Public Option vs. Medicare for All: The Coming Debate Over Health Care Justice

Part of the Series

Fighting for Our Lives: The Movement for Medicare for All

This piece is part of Fighting for Our Lives: The Movement for Medicare for All, a Truthout original series.

Progressives have been largely united in 2017 with efforts to stop GOP health reform efforts. Should the Democratic Party win back power, however, the battle over how to proceed with health care reform will likely be a contentious one. At the heart of this debate will be the political and policy merits of the “public option” as opposed to pursuing Medicare for All, or single-payer health care.

The public option, which gained prominence during the Obamacare debates, gives Americans the option of buying into a public plan (often in the form of a buy-in to Medicare) that can compete with private plans. Unlike Medicare for All, the public option would not create universal care nor end the commodification of health care. But many liberals support it as an incremental step in the right direction, and see it as more politically viable than single-payer.

“I support a public option” has become the go-to response for Democrats opposed to single-payer health care.

The parameters of this inevitable struggle were made clearer last week. Centrist Senate Democrats Tim Kaine (Virginia) and Michael Bennett (Colorado) — who declined to co-sponsor Bernie Sanders’ Medicare for All legislation — offered their own version of the “public option.” Their bill allows some people over 55 to buy into Medicare, according to The Washington Post, starting in rural areas, and expanding to the rest of the nation over time. The press described it as a “realistic and politically viable” alternative to Sanders’s bill, which was predictably treated as utopian nonsense by the dominant media.

Some liberals responded with great enthusiasm. “The Road to Single-Payer is Being Carved by Two Centrist Democrats,” exclaimed a headline on ThinkProgress, the blog of the Center for American Progress. “Progressives are winning the fight for the soul of the party.”

But the viability of the “public option” is very much disputed among health care advocates, who suggest the policy would be weak at best, and counterproductive at worst. The effort, they argue, would be a waste of political capital and have negative, if unintended, consequences, that will set the single-payer movement back instead of forward.

“We have been doing incrementalism for 60 years. We did it with Medicare and Medicaid,” said Ida Hellander, a long-time staffer for Physicians for a National Health Program (PNHP), in an interview with Truthout. “Isn’t it time we just went the whole way and covered everyone?”

The debate is an important one. Numerous polls show Americans worry more about health care than any other public concern. Guaranteeing health care to all should be a top priority for progressives in the coming years. Will the public option help the US reach this goal, and if so, how? Is a health care guarantee a goal that most Democrats truly share, even on an idealistic level? (Kaine, for one, says he’d rather aim for “more choices.”)

Progressives will need to think carefully about these questions if and when the Democrats pursue health care reform again.

How the Public Option Became the Democrats’ Go-To Alternative

Whether one supports Kaine’s bill or not, few will deny that its existence reflects a considerable shift in Democratic Party politics in the last decade. When the Affordable Care Act (ACA) was being debated, the public option was opposed by the party’s conservative wing. Even many who claimed to support it — notably President Obama — did little to push for it. Progressives were adamant about its inclusion for much of the debate. The drug and health insurance industry opposed it militantly and still does.

But aggressive grassroots support for single-payer has grown since the Bernie Sanders campaign, and it has been further fueled by the massive grassroots opposition to the GOP bills to gut Medicaid. These factors have helped lead to a record 120 co-sponsors for Rep. John Conyers’s (MI) single-payer bill in the House, as well as 16 co-sponsors for Sanders’s similar bill in the Senate. Some of the co-sponsors are considered potential presidential contenders, such as Sens. Kamala Harris (CA), Cory Booker (NJ) and Elizabeth Warren (MA).

Even some well-known party centrists have voiced support for single-payer: Former Senator and Finance Committee Chair Max Baucus, for example, has now come out in favor of the policy.

Those Democrats who remain opposed to single-payer need an answer to a progressive base which has taken to town hall meetings to pressure their representatives on health care. “I support a public option,” has largely been that answer. In the eight years since the ACA debates, conservative Democrats have gone from opposing the public option to using it as their primary counter to Medicare for All.

