Is the Public Option A Ghost, A Goblin, A Vampire or The Real Thing?

With Halloween just around the corner, I’m reminded of the ghosts, goblins, and vampires that at this time of year return from the dead to haunt the living. It seems that Washington is facing the same spirits which are permeating the ongoing healthcare debate.  Is the public option dead?  Is it alive?  Or, has it just gone into hiding?  More importantly, what is it?  The guessing game led to rampant speculation early in the week that the “public option” was gone, but by week’s end, it seemed more alive than ever.

Beginning Monday, a new Washington Post-ABC News poll showed support for a government-run insurance plan by a majority of the public.  Rebounding from an all-time low over the summer, the public option is now supported by 57 percent of the American public while 40 percent oppose the plan.  The American public though remains divided on the specifics. Which made me ask, what are the specifics?  Amidst all the proposals, counter-proposals, statements, and arguments, I was finding it difficult to comprehend.  So, in an effort to simplify the issue, here are the plans as I understand them:

The Senate public plan – It appears there is little likelihood a public plan of any construct will actually pass, but there are three public plan proposals floating around:

• State Opt-Out Approach:  The states will have the ability to opt-out of the federal public option as proposed by Senator Chuck Schumer (D-NY).  Senators Snowe (R-ME) and Nelson (D-NE) do not support this approach.
• Open Trigger Option:  A public option is created in the future if thresholds for expanding coverage and lowering the cost of healthcare go unmet by some date.  This is the Senator Snowe (R-ME) proposal.
• Laboratories Option:  Supported by Senator Tom Carper (D-DE), the model allows states to create their own models for a “public” plan.

The House is currently hosting three public plan options:

• Medicare-Like Option:  A public plan tied to Medicare rates.  While supported by Speaker Pelosi, it is does not appear to have the 218 votes required for passage.
• Closed Trigger Option:  The trigger creates a Medicare-plus-five-percent rate if the negotiated rates fail to save enough money.
• Direct Public Plan:  The federal government would negotiate rates directly with insurance companies, as is done in the private market.

Though the Senate Finance Committee under Senator Max Baucus (D-MT) chose to exclude a government-run insurance plan, he offered this week that, “This issue is alive, and we’re looking at it.”  The end result is that Senate Majority Leader Harry Reid (D-NV) is weighing whether or not to let the issue live or die on the floor of the Senate in the coming weeks – just in time for Halloween.   The drift of the Senate debate was captured by the surprising shift of Senator Kent Conrad (D-ND) who in the Senate Finance debate, positioned himself against a public plan option.  This week he announced his willingness to support a compromised public option based on government negotiated rates with providers, as is done with private insurance.  The tricky part for Reid is to find the common ground by piecing together an alliance that he hopes will include both Republicans and Democrats – the consummate test of political skill in the current environment.  Snowe has declared she will not support a public option unless it contains the proverbial “trigger option.” 

As I said several weeks ago, the number of players involved in the healthcare reform debate will shift and expand.  Not to be outdone by her Senate colleague from Maine, Senator Susan Collins (R-ME) entered the fray.  As a former Commissioner with oversight responsibility for Maine’s Healthcare Insurance industry, Collins signaled that she plans to work with both sides of the aisle to pass Congressional reform efforts. She has been working with Senator Joe Lieberman (I-CT) on healthcare amendments while simultaneously holding dialogue with both Senate Majority Leader Reid and Senate Minority Leader Mitch McConnell (R-KY).  As one of the few Republicans invited to the White House to meet with Chief of Staff Rahm Emmanuel in recent months, Collins has shown her bipartisan credentials in the past by voting as only one of three Republicans in support of President Obama’s stimulus package.  As the Democrats begin to trick-or-treat for bipartisan support, don’t count on the death of the public option quite yet…

The debate on the public option also was not confined to the Senate.  Much to the pleasure of Speaker Nancy Pelosi (D-CA), the Congressional Budget Office on Tuesday reported back their analysis on the House Democrats’ healthcare plan that includes a public option. Surprising many across Washington, the CBO scored the bill at $871 billion, while reducing the federal deficit in the first 10 years.  This level of finance was significantly less than the $1.1 trillion price tag projected for the original House Tri-Committee bill passed in July, and more importantly, comes under the $900 billion cap set by President Obama.  Though the CBO report is unlikely to gain any Republican converts, it helped ameliorate some of the initial concerns over the House’s very high initial price.   Senator Reid is working closely with Speaker Nancy Pelosi (D-CA) so that the approach of the House and Senate is coordinated with similar versions of a public-option plan.  In fact, they made a joint appearance on Friday seeking support for the expanded public-option approach.

In speaking behind closed doors to the Democratic caucus earlier in the week, Speaker Pelosi voiced her desire to move forward with the more liberal version of the bill containing a government-run insurance coverage program tied to Medicare rates.  But the politics are clearly shifting from a House and a Senate approach to a Congressional approach.  While there is the potential of a clash between liberal and moderate Democrats who have varying opinions on the best approach, the final tally will require 218 votes in the House and 60 votes in the Senate.  Will the Senate Moderates and Blue Dog Democrats go along?  Will Snowe defect or acquiesce?  The questions remain open, but as I’ve said a number of times, the middle is where the action is.

We all need to turn our attention from the debate on the public option and focus on an equally contentious issue – how to secure the revenue for the healthcare reform package.  The Senate will not support the House’s so-called “millionaire’s tax,” a new taxation on millionaires.  And the House is unlikely to support an excise tax on more expensive “Cadillac” health-insurance plans.  It therefore appears that the Senate and House are headed for a collision course on the source of revenue for their respective plans – and in today’s world (especially with the looming federal deficit), no revenue means no progress.  In the final analysis, I predict the revenue question will loom large in the Senate-House reconciliation discussions and may represent the sticking point – not the public option.  While we will not know before Halloween, let’s hope for Thanksgiving…

Kevin Fickenscher, MD

The views and opinions expressed herein are my own and do not necessarily represent the views and opinions of Dell Perot Systems or its affiliates.