Obama: Soft on Health Insurance?

The early signs are worrying.

President Barack Obama

Is President Obama backing away from public health insurance?

It didn’t take long for the battle lines to be drawn. Even as Sen. Mitch McConnell, R-Ky., pronounced himself “encouraged by the bipartisan talks” at the March 5 White House forum on health care reform, the White House was reviewing a letter from McConnell; Orrin Hatch, R-Utah; Charles Grassley, R-Iowa; Mike Enzi, R-Wyo.; and Judd Gregg, R-N.H., stating their firm opposition to the public component to the health-care reform plan that Obama proposed during the campaign. As I explained last year (see “Obamacare: Better Than It Looks“), this public program would be offered only to the self-employed, to employees of small businesses, and to people whose employers didn’t give them health insurance. Even so, McConnell and Co. are dead set against it:

Forcing free market plans to compete with these government-run programs would create an un-level playing field and inevitably doom true competition. Ultimately, we would be left with a single government-run program controlling all of the market. This would take health care decisions out of doctors and patients and place them in the hands of another Washington bureaucracy.

Except for that last, scare-mongering part, I don’t disagree with the analysis. Employer-based health insurance is already withering away in the United States, in the sense both that employers are dropping health plans altogether and that over time the health plans they do offer cover less and less. (Raise your hand if your private health insurance coverage has improved during the past 10 years. Right. Didn’t think so.) A private health insurance industry that charges ever-higher premiums, imposes ever-higher deductibles, covers ever-fewer medical conditions, and engages in ever-more-creative chicanery to deny policyholders coverage will find it difficult to compete even with a mediocre government health program. To add insult to injury, it’s been demonstrated time and again that public health plans are more cost-effective than private health plans. Jacob Hacker, the Berkeley political scientist who devised the “public plan choice” option adopted first by John Edwards and later by Obama, observed in a recent paper that between 1997 and 2006, “health spending per enrollee (for comparable benefits) grew at 4.6 percent under Medicare, compared with 7.3 percent under private health insurance.” Given these realities (of which all parties to this discussion are well-aware), I don’t see an argument for adding health insurance to the growing list of private industry sectors that the federal government must prop up to save our sagging economy.

What did the president say in response? According to the New York Times and the Boston Globe, which had their eye on the ball (most other news organizations didn’t), he said, “I recognize the fear that if a public option is run through Washington and there are incentives to try to tamp down costs … private insurance plans might end up feeling overwhelmed.” I’m not sure what Obama meant by this, but if he meant that the federal government must put the financial health of insurance companies above the interests of the uninsured and the underinsured, then he’s being conciliatory to a nonsensical degree.

[Update, March 7: Ezra Klein of The American Prospect interpretedObama’s remarks quite differently as “a strong articulation of the case for a public plan.” Klein also supplied a transcript. Apparently the comment was in response to question from Grassley:

Sen. Grassley: The only thing that I would throw out for your consideration – and please don’t respond to this now, because I’m asking you just to think about it – there’s a lot of us that feel that the public option that the government is an unfair competitor and that we’re going to get an awful lot of crowd out, and we have to keep what we have now strong, and make it stronger.President Obama: Okay. Well, let me just—I’m not going to respond definitively. The thinking on the public option has been that it gives consumers more choices, and it helps give—keep the private sector honest, because there’s some competition out there. That’s been the thinking.I recognize, though, the fear that if a public option is run through Washington, and there are incentives to try to tamp down costs and—or at least what shows up on the books, and you’ve got the ability in Washington, apparently, to print money—that private insurance plans might end up feeling overwhelmed. So I recognize that there’s that concern. I think it’s a serious one and a real one. And we’ll make sure that it gets addressed, partly because I assume it will be very—be very hard to come out of committee unless we’re thinking about it a little bit. And so we want to make sure that that’s something that we pay attention to.

I still don’t understand what the president was talking about. I’m still worried that he’s preparing to sell out the public option. But I’d be delighted if Klein were proven right.]

Correction, March 7, 2009: An earlier version of this column went on to state, erroneously, that the health care page of the White House Web site makes no mention of the public component to Obama’s plan. In fact, it does.