A Moderate Plan for Health Care

One of the most contentious issues in the Congressional debate over health care reform is over whether to create a new public plan to compete with private insurers. Senator Charles Schumer of New York is making strenuous efforts to forge a compromise that ought to appeal to political moderates who are not reflexively opposed to a government-run program or beholden to private insurers concerned about profit margins.

Any competition between a new public plan and private plans would be waged on a regulated field of battle within a new health insurance exchange. Most reform proposals envisage the exchange as a place where individuals unable to obtain coverage at work and ineligible for existing public programs like Medicaid could buy policies that would be available to everyone without regard to pre-existing medical problems. Low-income people would get subsidies to help buy a private or public plan.

Opponents of a new public plan have raised the specter that it might have unfair advantages that would enable it to draw customers from private insurers and ultimately drive them out of business, leaving virtually all Americans enrolled in a full-fledged single-payer system, like Medicare. That prospect could be mitigated by appropriate ground rules.

The insurance industry is so desperate to avoid competition that it has already pledged numerous reforms and called for tighter regulation of the private market to expand coverage and control costs. But even with tighter regulation, Congress should include a public plan option to give consumers broader choice, provide a refuge for people who don’t trust private insurers to have their best interest at heart and serve as a yardstick for judging the performance of private plans.

Private plans have done a poor job at restraining premium increases; they mostly pass rising medical costs on to the subscriber. A good dose of competition from a public plan with potentially lower administrative costs and no need to generate profits might be the right competitive medicine to improve their performance.

Senator Schumer, a Democratic member of the crucial Senate Finance Committee who was assigned to study the issue, has come up with some reasonable principles to ensure that any competition between a public plan and private plans would be a fair fight. In general, he suggests that a public plan should have to comply with the same rules and standards as private plans.

The public plan could not be supported by tax revenues or government appropriations but by premiums and co-payments. It would have to maintain reserves, like private insurers, and provide the same minimum benefits as all other insurers in the exchange. It could not compel doctors who want to participate in Medicare to also participate in the new public plan. And it would be run by different officials from those who run the insurance exchange to lessen the likelihood that federal officials would give unfair advantages to their program.

One can argue over details, but Mr. Schumer is on the right track. It should be possible to design a system in which public and private plans could compete without destroying the private coverage that most Americans have and for the most part want to keep. The question is whether Republicans in Congress are willing to try.