How the Public Option Is Like Ken Griffey, Jr.

by Tim Foley

categories: For Profit Insurance, Impediments to Reform, Public Plan

Published April 07, 2009 @ 04:15PM PT

As Yogi Berra once said, "It's tough to make predictions, especially about the future."  When Ken Griffey Jr. was traded to the Cincinnati Reds in 2000, a mega-superstar returning to the same team his father had played for and the city where he grew up, it seemed like the sky was the limit.  Cincinnati gave him a parade and a hero's welcome on the day he was traded, pundits speculated on his ability to lift the Reds - who had come within one game of a playoff berth - to the playoffs, and I and my roommate rushed to pick him first in my fantasy baseball draft.  But our predictions were off.  Griffey had one of his worst seasons, the Reds finished 10 games behind the Cardinals, and our fantasy baseball team tanked.

Keep this in mind as you read the articles pondering the Lewin Group's new analysis on the public option that would compete with private insurance as part of a health care reform package.

Despite their reputation as being one of the leading go-to firms for giving ammunition to conservative fears that any public option would "crowd out" private insurance, a reputation stoked by Vice President and maverick quotation machine John Shiels (who delightfully gives the not-at-all restrained analysis "The private insurance industry might just fizzle out altogether" in today's AP report - way to stoke those fears, John!), the report itself recognizes its own shortcomings and the somewhat impossible nature of its task.  They disclaim up front, "The public plan is difficult to evaluate because no one has specified in legislation how it would work."  The best they can do is make an educated guess: less on what President Obama or Senators Max Baucus or Ted Kennedy have revealed about the public option, and more on what other candidates described, particularly about the public option using the leverage of Medicare rates and being open to everyone, not just the uninsured and small businesses.  It's not a bad guess - akin to guessing that Griffey's performance as a Red would be in the realm of his 1999 stats with 48 homers, 24 stolen bases and 134 runs batted in.

Except in 2000, Griffey only hit 40 home runs, had 6 stolen bases and had 118 RBIs - and would never get that high in any of those categories again.

Nevertheless, as a guess, the Lewin Group analysis is pretty useful.  They even provide two different sets of analysis, one for if the public option uses the full leverage of Medicare rates and provider networks and is a choice given to every American (the robust Seattle Mariners Griffey version), and one if the option uses reimbursement rates similar to private insurance and is only open to individuals, the uninsured and small businesses (the weaker Cincinnati Reds Griffey version).

If the Mariners Griffey version is proposed in Congress, conservatives will be able to raise the specter of crowd out - a staggering 131.2 million people are estimated to join the public plan, over 90% of them leaving private insurance to do so.  Hospital revenue would decline because Medicare reimburses at a lower rate, to the tune of $36 billion a year - which sounds horrifying until you realizes that's not even a 5% decline - while physicians would see about a 7% decline in reimbursement to $33 billion a year.  The case for catastrophically unfair competition is much weaker if it's the Reds Griffey version, as only 42.9 million people would choose the public option under decreased cost controls and eligibility, with about 75% coming from private insurance.  That's still a lot of people leaving private insurance, but barely a quarter of the stampede for the exits caused by the Mariners Griffey version.  Similarly, physician reimbursement would still decline, but it'd be a blip - less than one percent.  Hospital revenues would actually increase.

But there are two big things that we miss just by looking at this in terms of crowd out (as I expect way too many news articles will do tomorrow).  First, the Lewin Group makes no assumptions that the insurance industry will adapt - in fact they presume that the other regulatory reform will establish a standard minimum benefit for everyone and prevent the private insurance from finding a way to get more customers.  Well, from your lips to God's ears, John Shiels, but if there's one thing we've seen, it's the infinite adaptability of the insurance industry - individual rating to attract healthier customers, high deductible and emergency-only plans, insurance for insurance (policies that reimburse you if you lose your job and your health coverage - what a weird product!), lifetime maximum benefits, and a whole host of "cave of horror" policies designed to make customers think they're fully covered when they're not.  Heck, private insurance has convinced 20% of Medicare recipients to buy into Medicare Advantage, where there's often not an appreciable difference in benefits, a much decreased providers network, and the thing costs 14% more.

The second thing is this - Ken Griffey Jr. is a first-ballot Hall of Famer, whether he meets our yearly predictions are not.  Neither vision of the public option is ideal, but both do a world of good.  If we go with the most robust version, the report says, "On average, the monthly premium in the public plan for a typical benefits package would be $761 per family compared with an average of $970 per family in the private market for the same coverage."  That's extending coverage to nearly every American while bringing costs down.  Conservative defenses of the indefensible business practices of private insurance aside, isn't that the whole point of reform?

At the end of the day, the Lewin Group suggests that not only would a third of Americans choose to enroll in a public option, but they would willingly leave the coverage that they have now to get coverage akin to a member of Congress and paid for by the same means as the 50 million Americans on Medicare - a program that, despite concerns over its reimbursement rates, 72% of doctors still accept.

Who are we to deny them?

(Photo credit:  terren in Virginia on Flickr.)