Krugman: Why the public option matters (calls out Ezra Klein)

[ProSense]

September 8, 2009, 4:56 pm

Why the public option matters

Most arguments against the public option are based either on deliberate misrepresentation of what that option would mean, or on remarkably thorough misunderstanding of the concept, which persists to a frustrating degree: I was really surprised to see Joe Klein worrying about the creation of a system in which doctors work directly for the government, British-style, when that has nothing whatsoever to do with the public option as proposed. (Forty years of Medicare haven’t turned the US into that kind of system — why would having a public plan change that?)

But what is one to make of the practical, political argument from the likes of Ezra Klein, who argue that any public plan actually included in legislation probably wouldn’t make that much difference, and that reform is worth having even without such a plan?

There are three reasons to be suspicious of that argument.

The first is that I suspect that Ezra and others understate the extent to which even a public plan with limited bargaining power will help hold down overall costs. Private insurers do pay providers more than Medicare does — but that’s only part of the reason Medicare has lower costs. There’s also the huge overhead of the private insurers, much of which involves marketing and attempts to cherry-pick clients — and even with community rating, some of that will still go on. A public plan would probably be able to attract clients with much less of that.

Second, a public plan would probably provide the only real competition in many markets.

Third — and this is where I am getting a very bad feeling about the idea of throwing in the towel on the public option — is the politics. Remember, to make reform work we have to have an individual mandate. And everything I see says that there will be a major backlash against the idea of forcing people to buy insurance from the existing companies. That backlash was part of what got Obama the nomination! Having the public option offers a defense against that backlash.

What worries me is not so much that the backlash would stop reform from passing, as that it would store up trouble for the not-too-distant future. Imagine that reform passes, but that premiums shoot up (or even keep rising at the rates of the past decade.) Then you could all too easily have many people blaming Obama et al for forcing them into this increasingly unaffordable system. A trigger might fix this — but the funny thing about such triggers is that they almost never get pulled.

Let me add a sort of larger point: aside from the essentially circular political arguments — centrist Democrats insisting that the public option must be dropped to get the votes of centrist Democrats — the argument against the public option boils down to the fact that it’s bad because it is, horrors, a government program. And sooner or later Democrats have to take a stand against Reaganism — against the presumption that if the government does it, it’s bad.

The Kleins are beginning to sound like tools.

[Justitia]

1. Thank you for this great article. Krugman finally gets it on the "mandate" part.

He even exclaims that this is part of what got Obama the nomination!

Whew!

And I'm glad he called out the Kleins. Joe - who cares what he says. Ezra surprises me w/his lack of information.

[Vinnie From Indy]

2. Alelujuah!

"Let me add a sort of larger point: aside from the essentially circular political arguments — centrist Democrats insisting that the public option must be dropped to get the votes of centrist Democrats — the argument against the public option boils down to the fact that it’s bad because it is, horrors, a government program. And sooner or later Democrats have to take a stand against Reaganism — against the presumption that if the government does it, it’s bad."


A very good observation. Dems that believe they can serve two masters on this issue are woefully, and sadly mistaken. I am certain that many Dems look at upsetting "the base" as not that big of a deal because they believe that we have no where to go and will not punish them in 2010. That is wrong on two counts. They will lose support and they will still be crucified by the Rush Limbaugh right regardless of how they vote.

[DrToast]

3. He's right on point three, but Klein is right on costs

The public option won't make that much of a difference in cost. However, the mandate issue is more than enough reason to have a public option.

[ProSense]

4. "The public option won't make that much of a difference in cost." BS

How much is "that much"?

Anyone pushing this line is completely disingenous. First of all the public option saves $150 billion.

[DrToast]

9. Speaking of disingenous

First of all the public option saves $150 billion.

It "saves" $150 billion versus providing subsidies to people to buy private insurance.

But either way, $150 billion is over 10 years, or $15 billion per year. That's a little more than 1/2% of annual health care spending in the US.

So yes, the public option doesn't make much of a difference in cost.

It's not even the most important cost-cutter in the bill. We get more cost savings from the MEDPAC reforms of Medicare.

[ProSense]

12. "either way, $150 billion is over 10 years, or $15 billion per year... little more than 1/2%" Hmmm

compared to the cost of leaving the system intact? Yeah, what the hell is $15 billion a year?

