Obama backs away from public insurance plan, and it’s a smart move


President Obama is correct in saying that a public health insurance plan would help lower costs for everyone by making the market more competitive.

But when the Obama administration signaled this week that it was backing away from a public plan, it wasn’t putting the kibosh on meaningful change.

What it was saying was that we’ve taken our collective eye off the ball. The point of this debate isn’t whether the government should offer its own insurance product -- and it’s certainly not whether the government wants “death panels” to kill old people.


The point is how we can extend coverage to the roughly 47 million who now go without.

The point is how we can rein in runaway medical costs.

The point is how we can ensure that people with health problems or pre-existing conditions aren’t denied coverage, or aren’t hit with monthly premiums that only Bill Gates could afford.

The point is how we can overhaul our healthcare system to make it more equitable, fair and accessible.

And I suspect that Obama has known this all along -- just as he’s known for weeks if not months that a public plan wouldn’t fly, not in such an acrimonious and partisan political environment.

“Obama is a smart guy and he has smart people around him,” said Stuart Altman, a professor of health policy at Brandeis University who served as an advisor to Obama during the election campaign. “It’s very possible they all realized at some point that the public plan wouldn’t work and that it was something to be dealt away.”

Altman recalled sitting down with Obama’s health policy team during the campaign. “I asked what this public plan was, and I was told that it was very small and limited,” he said.

The original idea, Altman said, was that a modest public program would be developed to address the needs of individuals who couldn’t get coverage from private insurers, or small businesses that found coverage for employees too costly.


“It was never intended to be available to everyone,” he said.

That changed as it became increasingly clear that the single-payer insurance system championed by the more progressive elements of the Democratic Party wouldn’t be part of the healthcare reform landscape.

Most other developed nations have some form of single-payer system. Health coverage is funded by tax dollars and is guaranteed to everyone.

Single-payer supporters seized on Obama’s public plan as a way to gradually introduce such a system to this country. Suddenly, what had been envisioned as a small part of the reform package became the be-all-end-all for backers of change.

Not surprisingly, the public plan similarly became the sole concern for everyone who worried that the government was taking too active a role in medical issues -- an attempt to “socialize” healthcare.

“It turned into a gigantic distraction,” Altman said. “It’s not surprising the White House would back away from it. Without the public plan, they can get almost everything else they want for healthcare reform.”

Devon Herrick, a health economist with the National Center for Policy Analysis, agreed that removing a public plan from the equation would likely break the logjam in reform talks.


“It became clear that the healthcare industry couldn’t live with this,” he said. “You give them a concession by dropping the public option and you’re in a much better position to bargain.”

White House officials insist that nothing has changed. The president, they say, still believes that competition and choice are key to fixing the insurance market, and he’s open to any proposal that would accomplish this.

Whatever. The only thing that’s important is that Obama is trying to get reform talks back on track -- and he knows that reform doesn’t hinge on a public insurance plan.

Details are still sketchy, but it looks like the haggling now will be over creation of cooperatives that would allow people, businesses and other organizations to band together for affordable medical coverage.

The trick to making co-ops effective is ensuring that they don’t just end up as dumping grounds for all the old and unhealthy people whom private insurers have traditionally shunned. That means the co-ops would need to be structured to also attract the young and healthy.

It also means they’d need to be large enough to spread the risk far and wide. Municipal or state co-ops might be too small. National co-ops might be the only viable solution.


Would a public plan be better? Probably. But well-designed co-ops, competitively sold in well-regulated markets, could accomplish almost as much.

Of course, this won’t mollify those who believe a single-payer system is the only way to bring about equitably priced universal coverage.

“The public plan was the last hope for keeping private insurers honest,” said Jamie Court, president of Consumer Watchdog in Santa Monica. “If I was the White House, I would hope that healthcare reform doesn’t pass right now, because it’s going to be a disaster.”

I can relate to his frustration. I too think that something like a Medicare-for-all program is the most sensible solution for the country’s healthcare woes. It may not be a perfect system, but it would be fairer and more effective than what we have now.

But it’s clear that a public plan would torpedo reform efforts, and that’s not an acceptable outcome when polls show that an overwhelming majority of Americans otherwise support overhauling the insurance system.

Like Altman said, Obama’s a smart guy and he has smart people around him.

Now they have the upper hand. Now they can say they’ll do whatever it takes to get a meaningful reform deal cut.


The burden will be on the insurance industry and its friends to do the same.


David Lazarus’ column runs Wednesdays and Sundays. Send your tips or feedback to