Guest Post: Robert Borosage, OEN

Private Muscle and the Public Option in Health Care

We're headed into the end game for health care reform. The president has put himself in the arena. The insurance lobby is unleashing the scare campaign. A strong bill will pass the House. But at this point, too many Senators are still standing in the way.

The reform includes a broad range of measures to extend and improve care and help curb rising costs, but the epicenter of the debate is over what is called the "public option." Health care reform will mandate businesses provide insurance or pay into a general fund. Individuals will be responsible to get health insurance, with subsidies for those that can't afford it. We'll able to retain the insurance we have, or have the choice of a range of plans, including a public option, modeled after Medicare. A strong public option, competing with private insurance, is key to helping to get costs under control.

And costs must be brought under control. We now spend nearly 50% more on health care per capita than any other country, with mediocre results. We ration care by price, with some 47 million Americans uninsured. It costs the rest of us about $1000 a year to pay for the price of their care when they are forced finally to check themselves into emergency rooms.

Tell stories, not statistics, the pollsters tell us. But after adjusting for inflation, health care costs have soared by 58% since 2000; while wages for most Americans were stagnant or lost ground. As the auto companies showed, businesses increasingly can't afford health care. Families find it unaffordable. Virtually the entire long term debt challenge facing the US government is from the projected rise of health care costs. Get health care costs under control, the US has no long term fiscal problem. Fail to get them under control, the costs will bankrupt the federal government, state governments, businesses that offer health care (and increasing numbers won't) and families. Reform that gets costs under control is imperative. There is no choice.

A key to getting costs under control is the public plan. It can take advantage of its purchasing power to gain cost reductions. It can model best care practices. Private insurance -- which in most localities translates into a couple of dominant providers that don't compete on price -- will be forced to measure up with greater efficiency, innovation, and cost savings techniques.

Yet the debate in the Senate has been fixated on how to weaken or abandon the public plan rather than strengthen it. Republicans, for the most part, have taken themselves out of the adult conversation. Like first generation robots, they endlessly repeat the exact same words crafted by Frank Luntz - "government takeover," "no choice of doctor," "bureaucrats not doctors prescribing medicine." It's frankly pathetic. We have no choice as a society but to figure out how to fix this - and Republican leaders have chosen simply to peddle lies and scare stories and absent themselves from any serious discussion.

A gaggle of Democratic Senators -- led by Senator Baucus and the so-called "moderate" Senators -- have publicly thrashed around for ways to weaken or gut the public option. Outside groups like the Third Way have provided guidelines for disemboweling it. Some have suggested putting it off until private insurance competition proves it can't get costs under control -- as if that hasn't been proven over the last decades. Baucus suggested decentralized local "co-ops" would serve as the public option -- an idea notable for being both unmanageable and ineffective. Even if a network of coops somehow arose to insure that people had an option, they wouldn't have the clout to hold costs down and force private insurance to compete.

Others, remarkably, have detailed ways to deprive the public option of the power to lower costs. They call for a "level playing field" with private insurance. The public plan can't be subsidized, can't use its buying power to lower costs, can't take advantage of lower administrative overhead.

This sounds silly. We face soaring health care costs that will literally cripple our future. Surely, no Senator concerned about the country would work to undermine the key idea that would help get a lid on costs. They wouldn't, as Barack Obama warned, just "create a system where the insurance companies have more customers on Uncle Sam's dime, but still fail to meet their responsibilities." If you assume that, you would be wrong. They've done it repeatedly in the past.

For example, early in Bush's first term, Republicans decided that passing a prescription drug benefit for seniors would help cement Karl Rove's permanent majority. The benefit would help 41 million Americans with a soaring cost of care not yet covered by Medicare. It would also create massive new market for the drug companies. And, of course, Medicare could do what governments across the world do -- use its buying power to lower the cost of the drugs.

Only, when Republicans passed the law -- in the dead of night, twisting arms to get it done -- it actually prohibited Medicare from negotiating a lower price for drugs. Don't worry, they argued, competition would lower drug costs (even as they banned the import of cheaper drugs from Canada or Mexico).

Why? Well, using government muscle violated "free market" sensibilities. More importantly, the drug companies have one of the most powerful lobbies on Capitol Hill. Billy Tauzin, the chair of the key House committee ushering the bill through, left soon after to get a two million dollar a year job as a head of Big PhRMA, the drug company lobby. Tom Scully, the administration's point person who helped secret the actual cost of the bill, was already negotiating his million dollar job as the debate was going on. In all, 15 congressional representatives, aides and administration officials involved in the debate left shortly thereafter to take jobs with the drug lobby. With a $9 billion increase in annual profits at stake, the drug industry got an amazing return on its investment.

Today, seniors pay 60% more for the same drugs than the price charged veterans becuse the Veteran's Administration does negotiate lower prices.

Extreme? Not really. The health insurance companies decided they should be allowed to compete with Medicare in providing health insurance options to seniors. Seniors would get more choice; Medicare, the bureaucratic behemoth, would get agile competition. Win, win, they argued, calling the program "Medicare Advantage."

Only the insurance companies couldn't compete with Medicare straight up. So they demanded subsidies from the government to enable them to vie with the Medicare program they described as horrendously inefficient, unpopular and bureaucratic.

And they stand to pocket an estimated $177 billion in excess payments over 10 years to compete with Medicare - subsidies that Obama would sensibly cut to help pay for health care reform.

Money talks. Nine Republican Senators on the key Senate Finance Committee wrote President Obama to say they would oppose any reform with a public plan. The Center for Responsive Politics reports that the nine had had pocketed $17.7 million in contributions from insurance and health care interests over the course of their careers.. click here

Not surprisingly, the 20 largest insurance and drug companies and their trade associations have pumped up their lobbying by 41% over last year -- with reported spending over $75 million in the first quarter alone.

This is the corruption of crony capitalism; a compromised congress using taxpayer's money to enrich entrenched interests. Only now, the cost of this in health care is not sustainable. Dramatic reform is vital or we all follow the auto companies and go belly up.

So if your Senator says he or she is opposed to a public option, or wants a weaker public option, or a non-profit co-op that isn't big government, or prates about the "government takeover of health care," about losing your choice of doctor, about bureaucrats not doctors prescribing medicine, don't fall for it. Either he or she is either utterly clueless or more likely is representing the interests of the industry, not the voters.

This business as usual is no longer affordable or acceptable. We shouldn't let cynicism lower our expectations. Soaring health care costs and the human tragedy of those without insurance can no longer be ignored. Reform can't be postponed. It is a stunning disservice that Republicans have taken themselves out of serious discussion. And it is an open scandal that Senators are catering to the private insurance industry that has profited from the problem rather than helping to solve it. We must expect more and demand more from those given the privilege to represent us.