Public Plan Opposition Premature Before Policy Takes Shape, DeParle Says

White House advisors are urging legislators to focus on shaping the details of a public insurance option before taking a stance on whether it should be part of broad health reform legislation.

White House Office of Health Reform Director Nancy-Ann DeParle described her approach to managing the issue on Capitol Hill during an April 15 reporters' briefing sponsored by the Kaiser Family Foundation.

She noted the public plan option has become a flash point in discussions on health care reform, with some legislators wary even though the concept is still largely unformed.

"It's been interesting to me in talking to members of Congress who have raised questions about it to learn that when you start using examples, actually [the legislators] aren't so clear about what it is,' she said.

The administration links the public option with its basic goals: trying to lower costs and keeping the private sector "honest" and "competitive," DeParle said. Everyone agrees with those goals, DeParle noted, and the White House is open to different approaches on how to get there.

Start With A Plan With Low Overhead

She offered one basic principle for a public plan. It should be "something that's sponsored by the government and therefore has very low or almost non-existent administrative costs compared to others."

She noted there are a number of examples in the marketplace now that could serve as a model for a public plan, including state employee health plans. Those are sponsored by state governments, so have lower administrative costs and tend to be less expensive, but are often operated by private insurers.

In terms of payment approaches, she expressed a good deal of flexibility: the public plan could have rates that are "very similar" to private plans or, "it could have payment rates that are the same as Medicare."

For the pharma industry, the prospect of pricing controls is a major concern with the public option.

Private payers oppose the public option with arguments that Medicare payments are too low as it is, and widespread adoption of those rates in a public plan would shift even more costs to the private sector, driving those plans out of business.

An ¹ analysis released April 6 by the Lewin Group estimates that if Medicare payment levels are used in the public plan, monthly premiums could be 30 percent less than those for comparable private coverage ($761 per family vs. $970). The difference in premiums also reflects the lower administrative costs of a public option.

Assuming eligibility for the public plan is limited to small employers, individuals and the self-employed, the analysis suggests enrollment could reach 42.9 million, including 32 million who switched to the plan from private coverage.

The report is entitled "The Cost and Coverage Impacts of a Public Plan: Alternative Design Options." The Lewin Group is owned by UnitedHealth Group subsidiary Ingenix.

"Built-In Restraints" On Cutting Costs Too Low

Supporters of the public plan option maintain that it would not put private insurers out of business due to a number of "built-in restraints." The argument is included in a recent ² policy brief by University of California Berkeley Professor Jacob Hacker (³ (Also see "Public Health Plan’s Price-Setting Authority Emphasized In UC Berkeley/IAF Policy Brief" - Pink Sheet, 8 Apr, 2009.)).

As with Medicare, Hacker points out, the public plan would have to balance spending growth restraint with the duty to preserve access to needed care and the quality of that care.

In any event, "if the public plan would aggressively move too strongly on the cost containment side, individuals would be able to select from the private plan options," Hacker states.

Opposition in Congress to the public option has prompted stakeholder concerns that the issue will ultimately be the deal-breaker in health care reform. During the Kaiser briefing, DeParle was pressed on whether the president might be inclined to veto health care reform legislation if it did not include a public insurance plan, but she declined to discuss what might draw a presidential veto.

The question arose because the day before, at the World Health Care Congress in Washington, D.C., HHS' Dora Hughes appeared to suggest the White House might accept a health reform package that did not include a public option. Hughes is counselor for public health and science in the Office of the Secretary.

In a keynote address April 14, she said as long as health care reform legislation is aligned with the eight basic principles Obama has laid out, "he would not oppose a plan that did not have a public option."

The eight principles are part of the budget framework released by the White House in late February (⁴ (Also see "More Rebates For More Coverage: Budget Seeks Medicaid Rx Rebate Of 22%" - Pink Sheet, 2 Mar, 2009.), p. 5).

They include: making health coverage affordable by reducing waste and high administrative costs; aiming for universality; guaranteeing choice in physicians and plans; improving the quality of care through expanded use of health IT and data on the effectiveness of medical interventions; and maintaining long-term fiscal sustainability by reducing cost growth, improving productivity and dedicating additional sources of revenue.

Hughes noted that although the public plan option has been a key part of Obama's health reform platform, "he has continued to say that if there are other good plans out there, he will not be doctrinaire."

In one of her early appearances at a large public forum for health care stakeholders, Hughes emphasized the administration's willingness to work collaboratively on a health care reform plan, noting the White House has no "secret plan" in the works. She also reiterated the administration's determination to get a bill signed by the end of the year.

- Cathy Kelly ([email protected])