The Public Option Broken Down

Hi all -

Good news today - well at least fair news on the health care reform front - the Senate Finance Committee got a bill through their committee. Although it's a really watered down bill, at least it's a start - and it's progress. Now on to meshing them all together. I need to get back to reading now that they've actually gotten somewhere.

And with the report out yesterday from Pricewaterhouse Coopers, there's no time like the present to talk about the Public Option.

First, let me review their report with you. I have to say, I think it's a bit funny and sad at the same time. It seems like the insurance companies, which may have been feigning their support all along, holding out for the last minute to drop a bomb or two, got caught up in the circus over the last couple of days.

It seems that the insurance companies had an "independent" review board conduct some kind of a study after reviewing just part of the Senate Finance Committee bill - the part they paid them to review. Surprise, surprise. They predict that insurance rates will increase by 111% over the next 10 years. Let's put that in more tangible figures - By 2019:

Single people will see their premiums increase $1,500.00 per year. Families will pay $4,000.00 more per year.

A further breakdown shows that single people now pay approximately $4,600.00 yearly. With the current system, these rates will increase to $8,200.00 yearly. Under the Baucus plan, these rates will increase to $9,700.00 yearly.

Families pay approximately $12,300.00 yearly. With the current system, projected rates would increase to $21,900.00 yearly. Under the Baucus plan, these rates would be $25,900.00 yearly.

Now keep in mind, under the current system we have, they are still projecting a 79% inflation rate.

Now, that's just ridiculous - especially since wage growth only averages 3 - 4 % annually.

And even more ridiculous - the insurance industry just shot themselves in the foot by releasing that report. Maybe they thought they could scare the people or the congress by talking about how high premiums would continue to rise. I guess no one stopped to think, well, if they can't control their own growth in their own premiums - maybe, just maybe we should have a public option.

Let's talk about what a Public Option is and how it could benefit or hinder health care reform.
Let's hit the basics first - what is a Public Option when we're talking about health care?
Basically, all it is is another company, the government, competing for business in the health insurance industry.

Right now there are a lot of different insurance companies -Aetna, Blue Cross/Blue Shield, Cigna, Kaiser, etc.... Technically speaking, because there are so many different insurance companies, they should be able to keep each other in check - to help keep prices competitive and affordable. Unfortunately, in most of the country, more than 70% of the market is controlled by one insurance company. This is bad for the market, as there is no competition from other companies to help keep premiums affordable. Plus, there is no way that providers, doctors or hospitals, can negotiate for better prices for services. And as the companies get bigger, they just keep buying each other out. In the last 10 years, there have been more than 400 health care related mergers.

With the Public Option, congress is hoping it would keep the insurance companies under control. Because the government has fewer overhead expenses, they can run their "business" a little cheaper. They can also negotiate cheaper fees for services provided, and this would force the insurance companies to be more competitive with their prices, to offer superior plans and to give excellent service.

Let's review some of systems that have a government agency in force already, ones that compete with the private sector.

First up - the obvious choice to discuss is the US Postal Service. Now granted, private companies like UPS, DHL and FedEx came about partly because of this agency's inefficiency and poor service. But let's be honest, someone would have eventually figured out they could make money off of something that most of us need daily in our lives - sending stuff from one place to another.

So let's take a look at these companies. They all seem to compete on a fairly even level. They all ship packages for about the same prices. They each have their own little niche they fill.

DHL, who tried to compete in the US, finally turned their domestic shipping over to UPS, I think. Guess why - they weren't making any money here. They still are excellent and competitive with international shipping services.

FedEx is relatively more expensive but they're known for their excellent service and speedy deliveries. They also provide some of their shipping materials for free. They have the best online package tracking system of them all.

UPS's fortes are their speed of service and their 100.00 worth of insurance for free. They also have cheaper shipping rates for larger packages.

The US Postal Service is still the cheapest form of shipping for many things. None of the other companies can ship - or do they try to ship - a letter for $.44. Guess why - they can't compete. Plus in comparison, a small priority mail package can be shipped by them for $4.95. The other three carriers can't compete with that. Their cheapest packages ship for over $10.00. The USPS also offers some of their shipping materials for free. They do have a 70 lb limit on packages though and their online tracking system isn't very efficient.

Funny, I think the private companies have made the Public Option pick up it's game. I have to say it's been a long time since the USPS has lost something I've sent. I think they've learned to become more efficient and concentrate more on their customer service.

So when making your choices on who you give your business to, it's on a very personal level - what kind of package are you sending, what kind of expectations do you have, what will the cost be. These are all things you consider and I don't think you really say, "Well, I'm not going to pick the Public Option because they don't compete fairly with the private sector." Maybe I'm wrong, do you?


