to accept anyone who applies for coverage on more or less equal terms, regardless of prior illness. No more “cherry-picking” as Hacker says.

Meanwhile, everyone should be mandated to “play” (buy insurance) or “pay” (a penalty), the same as with auto insurance.

For such reforms to stick, Hacker maintains, they must be accompanied in the marketplace by a new public insurance plan, modeled after Medicare, that is strong enough to compete with the private insurers and force them to change.

Public plans start with a minimum 20 percent-30 percent cost advantage over private plans, Hacker estimates, because they seek no profits, can negotiate big-volume discounts from pharmaceutical companies and other health care providers, and spend less on executive salaries, marketing and dodging claims.

Even Medicare, which is far from perfect and was barred by Congress from bargaining with the pharmaceutical companies, “has a substantially better track record than private health plans in controlling costs while maintaining broad access to care, especially over the last 15 years,” he says.

Hacker is among those urging Obama to hold out for a robust public plan along the lines of the one contained in the bill drafted by the Senate HELP committee, under Kennedy’s leadership.

“A watered-down public plan,” Hacker writes, “would be a grave mistake.”

But the Senate Finance Committee, under Baucus, is looking at a variety of weaker options, including the idea of local health insurance co-ops pitched by Sen. Kent Conrad, D-North Dakota.

For his part, Baucus believes a national reform law this massive shouldn’t be enacted without bipartisan support. But getting any could mean a bill with no public option at all, since Republicans are thus far unanimous in rejecting the whole concept.

Here’s how the “strong” and “weak” options differ:

  • A “strong” public plan would offer a high-quality insurance product across the country to a diverse customer “pool,” reaching enough young, healthy prospects to balance the older, sicker and more expensive customers whogiven the new rules about taking all comerswill inevitably be drawn to it. This is often termed “a level playing field.”

  • A “weak” public plan, on the other hand, might be state-run rather than national, be limited in the quality of the coverage it offers (think: Medicaid) or be hamstrung in its ability to compete for desirable employer groups. If, for example, all but the smallest businesses and individual customers were required to buy from private insurers, that could turn the public plan into a dumping ground for the unemployed, while well-heeled customers (and their companies) paid more for better coverage.

The HELP bill’s public option, considered strong on quality (“level playing field”), is nonetheless weak on how many people could choose it.

In “scoring” the HELP bill for costs, the Congressional Budget Office estimated that by 2019, only 27 million Americans would even be eligible for the public option, and not all of them would choose it.

The limited pool is a big reason the CBO’s score was a relatively low $600 billion over 10 years, about half the estimate it attached to an earlier draft, according to progressive analyst Ezra Klein.

Another way of looking at it, Klein wrote in the Washington Post, is that the CBO score improved “because we’ve made the policy worse.”

Big bucks frame health care debate

Sen. Kay Hagan holds at least $180,000 in investments in more than 20 health care companies, according to Legistorm, a nonpartisan group that tracks congressional salaries and financial interests.

She also received $13,000 in the 2008 election cycle from Blue Cross Blue Shield and $29,1000 from the political action committee of Womble, Carlyle, Sandridge & Rice. This powerful law firm has offices in 11 cities including Raleigh and Washington, D.C., and represents many clients, including the insurance industry.

The Pharmaceutical Research and Manufacturers of America, which represents drug companies and opposes the public option, has targeted Hagan in an aggressive television ad campaign. The trade group spent nearly $20 million last year on lobbying, according to the Center for Responsive Politics, and is estimated to have spent nearly $12 million on ads nationwide this year.