By: Scarecrow Wednesday August 19, 2009 12:35 pm
There is something of value when elites tell you the truth, even while they're insulting you. So when the courageously anonymous *cough* senior White House official told the WaPo that anyone who thinks the Public Option (PO) -- the feature the President has been personally selling to the public and his supporters -- really is important must be from the misguided "left of the left," I assume it's a compliment.
Now comes The American Prospect's co-editor, Paul Starr, describing support for the PO as "overwrought" and telling us to "chill out." Shorter Starr: "You are and always have been dupes, you've been used, and now get back in your place, because the grownups need dupes like you."
Starr is not just making the usual point about how the PO has been so hobbled as to render it likely ineffective. He does that, but we already knew that and don't need the condescension. Instead he tells supporters they've been had, but that it's okay:
Because the public option has stood no realistic chance of being enacted in the form it was conceived, its main value all along this year has been as a bargaining chip. The proposal will now have served a valuable political purpose if, by sacrificing it, the White House is able to provide enough cover to Democratic senators from red states to get a bill out of the Senate Finance Committee, through the upper chamber, and into conference with the House.
As best I can tell, this also appears to be the White House view. The PO was put out there just to have something to give away to protect "Democratic senators from red states." Note that Starr doesn't condemn the WH for using its supporters so badly; he praises the WH, and is even cynical enough to encourage PO supporters to keep urging the PO so that the eventual give away will be more valuable and more credible when it actually occurs.
Neither Starr nor the WH apparently feels the need to explain why progressives should agree to be pawns, agree to be humiliated, compromised and then rolled, only to make life easier for conservadems who don't believe in democratic values like providing health care to everyone as a matter of right.
Starr also repeats misconceptions that have led folks ranging from otherwise informed Ezra Klein and Matthew Yglesias to the misinformed Joe Klein (see video) to confuse other features, such as the "exchanges," with the competitors in the exchange.
It simply hasn't penetrated with some folks that the critical reform that's important to the American people (now confirmed by Rasmussen) is not that there will be a place to make choices (the exchange) but having another, different choice to select (the PO) that doesn't function under the same perverse incentives that drive the private insurers.
Creating an exchange may be worth doing to lower information costs, but an exchange without the additional choice of a viable PO adds almost nothing of real value. Joe Klein thinks the exchange helps pool risk; uh, no, the mandates to purchase insurance is the mechanism that creates the pool to do that. And he thinks the exchange gives consumers market power -- nope -- and that consumers in the exchange would be able to negotiate terms with the insurers offering plans in the exchange -- not even close. All the exchange does is provide a place -- e.g., a website -- to provide information on what's available. It don't increase your leverage or enable you to negotiate with enhanced market power. Klein just makes that up.
In a PO-less exchange, all we get is a relatively small number of dominant private insurers that have a stranglehold on the private market. That "market" is not competitive, can never be competitive and will be dominated in most regions by near monopolies with price-fixing market power. But the private insurers will benefit from the mandates and federal subsidies. How is this reform?
So when Starr claims that . . .
As a result, individuals and small employer groups have an enormous amount to gain from a more efficient system. Creating that system -- a fairer and more efficient market for insurance -- is the main purpose of the exchanges and related reforms.
. . . he's talking through his hat. How many times do Krugman, DeLong, Stiglitz, Baker, et al have to explain there can't be an efficient market for insurance?
The whole point of "insurance reform" is to force the industry to change its destructive monopolistic behavior or be replaced. New regulation can start that, but he PO creates another choice the American people can select. Giving them that choice is a compromise between simply replacing the insurers outright and perpetuating/bailing them out. Single payer would replace them; mandates with federal subsidies would perpetuate/bail them out.
Starr also misses the forest when he discusses why the risk allocation provisions would not shield the PO from adverse selection -- as would occur if private insurers in the exchange can dump sicker patients that the PO must then cover:
Some provisions in reform legislation attempt to mitigate this risk. The most important of these calls for "risk adjusting" payments by the exchanges to the plans -- that is, providing a bonus to plans that enroll a sicker population and paying proportionately less to plans that enroll a healthier group. But it would be a mistake to think that such methods can completely avert the danger that the public plan will experience higher costs. As a result, just to break even, the public plan might require higher premiums than private insurers charge.
Think about what he's saying. Even though exchange rules prohibit private insurers from denying coverage to those with prior conditions, the insurers are so good at this they will do it anyway. So the PO might have to cover these people the insurers dump.
I agree that could happen, because regulations without an effective enforcement mechanism are never enough to overcome such powerful incentives to screw people. But if that is true, the same insurers will be even more likely to avoid (i.e, not market to) and dump high-risk patients in a PO-less exchange, but these sick people simply won't be able to get alternative coverage because there's no PO. That means the already less than universal coverage would simply fall short of it's already modest goals.
We know how the private insurers will behave; their profit-based incentive system and demands of Wall Street investors will dictate their actions. The key question reformers have to answer is whether we're going to continue shielding such behavior or begin to confront it. Will we start putting in place the mechanisms to replace them if -- as is likely -- they can't change their spots?
In the meantime, this "overwrought" advocate has no intention of "chilling out," just to help Rahmbo's strategy of screwing progressives and bailing out the insurance monopolists. If Rahm threatens to give away the PO, progressives should demand we not subsidize the private insurers. Hope I'm not being too subtle.
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