Veteran health administrator backs public option

As the head of a Los Angeles nonprofit organization that bills itself as “the nation’s largest public health plan,” Howard Kahn knows a thing or two about public options for health insurance.

And he gives cautious approval to the compromise plan unveiled in the Senate last week to break the logjam on healthcare reform and steer negotiations into the homestretch.

The Senate proposal, which is still a work in progress, would forgo a purely public insurance plan in favor of a government-administered program offered by private insurers.

While this probably won’t mollify those who have been pushing for a robust public insurance plan similar to what’s available in many European countries, the genius of the compromise lies in its lowering of the eligibility age for Medicare to 55 from 65.

If this happened, anyone want to bet whether we’d get to a Medicare-for-all system within a decade?

“The most important thing is that we move forward and expand coverage,” Kahn told me. “This compromise would do that.”

We spoke in a conference room at the downtown Los Angeles office of L.A. Care Health Plan, which serves as an HMO for the majority of Medi-Cal recipients in L.A. County, or about 800,000 people.

I’ll say right here: I don’t agree with everything Khan, 53, has to say about healthcare reform, particularly his advocacy of regional public plans as opposed to a more comprehensive national offering.

But this is a guy who has been involved with public health insurance in one way or another for more than 20 years, so his is a voice worth listening to as the reform debate lurches toward something like a conclusion.

That’s why Kahn was recently asked to testify before the House Energy and Commerce Subcommittee on Health about L.A. Care’s track record, and why he consults regularly with California lawmakers.

“There’s been a great deal of rhetoric in the debate about the public option,” said Rep. Henry A. Waxman (D-Beverly Hills). “Howard’s testimony before the health subcommittee was a welcome departure from that.

“He gave a thoughtful explanation of the benefits of competition between a local public plan and a private insurer for both Medicaid enrollees and taxpayers.”

Kahn believes his HMO-style agency’s experience shows that public plans are most effective when they’re intimately involved with the communities they serve.

He also believes that one reason our current healthcare system is so messed up is because large-scale public plans such as Medicare and Medicaid (Medi-Cal in California) don’t do enough to keep costs down.

Combine that with private insurers that place profit ahead of people’s well-being, as well as healthcare providers that routinely pile up costly treatments, and you have a surefire recipe for a system that’s totally out of whack.

“This system is sufficiently dysfunctional, it’s not worth defending as it stands today,” Kahn said.

Forget about the federal government taking over all health coverage. Kahn doesn’t think the political will exists for such a radical change involving about 17% of the economy.

Instead, he advocates a revamping of our current system so that private insurers remain the dominant players but are more strictly regulated in terms of how much coverage they provide, to whom, and for how much.

Alongside these big dogs would be regional entities like Kahn’s -- public plans, co-ops, whatever -- that would fill in the gaps and ensure that anyone overlooked by the heavyweights could still find coverage.

L.A. County supervisors approved a deal with the UC Board of Regents this month to create a new Martin Luther King Jr. Hospital. The hospital will be overseen by a quasi-public nonprofit agency.

This, Kahn said, is an example of what he’s talking about: Community-based healthcare.

“Public plans shouldn’t compete with an Aetna that’s insuring General Electric,” he said. “They should compete for smaller communities and populations.”

I disagree -- and I think President Obama would too. The main reason Obama called for a public option is because private insurers don’t treat all people fairly and because there’s a lack of competition in the healthcare marketplace.

It’s hard to see the competitive landscape improving if a public option were limited to regional agencies that basically serve as local safety nets for all those who can’t afford or otherwise lack access to coverage from private insurers.

For a public plan to truly succeed, even a semi-public plan like what the Senate is tinkering with, it needs to be large enough and influential enough to negotiate favorable terms with healthcare providers.

One proposal for the Senate plan is that it would be national in scope, and that anyone eligible could join. Another is that it would be tailored to the needs of individual states or regions.

“If they do a national option, that would be a step in the wrong direction,” Kahn said. “If they do multiple local plans, that would be a good thing.”

I’m not so sure. The real mojo of the Senate proposal lies in the government’s ability to negotiate patient-friendly terms with huge private insurers. That’s a factor almost exclusively of size.

But I agree with Kahn on this point: The most important thing is to move forward and expand coverage. That seems to be happening.

After all, this is the season of miracles.

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