Giffords’ Third Way Health Care Plan Aims to Torpedo Public Option

By Michael Bryan

I have suspected strongly even before Gabby Giffords was elected that she was only luke-warm to a universal health care plan. But I didn't suspect she might be actively hostile to the idea of doing anything but continuing the status quo, which shuts millions of Americans out of the health care system and allows a medical inflation rate three times that of the rest of the economy, threatening to bankrupt us all. The draft memo [PDF Download] of the Third Way, a centrist organization of which Giffords is a chairperson, on a "hybrid" health care plan has caused me to reconsider: this memo is evidence that Giffords wants to actively hinder the development of a viable public health care option.

The draft signals it's hostile intent to Obama's stated preference for a public option, and reform in general, by using the characters the health care industry used to help torpedo reform efforts in 1994 under Clinton: Harry and Louise are back. They are used as a synecdoche for the middle class throughout the document.

Third Way is careful not to overtly state their hostility to the public plan, instead they seek to kill it by a thousand small wounds, and a few well-disguised thrusts at the heart.

The second paragraph begins to tip the Third Way's hand:"But there is a very real danger that an overly intrusive public plan can ultimately undermine these very goals and destabilize the private-sector coverage that middle-class Americans—i.e., Harry and Louise—depend on and are largely satisfied with." The fear of a public plan is right up front – it could 'destabilize' the private sector that Harry and Louise were so fond of.

What does that mean? It means that a public option could drive real savings and cut into the fat profits of private insurance providers. What must be done to ensure that the private sector is protected? Essentially, the public plan must be destroyed. The question the memo really addresses is how to do that without looking like that's what Third Wayers are up to.

First the memo minimizes the importance of a public plan by claiming that it's political utility has already expired. The memo claims that the purpose of the public plan was to hold the private health sector's feet to the fire, and that it has already succeeded in extracting a promise of 2 trillion in savings over the next decade (voluntary, with no real cost accounting to ensure the goal is met, mind you…) and to not deny coverage or increase premiums due to pre-existing conditions. Since the industry has agreed to these measures, the public plan has met its political purpose, and the clear implication is that it may therefore be jettisoned.

The Third Way describes their neutered public plan as a 'hybrid' of the public and private sectors. What they actually want is a chimera that is so unfocused and devoid of power that it can be smothered in the cradle. The plan specifies four elements: a rejection of price-controls, a level playing field, current coverage stability, and cost containment measures.

The strongest emphasis throughout the memo is a rejection of 'price-controls' and 'rate setting' powers in the public plan. In other words, the public plan must operate like any other insurance company by negotiating with providers individually – which begs the question, why have a public option if it can't conduct business like Medicare to reduce costs? By insisting on this condition for a public plan, the Third Way seeks to destroy most of the utility of a public plan at the outset. The memo insists that taking price-controls off the table de-fangs conservative criticism and allows broader appeal. Well, 80% of Americans already want a public plan, how much broader appeal do you need? Oh, I suppose you could appeal to the Republicans and the private health care industry: the two players who stand to lose the most by any actual change in the status quo; the Republicans because real reform would be to Democrats much what the New Deal was politically, and the insurance industry because real reform would be what asteroids were to the dinosaurs. Nothing short of killing the public option will satisfy either of those constituencies, and that's apparently what Third Way wants to give them.

Next, the memo insists on a level playing field. This essentially means that the public plan must operate pretty much exactly like a private insurance company – which kind of misses the whole point of a public plan. The power of a public plan is the ability to pool together a broad demographic cross-section, including, but not at all limited to, traditionally under-served populations. That market power allows cost savings through better prevention, greater market power (i.e. the ability to set prices), and the rational study of cost-effectiveness of treatments. The memo cuts this promise of a public plan off at the knees.

First, they insist that the government can't utilize other government health programs to boost provider participation. For example, the government can't tell a provider that if they want to be a Medicare provider they must also accept the public plan, vastly reducing the plan's utility to consumers.

Next is a shot at gutting reform through a requirement that a public plan have the same reserve requirements as a private insurer. Doesn't sound like a big deal, but it makes launching and running a public option program vastly more expensive, and because a public plan would be backed by the government's good faith and credit, it is wholly unnecessary to protect those in the public plan. The purpose of reserves is to prevent default of obligations, generally not a problem experienced by government programs.

Taking the financial shot at the plan further, they insist that the public plan self-finance. Not even private insurers do that. Private insurance is heavily subsidized by employers and by generous tax credits to those employers. If the private market had to entirely self-finance, it would collapse immediately. No tax subsidy for the public plan means that premiums would be very high. It is essentially HIPPA write large, and if you have ever needed a HIPPA policy, you know how much such plans cost.

Assuming that subsidies are in the plan despite the Third Wayers' efforts, they want parity for the private insurance sector. That's right, they insist that those who have private insurance get the same subsidies as those in the public plan. Again, this greatly inflates the cost to the treasury of having a public plan, and tilts the field toward private insurance in the name of a level field.

The next attack is an attempt to severely limit the scope of the public option: "the hybrid should remain limited in scope. After all, it’s an experiment. It has no precedent in the current health care system, and it is critical that it not undermine a key promise of reform that people will be able to keep their own insurance. It is not a gateway toward a single-payer system, which is by definition highly disruptive. Nor should it drive up the cost of private insurance for Harry and Louise by shifting the cost of health care to the private sector." It has no precedent? How about Medicare/Medicaid/Tricare and Congress' own coverage? How about every other industrial nation on Earth? Don't those count as precedents? Again, the overweening concern not to discomfit the private health insurers is the real concern. God forbid a public option prove so much superior to private insurance that it drives the private sector out of business, saves the nation hundreds of billions that would otherwise end up as the profits for those private insurance parasites, and leads to a single-payer system – the horror!

The next 'improvement' is that the public plan be limited to "those employed in small businesses with 10 employees or less, those in the individual market, and those who lack insurance. Another option might to limit the geographic scope of the plan in its initial phases until its worth is demonstrated." Under those conditions you will never see significant cost savings and thus the public plan's 'worth' will never be demonstrated. Imagine that. How prophetic the Third Way was!

Finally, after loading unsustainable and unnecessary financial burdens onto the public plan, and eviscerating it by constraints, the Third Way insists that should the public plan falter (as designed), the ability of Congress to set it right must be restricted. They would make "any federal bailout of the hybrid in the event of a bankruptcy or shortfall subject to procedural hurdles such as a supermajority vote requirement in Congress." Limit it, de-fang it, tilt the field against it, burden it with financial restraints, then kill it by giving Republicans a veto if there is any sign of trouble. Brilliant plan… for anyone who doesn't want a public option at all.

Now, after all that, just in case it works, let's sunset the whole damn thing after four years so that we have to fight this same battle all over again. That's right. At the end of the memo, almost as an afterthought, the Third Way suggests the whole thing automatically sunset after just four years unless it can demonstrate "solid financial performance and positive impacts on market stability," whatever that means. How's that for the 'stability' they say they value so highly? How about a little of that stability for the folks who join the public plan?

It should be clear to any careful reader of the Third Way's plan that its sponsors are profoundly hostile to a public option. They don't seek improvement of a public option, they seek its distruction. Failing outright destruction, they seek to ensure that any public plan fails.

The really dangerous opponents of a more universal, rational, and affordable health care system for America are within the Democratic caucus.

Does Giffords really insist on all these requirements to lend her support to a public option? People should ask her if she supports all these conditions, and if so, how does she defend them?