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Democrats, GOP draw battle lines on healthcare plan

By Lisa Wangsness
Globe Staff / March 15, 2009
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WASHINGTON - Democrats and Republicans are battling over what is shaping up to be one of the most contentious issues in the healthcare debate: whether the government should establish a Medicare-style public insurance option for people under 65.

Last week, the liberal activist group MoveOn.org began running TV ads accusing insurers of opposing a government plan, which advocates say could provide cheap, portable coverage for anyone who buys it, out of fear that it could undercut profits.

"Don't let them get away with it," the ad warns.

Meanwhile, top Republican senators declared in a letter to President Obama last week that they would oppose any healthcare bill with a public plan because it would force insurers to compete on an "unlevel playing field" with the government, which could theoretically set artificially low prices and subsidize any shortfalls with taxpayers' money.

The issue will be among the most difficult Obama will have to address as he seeks a sweeping healthcare overhaul designed to lower costs, improve quality, and provide coverage for some 46 million uninsured. He has promised voters both a choice between private and public health insurance - and that his healthcare plan will be bipartisan.

"Right now, there is no middle ground," said John Rother, policy director for the AARP.

Interest groups have begun digging in. Conservatives, the insurance industry, and the small business lobby regard a public insurance plan as anathema, contending that it would drive private insurers out of business, leading to a Canadian-style single-payer plan.

Liberal groups and unions passionately support it, saying it would offer a plan with much lower administrative costs and greater stability, and could help drive systemwide innovations, such as the implementation of electronic health records.

Doctors and hospitals, whose income could be profoundly affected by dramatic changes in the insurance market, are waiting to take sides until there is an actual proposal with details about how a public plan would work and how it would fit into the overall system.

At the White House summit on healthcare last week, Obama tried to strike a diplomatic tone, saying he understood both sides: Those who favor a public plan saw it as a way to "keep the private sector honest," he said, but insurers might "feel overwhelmed" by a government-run plan, which he said is a serious concern. But he did not suggest a way to reach a compromise.

Without a bill on the table, Rother said, all the sniping back and forth is "almost comical" since no one has laid out how such a plan would work - who it would cover, how big it would be, and how it would relate to private insurers. Yet with so much at stake, the temperature of the debate is rising, though a bill is not expected until late spring.

Bryan Dowd, a health policy professor at the University of Minnesota, said years of fights over the Medicare program illustrate how politics can disrupt a hybrid public-private system. In the portion of Medicare that covers outpatient treatment, patients can choose either the traditional, government-run Medicare or a private plan.

For years, he said, Democrats and many Republicans have succumbed to political pressure to keep the public plan premiums lower through subsidies, contributing to huge government cost overruns. In addition, Republicans and many Democrats voted to provide subsidies to private insurers in certain parts of the country to help them provide better benefits. Obama has provoked an outcry from insurers by proposing to dramatically lower those extra payments.

Both parties, Dowd said, are "running the program into the ground while squabbling over whether [it should be] all private or all public."

But Jacob Hacker, a political science professor at UC Berkeley, believes there are ways of setting up a hybrid system that allows both public and private plans to thrive. An outside body could set rules for both types of plans to follow and prevent the public plan from drawing on tax dollars to stay solvent, or from paying doctors unfairly low rates, he said. While a public plan might offer lower premiums and better portability, he said, private plans could compete by tailoring benefits to better suit customers' needs, or by providing smaller, higher-quality networks of providers.

"I see a public-private competitive system as one that allows you to have something of the best of both worlds," he said.

James Roosevelt Jr., the president and chief executive of Tufts Health Plan, said the Massachusetts system offers a glimpse of how private insurers could accomplish most of the goals of having a public plan: The federal government could set criteria for a basic benefits package, make it available to anyone in the country, and forbid insurers from discrimination against the sick while requiring everyone to buy insurance. Insurers would design new products, tailored to the government's criteria, and compete for customers, who would have stable and affordable insurance no matter where they lived.

But many public-plan proponents say the Massachusetts law enriches insurers at the expense of middle-class people who cannot afford the insurance but are forced to buy it anyway.

"Our position is, let's compete," said Representative Eric Massa, a Democrat from New York and a strong supporter of public plans. "If your product is better, people will flock to you."

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