What's the Public Option, Again?

Advocates of including a “public option” in a proposed health-care overhaul got a major boost Tuesday from a Washington Post/ ABC News poll showing strong support for the idea. Even as congressional Democrats have been largely united in support of the overall shape of a reform package, the public-option issue has proven divisive. Centrist members tend to oppose the idea, even though virtually all analysts indicate that it would save money, thus meeting one of their key goals. But for left-wing members who aren’t thrilled with the generally pro-industry shape of the reform package, the public option has become an ideological touchstone—so much so that there are persistent threats of left-wing defections if the measure doesn’t materialize in the final bill.

Probably the most important thing about the public option is that whether it’s created or not, it won’t have any impact for good or for ill on the lives of most people.

A positive poll result strengthens the case that moderates, who tend to hold relatively vulnerable seats, should let the left more or less have its way on this one. And that’s good news. Proponents of the public plan have developed a tendency to exaggerate the significance of this debate, but they’re still right on the merits. At the same time, on another issue that tends to divide the Democratic caucus—the idea of an excise tax on pricey insurance plans—the moderates have the better case. In an ideal world, liberals will win on the public plan and moderates on the tax. Still, the poll raises the question of whether the public—and, indeed, the pollsters—understands what the public option is.

Probably the most important thing about the public option is that whether it’s created or not, it won’t have any impact for good or for ill on the lives of most people. If you’re in the military or a veteran or poor enough for Medicaid or old enough for Social Security or get health insurance through your employer, the public option has nothing to do with you. But for the minority of Americans who are currently uninsured, or who buy insurance on the individual market, it could make a big difference. All the different Democratic proposals agree that such people should be helped through the creation of a regulated health-insurance exchange. The exchange will function, essentially, as one giant risk pool (just as the employees at a company form a risk pool) which should bring premiums down, on average. But to make this work, it’s vital that everyone participates. Otherwise, people with below-average health needs will drop out, and premiums will skyrocket. Thus there will be a mandate that everyone who doesn’t already have coverage buy some. And, in turn, there will be subsidies to ensure that coverage is affordable.

But buy coverage from whom? Well, from private insurers who’ll presumably be offering an array of plans that conform to the regulators’ definition of minimum acceptable coverage.

This is where the public option comes in. Liberals say that in addition to whatever private industry wants to put on the table, people participating in the exchange should be able to enroll in an insurance program run by the government. For one thing, such a program would be an additional mechanism, alongside the regulators, for keeping private insurers honest. For another thing, such a program could use its leverage to pay reimbursement rates to health-care providers that are modeled on Medicare’s rates. These are lower than what private insurance (which, being more fragmented, can’t bargain as effectively) pays and thus could save money and control costs.

This whole set-up is, frankly, too complicated to explain in a poll question. But according to the Post’s poll, 57 percent of Americans say they would support “having the government create a new health-insurance plan to compete with private health-insurance plans.” Of the 40 percent who are opposed, 45 percent say they would change their minds “if this government-sponsored plan was run by state governments and was available only to people who did not have a choice of affordable private insurance.”

The preference for a state-run plan seems to evince a lack of understanding of the policy issues. This might work well enough for large states like California, Texas, and New York. But a program that insures only a relatively small fraction of the population of a small state like Vermont or Montana might be too small to be viable. Insurance needs scale to spread risk. What’s more, state-based plans would, in most places at least, lack the leverage necessary to bargain effectively with providers, thus defeating one of the major motivations for creating a public option.

The business about limiting eligibility to people who don’t have a choice of affordable private insurance suggests confusion on the part of the pollster. Under all proposals, people currently insured through their employers or existing government programs would be ineligible. At the same time, under all proposals everyone will be eligible for a level of subsidies designed to make insurance affordable. So this proposed modification to the plan would either change nothing, or else it would exclude absolutely everyone from the public plan. The question, in other words, doesn’t really make sense. Most likely whoever put the question together was simply confused, and respondents just played along.

This is a reminder, most of all, that public opinion polls tend to be unreliable when unfamiliar questions are asked. The public, moreover, isn’t composed of policy wonks. And the news sources most people rely on barely even try to explain policy specifics. Consequently, it would be exceedingly unwise for politicians to pay an undue amount of deference to poll results when outlining major policy measures. What will make health reform popular or unpopular at the end of the day will be whether or not people feel that it works for them. A public option should make reform work better, and that’s the best reason—both politically and substantively—to include one. Fragmenting it into state-by-state bits will make it work worse, and that’s the best reason not to do it that way. These programs won’t even be implemented until 2013 or beyond, by which point people will have long forgotten how they thought they felt about the various provisions back in the fall of 2009. At the end of the day, health reform that improves people’s lives will be popular, and reform that doesn’t won’t be.

Matthew Yglesias is a fellow at the Center for American Progress Action Fund. He is the author of Heads in the Sand: How the Republicans Screw Up Foreign Policy and Foreign Policy Screws Up the Democrats.