PI Original Adam Doster Thursday May 7th, 2009, 11:18am

Roskam's Public Plan Confusion

With the battle over health care reform looming, Republicans in Washington are drawing a line in the sand: any reform bill that includes a "public plan" won't get GOP support. On CSPAN's Washington Journal
this morning, Rep. Peter Roskam articulated this concern ...

With the battle over health care reform looming, Republicans in Washington are drawing a line in the sand: any reform bill that includes a "public plan" won't get GOP support. On CSPAN's Washington Journal this morning, Rep. Peter Roskam articulated this concern when asked about his priorities on the Ways and Means committee. But watching his response, it's clear that Roskam either does not understand how a public plan would work or is deliberately misleading Americans about its effects.

Citing a recent study by the Lewin Group (PDF), Roskam asserted that one unintended consequence of a government plan would be that millions of Americans would be "crowded out" of their current insurance coverage. Watch it here:


I think the challenge moving forward is -- and the question I asked the secretary was -- what is the impact on people who have private health insurance right now and are satisfied with it? There is one study from the Lewin Group that says 120 million people will be crowded out and will ultimately not enjoy that private coverage. And that’s one of those unintended consequences that I think needs to be brought up and answered during this health care debate.

Actually, congressman, those are the intended consequences of the public plan. Americans struggling to pay skyrocketing premiums would voluntarily switch to the cheaper public option, not be "crowded out" of their current insurance.

Lewin analyzed a few versions of a generic national public plan. These included one in which all employers and individuals could buy into a public plan that paid Medicare’s rates to doctors and hospitals. Medicare premiums are 32 percent lower than those of private insurers. They also test a public plan that needs to negotiate with hospitals and drug companies just like any other insurance plan. The latter version would still be cheaper -- administrative efficiencies would allow the private plan to offer premiums 9 percent lower than private insurance. Lewin says 20 million would enroll, with 12 million of those transferring over from the private system. Under the "single-payer lite version" -- a much cheaper option than both the negotiated public plan and the current system -- 131 million Americans would enroll, 119 million of whom would move from the private market.

Now, it's true that the analysis isn't perfect. Jacob Hacker argues that the enrollment figures are inflated because, contrary to the hybrid plan's proposed by most left-of-center reformers, Lewin assumes new rules would be imposed on employment-based health insurance that would increase the cost for some firms of providing coverage. Here is Hacker's take:

By contrast, all the proposals that are actually on the agenda today have employers  buy into an “exchange” that has both a public plan and private plans as a choice within it. Moreover, all these proposals have at least large employers enroll their workers in the exchange by paying a payroll-based contribution, not the public plan’s premium. Finally, none of these proposals includes substantial new regulations on employment-based health insurance.

Even though the enrollment numbers aren't quite accurate, there is still a key takeaway embedded in the data. Like other analyses before it, Lewin indicates that by competing with private plans, either iteration of the public plan will still net huge savings for consumers. As Ezra Klein writes, "even absent government bargaining power, the administrative efficiencies gives consumers a nine percent break on their premiums. Consumers, I imagine, would like the choice to save nine percent."

Choice is the key word. By framing enrollment in the public option as "crowding out," Roskam completely misrepresents the mechanics at work. Nobody will lose their coverage because the public option exists. Even people currently insured will be give a option by their employers to stay with what they have or move onto the government's plan. And because premiums will be more affordable -- and the system will be more efficient -- you can bet many will run to the public alternative. It's simple competition. You'd think a fiscal conservative like Roskam would value that.

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