Also, the savings is for the government. What about the saving in premiums for individuals?

Does the fact that Baucus' plan has a $3,500 penalty offer any clues?

[Oregone]

14. Thats peanuts

$15 billion a year? Single-payer will save you $400 billion a year abouts.

:)

That said, of course it will save money on the people enrolled (simply due to overhead/rates). But if its only servicing 10 million people, and firewalling the rest out, it will not, under any circumstances, bring competition. Why? Because it will only have access to compete for a small sector of people (who may not be profitable to insure conventionally anyway), and the private market may opt to cede the market share in order to preserve their pricing model for the rest of the market. And it goes to follow, anyone who doesn't qualify to make it past the firewall simply wont see one iota of savings from its existence.

The "public option" may chalk itself up to be a political success, and important to the 10 million estimated to be covered by it, but for the hundreds of millions left in the cold without the option, it is insignificant in effect and savings.

[Eric J in MN]

5. I agree with Ezra Klein that a public option passed this year will...

...probably be too weak to accomplish much under its original limitations in which few people can choose it.

However, I would hope that there would be pressure in the years ahead to change the law to let more people choose it.

[ProSense]

6. "probably be too weak " is a bullshit speculative argument. n/t

[Eric J in MN]

8. The House bill limits...

...who can choose the public option to employers with under 25 employees* and individuals who don't have insurance through their employer.

The law would have to be changed to let any employer choose the public option for private insurance companies to worry that they will lose big clients if they raise premiums.

I don't know what the final bill will say, and so my prediction of a weak public option which needs to changed in future years for significant competition is speculation, but so is everyone else's commentary on the bill.

* - and bigger employers with special permission

[ProSense]

10. Nonsense. What does that have to do with the fact that it is still the primary cost-saving measure?

Health Insurance Exchange is opened to small employers first (those with 10 or fewer employees in the first year, and 20 or fewer in the second year) and to larger employers over time.

Offers opportunity to small employers through the Exchange to provide their employees with broad choices for coverage and to be able to eliminate the administrative costs of maintaining their own health plan contracts.

[Eric J in MN]

11. that quote may refer to big employers with special permission...

...being allowed to use the public option.

[ProSense]

15. Special permission? n/t

[Cha]

7. "probably too weak"...well, here's to that

speculation NOT HAPPENING.

[BootinUp]

13. Why aren't there more people like Krugman

writing for the major news organizations. Its like you have to go to his opinion columns to read about reality anymore. The rest is some weird parallel universe where facts don't matter.

[Cha]

16. How stupid do the bloodsucking insurance corps DINOs

think we are?

"Let me add a sort of larger point: aside from the essentially circular political arguments — centrist Democrats insisting that the public option must be dropped to get the votes of centrist Democrats — the argument against the public option boils down to the fact that it’s bad because it is, horrors, a government program. And sooner or later Democrats have to take a stand against Reaganism — against the presumption that if the government does it, it’s bad."

Social Security, Medicare, Police, Firemen, Teachers, etc, etc..

[Hello_Kitty]

17. Nice to see Krugman finally understands why mandate support helped to sink Hillary.

Third — and this is where I am getting a very bad feeling about the idea of throwing in the towel on the public option — is the politics. Remember, to make reform work we have to have an individual mandate. And everything I see says that there will be a major backlash against the idea of forcing people to buy insurance from the existing companies. That backlash was part of what got Obama the nomination! Having the public option offers a defense against that backlash.

Day late and a dollar short.

[grantcart]

18. Its nice to be in 100% agreement with Krugman on this one.

[depakid]

19. "The Kleins are beginning to sound like tools."

Neither of the two Klein's know much about health care economics or the implementation public policy.

[Hello_Kitty]

20. Upon further reflection, I'm going to call bullshit on Krugman

Let's look at this statement:

Third — and this is where I am getting a very bad feeling about the idea of throwing in the towel on the public option — is the politics. Remember, to make reform work we have to have an individual mandate. And everything I see says that there will be a major backlash against the idea of forcing people to buy insurance from the existing companies. That backlash was part of what got Obama the nomination! Having the public option offers a defense against that backlash.

What worries me is not so much that the backlash would stop reform from passing, as that it would store up trouble for the not-too-distant future. Imagine that reform passes, but that premiums shoot up (or even keep rising at the rates of the past decade.) Then you could all too easily have many people blaming Obama et al for forcing them into this increasingly unaffordable system. A trigger might fix this — but the funny thing about such triggers is that they almost never get pulled.

