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Age of Obama
Barack Obama's presidency

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George W. Bush's presidency since 2007

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George W. Bush's presidency from 2005-06

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George W. Bush's presidency, 2000-04

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The secret world of Defense Secretary Gates

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Nazi Echo
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The Dark Side of Rev. Moon
Rev. Sun Myung Moon and American politics.

Contra Crack
Contra drug stories uncovered

Lost History
America's tainted historical record

The October Surprise "X-Files"
The 1980 election scandal exposed.

From free trade to the Kosovo crisis.

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The Incredible Shrinking Public Option

By Robert Parry
November 2, 2009

When the U.S. health care debate began last spring, the insurance industry and its congressional defenders fretted over the prospect that 119 million Americans might defect from private insurance to a public option, thus devastating the business model of wealthy insurance companies.

Since then, however, the industry has won so many concessions that the threat from the surviving public option has shrunk to about five percent of its feared effect. In assessing the House leadership’s health reform bill, the Congressional Budget Office projects that only six million Americans could or would sign up for the bill’s version of the public option.

And, to make the picture even prettier for the insurance industry, many of those six million would be the chronically ill, customers that the private insurers don’t want anyway.

Because of unified Republican resistance to any health-care overhaul and the objections of conservative and rural Democrats, House Speaker Nancy Pelosi scrapped her goal of a “robust” public option, one whose payments would be linked to Medicare rates and thus could have saved substantial money for the insured and the government, about $110 billion over the next 10 years, the CBO estimated.

Instead, Pelosi accepted a version of the public option which would require the government to negotiate rates with health providers just as private insurers do. That means the pressure to hold down medical costs would be much less and the potential savings would largely disappear.

Indeed, the CBO projects that the public option would have to charge premiums higher than private insurers because people with illnesses would turn to the public option as a more reliable way to get their medical treatment than what they could expect from profit-making companies, which would still look for ways of minimizing payouts.

The CBO study said the projection of six million public option enrollees “reflects CBO’s assessment that a public plan paying negotiated rates … would typically have premiums that are somewhat higher than the average premiums for the private plans in the exchanges [because] the public plan … would probably engage in less management of utilization by its enrollees and attract a less healthy pool of enrollees.”

In other words, CBO is saying that despite proposed restrictions on private insurers eliminating their exclusion of “preexisting conditions” and banning purges of sick people from their client lists, the insurance industry would seek ways around some of those rules.

Thus, the sick would gravitate toward the government plan, which, in turn, would require higher premiums, pushing more healthy people toward cheaper private plans.

This latest win-win for the insurance industry is just its latest victory as the health-reform package has wound its way through Congress.

Corralling the Public Option

The most important concession came when the public option was barred from competing with private insurers for their most lucrative contracts, those with large employers. The public option was confined to insurance “exchanges,” which would start in 2013 only for uninsured individuals and small businesses.

That concession slashed the prospect of defecting clients from the 119 million – predicted in an industry-backed study by the Lewin Group – to about 10 million to 12 million Americans who, the CBO said, would choose the lower-cost “robust” public option on the exchanges.

The death of that “robust” version in the House leadership’s bill trimmed the likely clientele for the public option to about half that number, to around six million, according to the CBO.

In another favor to the insurance industry, the surviving House and Senate bills put off competition from any public option until 2013, granting the private insurers another three-plus years of their continued cartel-like control of the health-insurance sector.

During that three-year period, the CBO analysis projects the number of uninsured Americans will rise to 51 million, meaning that people who are facing bankruptcy over medical costs or early death because they put off needed medical attention will be expected to suck it up for another three-plus years before they can shop on the insurance exchanges for coverage.

Democratic leaders say the three-year delay is needed to properly organize the exchanges. However, Republicans claim that it is really a budget sleight-of-hand to make the 10-year cost of the reforms appear a couple of hundred billion dollars less, keeping the total below $1 trillion.

The current Senate bill, which was cobbled together by Senate Majority Leader Harry Reid, offers another concession regarding the public option, a provision that would let states opt out. Reid included the opt-out clause in hopes of convincing several conservative Democrats to at least vote against a Republican filibuster and let the Senate proceed with the legislation.

But the opt-out clause means that some conservative states may bar their residents from signing up for the public option, thus possibly reducing the number of public option enrollees to less than six million.

Still, it’s hard to see why private insurers would object to inclusion of the weakened public option because the insurance industry already would be in line to get the bulk of the new customers, people compelled to buy insurance or face fines and who also might qualify for government subsidies that would go to insurance companies for policies offered on the insurance exchanges.

CBO estimates that about 30 million Americans would get insurance via the exchanges, with four-fifths buying from private companies. That’s about 24 million new customers. Plus, the public plan’s “adverse selection” – the tendency of sick people to pick the public option – means that private insurers would stand to get the healthiest and thus cheapest part of that pool.

Last summer, during a town hall meeting on health reform, President Barack Obama raised the ire of some liberals by referring to the public option as “just a sliver” of the health-reform package. Given the many concessions that have been made to the insurance industry, Obama’s description now appears to be more accurate than he probably understood at the time.

Robert Parry broke many of the Iran-Contra stories in the 1980s for the Associated Press and Newsweek. His latest book, Neck Deep: The Disastrous Presidency of George W. Bush, was written with two of his sons, Sam and Nat, and can be ordered at His two previous books, Secrecy & Privilege: The Rise of the Bush Dynasty from Watergate to Iraq and Lost History: Contras, Cocaine, the Press & 'Project Truth' are also available there. Or go to

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