Among those who adopt this position are Sens. Kaine, Bennett, Claire McCaskill (MO), Dianne Feinstein (CA) and Sherrod Brown (OH), to name a few. During the presidential campaign, Hillary Clinton also took the public option tack. Each of these politicians, according to data from the Center for Responsive Politics, has received large donations from the for-profit health care and drug industries (Kaine, Bennett, McCaskill, Feinstein, Brown, Clinton).

The Democratic National Committee, which refused to put Medicare for All in the party platform in 2016, also receives large donations from the insurance and pharmaceutical industries. Committee member Neera Tanden mentioned the public option three times as she spoke against the amendment to make Medicare for All part of the party’s official (but non-binding) platform.

In addition to the single-payer movement pressuring Democrats into a more progressive posture, Republican opposition to the ACA (a conservative policy which, infamously, was first introduced by the Heritage Foundation) is contributing to the shift.

“There is a realization that the market-style approach is not going to work,” said Jon Walker, who writes about health care policy for Shadowproof, the Intercept and elsewhere, in an interview with Truthout. “We can’t get insurers on board, we can’t get Republicans on board, they have made that clear. We are seeing a shift toward public solutions,”

So, Democrats must navigate health policy without alienating the base. An April 2017 Economist/YouGov poll showed 75 percent of Democrats support Medicare for All. The public option is almost as popular with 70 percent support. Even without accounting for party, both policies have a majority of public support.

“We know the wind is shifting and the politics are turning in favor of Medicare for All,” said Adam Gaffney, a Harvard Medical School instructor and critic of the public option, in an interview with Truthout. “In time, we could even have a pro-single-payer president.”

Even with a single-payer president, it is likely that Democrats will push for more incremental reforms. Even Sanders has publicly embraced the public option approach as a potential first step. Therefore, it is necessary to understand and pay close attention to what each of these proposals will actually do, in order to make informed choices about the route to truly universal health care.

The Policy Implications of the Public Option

There are infinite variables that could impact what kind of pubic option could become law. In 2013, the Congressional Budget Office (CBO) scored one version of a public option and found it would have “minimal impacts” on the number of uninsured Americans.

One reason for this is because the specific policy scored by CBO was limited to just a sliver of the country — those on the (relatively small) individual market who don’t already have insurance would be eligible to buy into the plan via the Obamacare exchanges. The CBO predicted about 2.5 million (of 7 million eligible people) would be covered by the public option, less than 1 percent of the country. This is not unique to public option proposals. Thus far, the major public option or Medicare buy-in proposals have been open to a small portion of the population, limited by factors, such as age, access to employer-based care and, in the case of Kaine’s bill, geographic location. Broadly speaking, the “option” is usually just available to people on the individual market, often limited to people ages 55-64.

The limited nature of these policies is not always made clear when politicians and pundits cite support for a public option. This shows how radically different this proposal is, when compared with single-payer. Single-payer would insure 100 percent of the population. The public option would likely only be open to a few million people. Unless the kind of public option pushed by Democrats is expanded widely, many advocates fear it will have rather limited impacts on health care for most people in the US.

Some are more optimistic. Once a public option is in place, Walker argues, more expansive possibilities can be pursued. “If we had a public option in Oregon, we could fight to make it so only the public option is on the exchanges,” he offered as an example. “It can at least be a useful tool for further progress.”

While many single-payer advocates are skeptical of its impacts, there is no denying the public option proposal makes the for-profit health industry nervous.

“We need proven solutions that will make health care more affordable for everyone,” said Marilyn Tavenner, president of America’s Health Insurance Plans (AHIP), in response to a public option proposal in August. “A public option is not one of those solutions.” Tavenner was the administrator for the Centers for Medicare and Medicaid under Obama, before accepting the job as the head of the most powerful lobby for private health insurers.

Will the Public Option Attract “Too Many” High-Risk Patients?