Okay, so if mandates make reform "work", why would we even have to worry about premiums rising at the rates of the past decade, much less shooting up higher than that? :shrug:

[ProSense]

22. "if mandates make reform "work", why would we even have to worry about premiums rising "

Mandates are about coverage, and have nothing to do with rising premiums.






edited typo.

[Hello_Kitty]

24. Exactly.

So proponents of mandates should stop claiming they will make reform "work". Part of reform is supposed to be making insurance more affordable for working Americans, right?

[Romulox]

21. Back in August (ancient history?) Krugman said that the Public Option wasn't crucial...

http://www.nytimes.com/2009/08/17/opinion/17krugman.html

But in his defense, the winds where blowing in a different direction at that time.

[ProSense]

23. Yeah, if this was Switzerland

Finally, the third route to universal coverage relies on private insurance companies, using a combination of regulation and subsidies to ensure that everyone is covered. Switzerland offers the clearest example: everyone is required to buy insurance, insurers can’t discriminate based on medical history or pre-existing conditions, and lower-income citizens get government help in paying for their policies.

In this country, the Massachusetts health reform more or less follows the Swiss model; costs are running higher than expected, but the reform has greatly reduced the number of uninsured. And the most common form of health insurance in America, employment-based coverage, actually has some “Swiss” aspects: to avoid making benefits taxable, employers have to follow rules that effectively rule out discrimination based on medical history and subsidize care for lower-wage workers.

<...>

So we can do this. At this point, all that stands in the way of universal health care in America are the greed of the medical-industrial complex, the lies of the right-wing propaganda machine, and the gullibility of voters who believe those lies.

[Romulox]

25. I know, I know. Everything looks bad when you remember it...

Krugman clearly was saying that the Swiss Plan, which has no public option, is the equivalent of Obama's plan at the time. And Krugman is trying to sell it. A couple weeks later, and the winds have obviously shifted. So it's not surprising Paul Krugman is changing his tune. Speaking sweet nothings to power is sort of his schtick.

So where does Obamacare fit into all this? Basically, it’s a plan to Swissify America, using regulation and subsidies to ensure universal coverage.

If we were starting from scratch we probably wouldn’t have chosen this route. True “socialized medicine” would undoubtedly cost less, and a straightforward extension of Medicare-type coverage to all Americans would probably be cheaper than a Swiss-style system. That’s why I and others believe that a true public option competing with private insurers is extremely important: otherwise, rising costs could all too easily undermine the whole effort.

But a Swiss-style system of universal coverage would be a vast improvement on what we have now. And we already know that such systems work.

[ProSense]

26. Krugman was doing analysis, he wasn't selling the Swiss plan. Or did you miss this

So where does Obamacare fit into all this? Basically, it’s a plan to Swissify America, using regulation and subsidies to ensure universal coverage.

If we were starting from scratch we probably wouldn’t have chosen this route. True “socialized medicine” would undoubtedly cost less, and a straightforward extension of Medicare-type coverage to all Americans would probably be cheaper than a Swiss-style system. That’s why I and others believe that a true public option competing with private insurers is extremely important: otherwise, rising costs could all too easily undermine the whole effort.

But a Swiss-style system of universal coverage would be a vast improvement on what we have now. And we already know that such systems work.

[Romulox]

27. He was justifying Obama's lack of support for a public option.

Any other reading is strained, to be generous.

[ProSense]

28. You said: "Krugman said that the Public Option wasn't crucial..." Obama's

proposal includes a public option. All the bills voted out of committee include a public option.

They are nothing like the Swiss system, and Krugman did not say it wasn't crucial to American health reform.

[Romulox]

29. LOL. Flat denial of of the plain meaning of words is *one* strategy...

not a very effective one. Good luck with your spin! :hi:

[ProSense]

30. "Flat denial of of the plain meaning of words is *one* strategy..." Then stop

using it:

You: Krugman said that the Public Option wasn't crucia...But in his defense, the winds where blowing in a different direction at that time.

Krugman from the link you provided:

That’s why I and others believe that a true public option competing with private insurers is extremely important: otherwise, rising costs could all too easily undermine the whole effort.