What Happens If Liberal Senators Cash In Their Public Option Chips?

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The scuttle around Capitol Hill today is that public option devotees in the Senate are considering giving up the fight – in exchange for some rather hefty parting gifts. But before we get too far, let’s clear one thing up – again. The public option “alternative” – which would replace the opt-out public plan currently in the Senate bill – being negotiated by a group of 10 Democrats working behind closed doors is not a government-run health insurance plan. The group is floating an idea that would basically allow the federal Office of Personnel and Management to negotiate with private non-profit insurance plans on behalf of small groups and individuals. This would not constitute a true public option and would not accomplish what a public option was designed to do: leverage a large-scale national public insurance plan to drive down health care costs and force private insurers to keep rates low. Politico’s Ben Smith has the best evidence I’ve seen that this new proposal lacks teeth. Here’s what an “insurance industry insider” told him about the new plan:

“We WIN,” the insider writes. “Administered by private insurance companies. No government funding. No government insurance competitor.”

Even though debate on the Senate floor is ongoing, with amendments being offered and voted on, health reform is, in a sense, stalled right now over the public option. Majority Leader Harry Reid hasn’t figured out a formula to get the 60 votes he needs to pass his health reform bill, with enough Democrats digging their heels in for or against the public option. So it’s deal-making time.

Several well-informed bloggers, including the Washington Post’s Ezra Klein, have reported today that the Democratic senators negotiating behind closed doors are considering lowering the age at which Americans qualify for Medicare. The idea here would be to give liberals something huge in exchange for asking them to agree to a health reform bill without a real public option. Expanding Medicare eligibility would have a massive impact on the health reform bill and the U.S. health care system. Even if newly eligible Americans would have to pay premiums to participate in Medicare, as Sam Stein at the Huffington Post is reporting, many crucial details could make or break this approach. Here are just three of the monumentally important things to consider:

The age at which people would be allowed to qualify for Medicare. If 55-65 or 60-65-year-olds opted to buy in to Medicare instead of purchasing private insurance, this would entirely change the risk pool both inside and outside of Medicare. Many other portions of the health care bill would be affected, including rating bands that determine how much private insurers can base premium rates on age. See here for more.

The affect on providers. Medicare reimbursement rates are lower than what private insurance pays in most cases. Most doctors still accept Medicare patients simply because with some 37 million Americans enrolled in the program, they can’t afford to turn these people away. But if the Medicare rolls expanded further, doctors could see their incomes drop.

The affect on the Medicare program. Even with the cuts to the program called for the in the Senate health reform bill, Medicare is not on the surest of footing. Expanding the program to bring in a whole new group of near elderly seems unlikely to improve its chances for solvency. But that potential problem could be mitigated by charging newly eligible Americans substantial premiums.

In short, pulling the public option out of the Senate bill and adding in a massive expansion of Medicare could change the tenor of the debate in any number of unpredictable ways. Trying to gauge potential reactions is part of what the group of 10 Democratic senators is doing now – letting a few details and ideas creep out here and there. But not everyone appears to be so fond of leaks and hints. Since I started writing this post, John D. Rockefeller, one of the Senate’s most ardent public option champions and one of the 10 negotiators, sent out a press release announcing he filed an amendment – to strengthen the public option already in the bill.