Why The "Trigger" Will Work
The Daily Beast, October 25, 2009
Health care's public-option "trigger" is great news for liberals and conservatives alike, because it gives both groups exactly what they want.
In my younger and more vulnerable years, as an aide in the last Democratic White House, President Bill Clinton said something that I've been turning over in my mind ever since. It came during a health-care meeting in the Cabinet Room in 1994, during which Clinton shared a conversation he'd had with Senator Sam Nunn of Georgia. Then, as now, the question of how to "bend the curve" on health costs was the seminal issue in health reform, and Nunn had spent several days caucusing with assorted provider groups in his state in search of an answer. Nunn told Clinton the consensus among industry leaders was clear. "Just give us the number," they'd told Nunn, meaning the slower growth rate of health costs the country could afford to spend. "We'll figure out how to divvy it up so it works."
Just give us the number. Unlike many advanced nations, which run health expenses through the government's books, the United States doesn't have a global budget for health care. This, and the fact that Americans pay directly for only a small portion of their own health spending (and thus have little incentive to be smart shoppers), helps explain why costs are out of control. Everyone agrees that U.S. health care is radically inefficient. We spend 17 percent of our GDP while other wealthy nations spend 10 to 11 percent. Yet we have no better health outcomes to show for this excess expense, and shamefully leave 50 million people uninsured. We also have huge regional swings in the utilization of various procedures and services that bear no relation to outcomes.
Despite this proof of inefficiency, any proposal to slow the growth of health costs is met with doomsday cries from hospitals, doctors, insurers, medical-device makers, drug companies, nursing homes, and more. The iron law of health-care politics holds: Every dollar of health-care "waste" is somebody's dollar of income. Reformers know that efforts to clamp down on costs this year have been largely gutted by the medical industrial complex. The pilots of new payment systems and similar innovations in the emerging health bills may offer some promising directions in the decade ahead. But no one should pretend they'll save real money any time soon.
This presents a dilemma. If we emerge from this year's epic health legislation without having done anything to re-engineer the cost of health-care delivery, today's achievements will be short-lived. Lawmakers already have to fudge the numbers to create the illusion of insurance affordability and deficit neutrality. As health costs continue to climb, we'll either bust the budget in order to lift subsidies for health insurance ever higher, or the government will exempt more Americans from a mandate to buy coverage, destabilizing the risk pool and sending premiums through the roof.
The only way to avoid these grim scenarios is to get serious about costs. The most politically viable way to do this is what Nunn told Clinton 15 years ago: "Give them the number." The device for doing this can be the so-called public-option "trigger."
How might that work? First, the government would define what affordable coverage means at differing levels of income. For example, families earning less than $25,000 might be expected to spend no more than 3 percent of their income on premiums for decent health coverage; those earning $50,000 no more than 5 percent; and so on. Each state or region would be required to offer several competing affordable options for citizens after the implementation of the new insurance exchanges. If a state or regional exchange failed to offer these affordable options, a new public program would be launched that meets these criteria.
The idea is to create, for the first time, a forcing device that compels the entire health sector to organize and compete around meeting newly defined metrics of affordability. The collective fear of an actual public option would lead the industry to rethink current practices in order to avoid the dreaded "trigger."
Insurers, who until now have vowed to fight any version of a public option to the death, should in fact welcome this forcing device. Why? Because it's the only way they can halt the industry's descent from merely being demonized today to facing the regulatory equivalent of lynch mobs tomorrow. It is insurers, after all, who will be blamed as health premiums continue to soar. Yet this blame will largely be unfair. The dirty little secret of health care is that it is not the market power of insurers that fuels health costs, but the local market power of doctor groups, hospital chains, and other local provider oligopolies. Insurers today lack the clout to fight the terms offered by the big local provider organizations (if they want to serve a market, for example, there's no choice but to include the big local doctor group in their network). And they'll never persuade ambitious attorneys general to run the political risk of cracking down on overreaching doctors and hospitals—these "good guys" hold sway over elected officials in every district.
The public-option trigger would thus give health plans the tool they've lacked to force an entirely new set of negotiations about cost-effective care delivery in every market. The fear of God—or, at least, of Uncle Sam—would finally give health plans a chance to contribute to society by boosting the value Americans get from every health-care dollar.
Liberals who prefer an immediate and national public option should be comfortable with a trigger in the end. After all, the goal is affordable health care for every American—the public option is merely a means to that end. If the trigger threat makes it happen, great; and if it doesn't do the trick, the public option clicks in. Republicans who are serious about health costs should also cheer this approach because it sets a broad public goal and only adds new government action if the private sector can't deliver. (Of course Republicans won't support it because they won't support anything that helps President Obama, but that doesn't mean GOP ideas won't have been included.)
With Nancy Pelosi lacking the votes for a full public option in the House, and Olympia Snowe pledging to withhold her vote if a full public option is added in the Senate, the policy and political logic of the public-option trigger will soon be irresistible.
