Just what happened to the public option

It was never going to be a Canadian-style single-payer, government-run insurance system, but the congressional Democrats, backed by Barack Obama, have for months been pushing for a “public option”—an alternative government-run insurance plan as part of the wide-ranging health care reform that is to be the legacy-making policy centrepiece of Obama’s first term as president.

The “public option” was supposed to help cover the 45 million uninsured Americans, and put downward pressure on skyrocketing health care costs by allowing a government entity to negotiate low bulk rates with medical providers and forcing private insurers to compete with a not-for-profit alternative. To some liberal Democrats, it was the heart of the comprehensive health care reform scheme and offered a first step toward laying down the infrastructure for those who clung to the currently impossible dream of a single-payer system. Given Democratic control of the White House and both houses of Congress, and a protracted recession in which legions of Americans are losing their health care insurance along with their jobs, it seemed at the outset like a fortuitous moment to pass the plan—despite objections by the Republican minority that it would amount to a “socialist” takeover of health care.

But this month, lawmakers returned to their home districts for the summer break and met with outraged crowds at town halls fed up with government bailouts of Wall Street and the auto sector, worried about a government takeover leading to ever-mounting deficits, eventual rationing of health care, and the spectre, however hysterical, of “death panels” of faceless bureaucrats deciding whose grandma gets care and whose doesn’t. With staunch opposition from Republicans, and disinterest from moderate Democrats who are leading the quest for a bipartisan compromise, the public option proposal is now on life support, and the White House shows no sign of trying to save it. At a Saturday town hall forum in Grand Junction, Colo., Obama downplayed its importance, “The public option, whether we have it or we don’t have it, is not the entirety of health care reform. This is just one sliver of it, one aspect of it.” On Sunday, Kathleen Sebelius, Obama’s secretary of health and human services, appeared on CNN and said of the public option, “Let’s not have this be the only focus of the conversation,” fueling speculation that the administration had all but abandoned the idea. By Tuesday, the White House spokesman Robert Gibbs was saying that nothing had changed—that the administration still “supports” the public option but has always been open to other alternatives as well.

How did the public option die so soon?

First, there was Obama’s lukewarm commitment. When he ran for president, Obama campaigned on comprehensive health care reform that would include universal coverage. He did not run on the idea of a public option (it was part of John Edwards’ platform)—although Obama later backed congressional Democrats who embraced it. Once in office, Obama said he preferred a plan that included the public option but at no point did he promise to veto legislation that did not include it.

Second, there was Obama’s tactical gamble aimed at not repeating the mistakes of the Clinton administration’s health care reform. The Clintons ran into trouble by working out a complicated health care reform plan behind closed doors, and then attempting to impose it on Congress, which balked. Obama tried the reverse route: he set out several general principles for reform—covering the uninsured, reducing skyrocketing health care costs, not adding to the deficit—but left the details up to lawmakers to fill in. His largely hands-off approach created two complications: various lawmakers in both the House and Senate crafted several comprehensive bills, some containing contradictory approaches. The leading House bill includes a public option, while the leading Senate bill adamantly does not. Congress was unable to agree on a single approach before leaving town for the August recess, and with bills pending in multiple committees, each one with different features, the policy sales job became a cacophony. Lawmakers had to defend the “plan” without knowing what it would actually look like, while critics were able to slam a generalized “Obamacare.” The White House had lost control of the debate.

And leaving the work to Congress had the effect of empowering small coalitions of conservative Democrats and moderate Republicans, whose votes will be crucial to passing a final bill, to take a leading role in crafting a compromise—particularly in the Senate, where the Democrats have a slim majority. The revenge-of-the-moderates moment on Capitol Hill was bad news for the public option. In the Senate, a senior Democrat on the finance committee, Senator Kent Conrad of North Dakota, declared flatly that there are not the votes to pass a public option, a calculation some Democrats dispute. Instead, he offered an alternative proposal for encouraging competition: the creation of not-for-profit insurance “co-operatives” that would compete for business with private health insurance companies. They would be run by their members, not by the government.