Now, let's move on to our Education System. There are plenty of public and private schools - in primary, secondary and collegiate level education. Public schools are subsidized by our tax dollars; private schools are owned and run by private companies for a profit and charter schools are somewhere in between. Charter schools are subsidized by our tax dollars, but run by private companies for a profit. 75% of schools are public, 25% private.

Interesting enough, private schools have been good for the Public Option. They've made the public schools pick up their game. And public schools are good for private schools as well. Private schools now have to offer something special - something worth paying more for.

In comparison - public/state school tuition is generally less than $10,000.00 a year; private school tuition is anywhere from $30,000.00 - $120,000.00 a year. On the other hand, there are more grants and scholarships available for private schools.

There are a lot of regulations for public schools, where as next to none for private schools. The private schools pretty much make up their own rules. Some private schools don't even require their teachers to have college degrees or state licensure. Public schools have to follow all the anti-discrimination laws as well - private schools, not so much. And believe it or not, recent studies show that public school scores are as high and even higher in some areas.

Now, again, when making a decision about where you or your family goes to school, a lot of personal choice comes to mind. I think it's nice to be able to choose. I think we choose what works best for our family, our children - I'm guessing we decide with a lot of factors in mind - what the school has to offer, curriculum, location, costs, etc. I'm sure there's also some perceived thought that if we're paying more, we must be getting more for our dollar. I'm not sure that's always the case. Again, I'm not sure we think, well, we aren't going to even look at that school as it's a Public School.


Let's move on to another Public Option in the insurance industry. This one should make you chuckle a little bit - especially if you read my earlier blog about how the government programs take the biggest hit on the sickest and poorest people - while the insurance companies make billions off of us.

Have you ever heard of the National Flood Insurance Program? I know, in the past, I almost bought a house that was in a flood zone - not knowing of course, how much it would cost me to insure the place and it's contents.

Well after some of the horrible hurricanes over the past few years, most insurance companies started to drop their clients and they refused to pay a great deal of flood claims, through loopholes in their policies. After Hurricanes Rita and Katrina they denied numerous claims saying that the water destroyed the properties before the wind could. The private insurers decided there wasn't any money to be made. Well, guess who stepped in - the government. The private insurance companies still run these programs, but it's 100% backed by the government with our tax dollars of course. And this insurance is MANDATORY.

Funny, some of the senators that have been so nasty about the Public Option in Health Care - like Grassley, Enzi, Snowe and some other 44 Republicans - voted for this flood insurance program. And even funnier, the more conservative states have used the most money from the program - North Carolina, Mississippi, Wisconsin, Florida, Illinois, Missouri, Indiana, Iowa, Louisiana - and ........ wait for it ....... Texas. Texas has benefited the most. They've taken 1.5 billion dollars in claims. 682,000 people have turned in claims under this program.


So, I say what's the harm in having a Public Option? Come on people, weigh in.

I know, some people are going to say that the government competes unfairly in business against the private sector - they may put the private companies out of business. On the other hand, a lot of us choose to spend a little bit more money going to the UPS or Fed Ex store to ship our packages because we want to, because it's an option, because we can. I say bring it on, I'll choose it if I think it's just what I'm looking for, what's right for me and my family, for a price I can afford - because I can if I want - it's my choice.

I also say the insurance companies should say the same, bring it on. If they think they have a great product, give excellent service, are as efficient as they can be and their clientele are satisfied, then it should be a non-issue for them as well. My question to them, do they actually have a product or service to offer me that is worth paying more for????

And in closing, I must say, that the Public Option in itself will not solve the inflationary problems we have with the health care system. Competition can only help control costs so much. I'm guessing that's why Pres. Obama said it was only a small part of the whole picture.

From 1970 - 2000, Health Care spending increased by 11% in the private sector and 9.5% in the Medicare system. From 2000 - 2004, it increased by 9.5% in the private sector and 6.7% in the Medicare system. So although, you can say the government program is inefficient, just by price comparisons alone, you can see that the government program still does a little better than the private insurance industry. But sadly, the increases on either side are just too much.

What we really need more than anything is health care reform. A strong Public Option and Health Care Reform has to happen and has to happen now. We need to control costs, reduce waste and fraud. We need to restructure the payment system to pay for performance programs - quality of care, not quantity. We need to have a national information technology system - all computers, all providers talking to each other, sharing their tests and results - prevent duplication of services. We need transparency in the health care delivery system - we need to know who is charging how much for what and what their outcomes in care are. We need to form a committee that studies and implements best clinical practices for all patients. And last but not least, we have to find ways to increase access to all Americans. I can not say it enough ACCESS, ACCESS, ACCESS. We need more community health centers, more primary doctors and staff. We need to start now.


Let's do some brainstorming together to see where we can cut costs - what we can do to turn this machine around. Tell me your ideas.

More later. Off this thing for now.