Posted on April 15, 2009

Hacker says that public option/private exchange would EXPAND private insurance market


Extended discussion of Lewin Group

By Jacob Hacker
Institute for America’s Future
April 11, 2009

Put simply, Health Care for America is a pure, undiluted proposal for public plan choice. So it’s notable that under my proposal, according to the Lewin Group’s analysis of a couple years ago, the public plan ends up with much lower enrollment in the public plan than projected in the Lewin Group’s new analysis (90 million versus over 131 million). (For aficionados, the national insurance exchange in my proposal would have larger enrollment, but around 38 million people in the exchange would choose private plans instead of the public plan.)

In short, the Lewin Group’s hypothetical proposal has three features that guarantee the public plan will be big. Whatever “131 million enrollees in the public plan” represents, it does not represent an accurate picture of Obama’s campaign pronouncements, or Max Baucus’s “White Paper,” or my plan, or any other proposal under serious consideration today.

To get an estimate of how many people will end up in the public plan, therefore, we need to go back to the Lewin Group’s analyses of proposals more or less like what Obama proposed during the campaign—namely, play-or-pay plans with an exchange that features a competing public plan, and without extensive new rules on employment-based insurance. Those analyses (of my proposal or the Commonwealth Fund proposal) show that enrollment in the public plan is likely to be much, much smaller than the Lewin Group’s analysis estimates. Indeed, if you look at the Lewin Group’s analysis of my proposal (again, the maximalist public plan choice approach), more Americans have private insurance after reform than do before—either through their employer or through the new national insurance exchange.


By Don McCanne, MD

Offering a public plan option within a market of private health plans has been one of the more controversial proposals during the current national dialogue on health care reform.

The opponents of the public option, especially the private insurance industry and the Republican members of Congress, insist that a government-sponsored plan would be an unfair competitor and drive the private insurance industry out of business. Theoretically, the government would do this by extracting unfair concessions from the health care providers, pricing the public option at a lower level than the private insurance sector could ever meet. (This ignores the more important evidence such as the demonstrated greater efficiencies of our public Medicare program when contrasted with the private Medicare Advantage plans.)

The supporters of a public option, especially the progressive community, contend that the public option would be a superior product made more affordable by reducing administrative inefficiencies. They contend that competition would motivate a massive shift to the public option, bringing us much closer to the single payer model that many in the progressive community prefer. (Much has been said about why this approach actually sacrifices most of the single payer advantages and would likely never lead to a single payer system.)

Professor Jacob Hacker of the University of California at Berkeley (and formerly at Yale) has been a leading proponent of reform based on a national insurance exchange of private plans with the addition of a public plan option. And what does he have to say about the impact that a public plan option would have on market share for the private health plans? He says that under his proposal, “more Americans have private insurance after reform than do before — either through their employer or through the new national insurance exchange.”

Get That? Even with a Medicare-like public plan option, the market for the private insurers will expand! That is the real tragedy of this debate over a public plan option. It has led us away from the debate we should be having instead: an affordable single payer national health program for everyone, versus expansion of our over-priced, inequitable, and inefficient system of financing health care through private plans and public programs

Forget about the public plan option! Let’s get rid of the private health plans, and go with single payer!