One potential effect of the public option poses less of a concern to private insurers — and a serious concern to progressive health care advocates. That element is adverse selection, or a disproportionate number of sick or unhealthy people flocking to the public plan. This would make the public plan more expensive and less efficient, to the benefit of private plans who would lose many of their highest-risk patients.

“Adverse selection is the main consideration that many people don’t seem willing to address,” said Ted Marmor of Yale University, in an interview with Truthout. “People see the word ‘public’ and they get their jollies, but they don’t understand why the public option won’t work.”

Marmor, author of Social Insurance: America’s Neglected Heritage and Contested Future, argues a more efficient alternative is simply lowering the age of enrollment to 55 (and eventually zero) across the board. Lowering the Medicare age, without an option or means testing, would save money and avoid adverse selection, he said, since the entire risk pool of people over 55 would be included.

Even experts who favor a public option acknowledge the problem of adverse selection. “We find that adverse selection eliminates any market for a Medicare buy-in if it is offered as an unsubsidized option to individual private health insurance,” concluded a 2012 report from the National Bureau of Economic Research. “If this type of program is to have any impact on the number of the uninsured it must either be mandatory for those without another form of insurance or partially subsidized by the government to make it more attractive to healthy individuals.”

Gary D. Hansen, one of the authors of the report, told Truthout that a Medicare buy-in or public option is a useful reform if subsidies are used to counter adverse selection. “Given that demand for health insurance is high for those 55 and over, our study finds that the subsidies needed to induce people to enroll in the plan do not need to be that high,” said Hansen, a professor of Economics from UCLA.

When asked if lowering the age without the option would solve adverse selection, he said yes, but noted it would be more expensive for the government than the subsidy he proposes. “To me, the major problem with health insurance reform is finding a solution that doesn’t add significantly to the government budget and requires significant new tax revenue,” he said.

The Politics of the Public Option

Indeed, the fear of requiring “significant” tax revenue is at the heart of much of the advocacy of a public option over single-payer. However, single-payer is far more cost-efficient than a public option. This is because, among other reasons, a nation-wide risk pool gives the government more bargaining power when negotiating drug prices, and cuts administrative waste. Every nation in the Organization for Economic Cooperation and Development (OECD), except the US, has a national risk pool and guaranteed universal care. As of 2012, the average OECD country spends $3,268 per capita on health care and 9.5 percent of its GDP on health expenses — about half of what the US spends.

Yet, despite saving money overall, Medicare for All does require a dreaded tax increase — a prospect that makes legislators extremely nervous. As a result, the public option is sold by the corporate press as the practical alternative to single-payer. “Approaching the goal [of universal care] incrementally may seem cowardly to some. But in politics brains really do matter as much as spine,” observed Ed Kilgore in New York magazine. Kilgore did mention that Kaine’s plan was drab and complex, but did not mention adverse selection or its failure to significantly bend the cost curve. For someone emphasizing brain power and practicality, these serious policy concerns would seem to warrant a brief acknowledgement.

As Benjamin Day of Healthcare-Now! tells Truthout, the public option is not as pragmatic as its advocates suggest. This is largely due to the lack of real savings offered by the policy.

“Incrementalism is fine most of the time, but it doesn’t work especially well in health care,” he said. “This is because one of the key benefits to Medicare for All is the cost efficiency, and the public option and other incremental approaches don’t address the cost issue very well.”

Moreover, the odds of a strong public option passing are not good if it is the starting point in negotiations. Whether progressives want single-payer or a public option, accomplishing either goal will depend on a vibrant movement that is pushing for nothing short of Medicare for All. Democrats may then feel compelled to put teeth into any incremental plans.

The message of incrementalism also seems unlikely to help Democrats win back Congress or the presidency. “Medicare for All” and “Health Care is a Human Right,” on the other hand, are resonating themes. They function as both appeals to emotion and also very real goals based on policies that are international norms. The Kaine/Bennett message is less inspiring: “Medicare for a fraction of people between the ages of 55-64 who live in rural areas, and have no access to employer-based care.”

That is a policy, and a message, which is not likely to move the needle much in the struggle for health care justice.