The Daily Beast, October 25, 2009
Health care's public-option "trigger" is great news for liberals and conservatives alike, because it gives both groups exactly what they want.
In my younger and more vulnerable years, as an aide in the last Democratic White House, President Bill Clinton said something that I've been turning over in my mind ever since. It came during a health-care meeting in the Cabinet Room in 1994, during which Clinton shared a conversation he'd had with Senator Sam Nunn of Georgia. Then, as now, the question of how to "bend the curve" on health costs was the seminal issue in health reform, and Nunn had spent several days caucusing with assorted provider groups in his state in search of an answer. Nunn told Clinton the consensus among industry leaders was clear. "Just give us the number," they'd told Nunn, meaning the slower growth rate of health costs the country could afford to spend. "We'll figure out how to divvy it up so it works."
Just give us the number. Unlike many advanced nations, which run health expenses through the government's books, the United States doesn't have a global budget for health care. This, and the fact that Americans pay directly for only a small portion of their own health spending (and thus have little incentive to be smart shoppers), helps explain why costs are out of control. Everyone agrees that U.S. health care is radically inefficient. We spend 17 percent of our GDP while other wealthy nations spend 10 to 11 percent. Yet we have no better health outcomes to show for this excess expense, and shamefully leave 50 million people uninsured. We also have huge regional swings in the utilization of various procedures and services that bear no relation to outcomes.
Despite this proof of inefficiency, any proposal to slow the growth of health costs is met with doomsday cries from hospitals, doctors, insurers, medical-device makers, drug companies, nursing homes, and more. The iron law of health-care politics holds: Every dollar of health-care "waste" is somebody's dollar of income. Reformers know that efforts to clamp down on costs this year have been largely gutted by the medical industrial complex. The pilots of new payment systems and similar innovations in the emerging health bills may offer some promising directions in the decade ahead. But no one should pretend they'll save real money any time soon.
This presents a dilemma. If we emerge from this year's epic health legislation without having done anything to re-engineer the cost of health-care delivery, today's achievements will be short-lived. Lawmakers already have to fudge the numbers to create the illusion of insurance affordability and deficit neutrality. As health costs continue to climb, we'll either bust the budget in order to lift subsidies for health insurance ever higher, or the government will exempt more Americans from a mandate to buy coverage, destabilizing the risk pool and sending premiums through the roof.
The only way to avoid these grim scenarios is to get serious about costs. The most politically viable way to do this is what Nunn told Clinton 15 years ago: "Give them the number." The device for doing this can be the so-called public-option "trigger."
How might that work? First, the government would define what affordable coverage means at differing levels of income. For example, families earning less than $25,000 might be expected to spend no more than 3 percent of their income on premiums for decent health coverage; those earning $50,000 no more than 5 percent; and so on. Each state or region would be required to offer several competing affordable options for citizens after the implementation of the new insurance exchanges. If a state or regional exchange failed to offer these affordable options, a new public program would be launched that meets these criteria.
The idea is to create, for the first time, a forcing device that compels the entire health sector to organize and compete around meeting newly defined metrics of affordability. The collective fear of an actual public option would lead the industry to rethink current practices in order to avoid the dreaded "trigger."
Insurers, who until now have vowed to fight any version of a public option to the death, should in fact welcome this forcing device. Why? Because it's the only way they can halt the industry's descent from merely being demonized today to facing the regulatory equivalent of lynch mobs tomorrow. It is insurers, after all, who will be blamed as health premiums continue to soar. Yet this blame will largely be unfair. The dirty little secret of health care is that it is not the market power of insurers that fuels health costs, but the local market power of doctor groups, hospital chains, and other local provider oligopolies. Insurers today lack the clout to fight the terms offered by the big local provider organizations (if they want to serve a market, for example, there's no choice but to include the big local doctor group in their network). And they'll never persuade ambitious attorneys general to run the political risk of cracking down on overreaching doctors and hospitals—these "good guys" hold sway over elected officials in every district.
The public-option trigger would thus give health plans the tool they've lacked to force an entirely new set of negotiations about cost-effective care delivery in every market. The fear of God—or, at least, of Uncle Sam—would finally give health plans a chance to contribute to society by boosting the value Americans get from every health-care dollar.
Liberals who prefer an immediate and national public option should be comfortable with a trigger in the end. After all, the goal is affordable health care for every American—the public option is merely a means to that end. If the trigger threat makes it happen, great; and if it doesn't do the trick, the public option clicks in. Republicans who are serious about health costs should also cheer this approach because it sets a broad public goal and only adds new government action if the private sector can't deliver. (Of course Republicans won't support it because they won't support anything that helps President Obama, but that doesn't mean GOP ideas won't have been included.)
With Nancy Pelosi lacking the votes for a full public option in the House, and Olympia Snowe pledging to withhold her vote if a full public option is added in the Senate, the policy and political logic of the public-option trigger will soon be irresistible.