The Health Reform Vampire

The seemingly endless debate among Democrats about whether or not to include a public plan in health care reform finally ended in December with the exclusion of a public plan from the Senate’s bill.  Now, unfortunately, it seems that the public plan may be coming back from the dead.  Twenty-two senators have signed a letter urging Majority Leader Reid to include a public plan in the Democrats’ health reform legislation, expected to pass the Senate via reconciliation if 50 votes can be found to support it.

Ezra Klein discusses the political advantages and disadvantages of adding a public plan to the bill.  Very briefly, it could make the bill more popular, especially with the Democratic base, but it could confuse and slow down a process that has already taken way too long.  Jonathan Cohn provides more detailed reporting here and draws essentially the same conclusion with more emphasis on the worry side.  These political reads seem mostly right, but they both express ambivalence because they say a public plan would improve the bill on policy grounds while reducing the chances of success in the end.  However, while the political benefits may be real, the policy value of a public plan is likely to be an illusion.

As I wrote in a column last May with Bryan Dowd and Roger Feldman, the real-world implementation of a public plan is unlikely to deliver the lower costs and improved efficiency imagined by its proponents.  Drawing on years of experience with Medicare policy, we observed that public plans (like Medicare) are too subject to political meddling from Congress to be effective purchasers of services from well organized groups like doctors, hospitals, and equipment manufacturers.  These providers, enthusiastically enabled by members of Congress, routinely overturn or block efforts by Medicare administrators to use sensible acquisition procedures like competitive bidding.  There is no reason to think a new public plan would be any more successful against these forces than the old one has been.  This is the most important reason why the Congressional Budget Office estimated almost no budget impact for the public plan included in the House bill.

As we begin the make or break push to pass health reform, resistance will be strong and the degree of difficulty is high.  The public plan divides the Democratic caucus and alienates important interest groups including hospitals and physicians.  It sucks the life out of the reform effort without holding any realistic prospect of worthwhile policy change.  It may look attractive to some at first glance, but relationships with the undead never work out well in the end.

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