Conrad has been working with six moderate senators—three Democrats and three Republicans—to craft a bipartisan compromise that can pass the Senate. The White House has been reportedly in close contact with the group. The Republicans include Olympia Snowe, a Republican senator from Maine, who said she does not support the public option but would be willing to back a five-year “trigger” that would bring in a public option if sufficient competition and cost-savings were not achieved in time. Such a compromise, if passed by the Senate, could offer House Democrats a face-saving way out of the stand-off when it comes time to reconcile the House and Senate versions of the legislation in the closed-door negotiating process known as conference. Because the co-operatives would not be government-run, they would be more palatable to Republicans. “You could argue it’s more than a face-saver,” says Norman Ornstein, a congressional analyst at the conservative American Enterprise Institute, a Washington think tank. “If the goal is not the public option per se but to make sure that insurance companies do what you want them to, then you can say, ‘You have five years until the guillotine comes down.’ And that could have a real impact.”

But the shift in the centre of gravity from the left-leaning Democratic leadership to the centrist deal-makers has spurred a backlash from progressive Democrats and the left wing of the party, who argue that a public option is essential to keeping costs in check. In the House, liberal Democrats are threatening that the bill will fall apart without a public option. In July, 59 Democrats sent a letter to Speaker Nancy Pelosi vowing to vote against any legislation that does not include a public option. That would be enough lost Democratic votes to torpedo the legislation in the House. This week, Rep. Anthony Weiner of New York, a staunch supporter of the public option, and a member of the House energy and commerce committee, estimated that a bill without the public option would lose 100 votes in the House.

Outside Capitol Hill, too, what has appeared to be the unceremonious dumping of the public option has already lost Obama points inside his own party. “Without a public, Medicare-like option, health care reform is a band-aid for a system in critical condition,” blogged Robert Reich, a University of California at Berkeley professor and Bill Clinton’s former labour secretary. He blamed Obama for its apparent demise: “It’s because the White House has never made an explicit commitment to a public option.”

Will the progressive Democrats make good on their vows to vote against reform if the final legislation does not include a public option? Will they actually risk handing Obama—and their own party—a major defeat before the 2010 mid-term elections? Probably not, though they can hardly say so at this point in the process without losing a major bargaining chip.

There is plenty of reason for them to swallow their pride, says one veteran of the Clinton health care wars. “It behooves progressives to keep the big prize in sight as we go into the stretch on this debate,” says Will Marshall, president of the Progressive Policy Institute, a think tank for moderate Democrats which had a reputation as Bill Clinton’s idea mill. Marshall said Obama is right to show “tactical flexibility” on the issue. “The central fallacy is that the public option is the core structural reform needed to get universal coverage at an affordable cost. We can get there without it. To me it’s an example of ideological passions crowding out a very pragmatic view of what reform can and should accomplish.”

Even without a public option, the health care reform legislation stands to include many substantive changes for Americans. Most likely a final bill will achieve near-universal coverage through some combination of a legal requirement for all individuals and most employers to buy health care insurance combined with subsidies for lower income people paid for by tax hikes on upper income earners. Tough new regulations would prevent insurance companies from denying coverage to people with pre-existing medical conditions, or from dropping their coverage when they get sick, or from limiting their coverage in the case of catastrophic illness. There would also be a Health Insurance Exchange, where individuals could compare and choose the most appropriate plan for themselves. The reforms under debate also include a variety of efficiency improvements, from electronic health records to studies on the comparative effectiveness of various treatments to an emphasis on preventive care.

Obama has already made more progress than Clinton did, Marshall insists. “I was there in 1994 watching closely, and the insurance industry was leading the charge against the bill—and this time they are on board. They don’t like the public option, but they have agreed with main structural innovation, which is the health exchanges, and the strict rules against denying coverage or taking it away on medical grounds.” He adds: “Progressives ought to take that in a heartbeat.”