Coming soon to a doctor's office near you: Obamacare public option

Regardless of who wins the presidential election, it appears likely that in order to save what's left of Obamacare, some kind of "public option" will be proposed in Congress next year.

We've documented the death spiral of Obamacare over the last few months as the co-ops continue to fail, insurers run away from the state exchanges, and premiums spike at unbearable levels.  Even with the government subsidies for most consumers, the few plans available to many Americans have higher deductibles and less coverage than plans in the past. 

This has led Democrats running for every office from top to bottom to call for a radical fix for the law – the public option that would force most of the remaining private insurers out of the market and complete a government takeover of the health care system.

Washington Times:

“It’s just been an awful summer for Obamacare,” Robert Laszewski, a health care policy consultant in Alexandria, Virginia, said of the shift back to the public option. “I think what’s really intriguing is that the most committed Obamacare supporters are coming to the realization the exchanges are unsustainable and not working, and are in need of a fundamental fix.”

That realization has been fueled by a spate of bad news.

Health Republic of New Jersey, one of the nonprofit cooperatives set up instead of government-run plans, said it is shutting down operations. That leaves just six of the original 23 coops still running, despite more than $2 billion in federal loans to keep them afloat.

Meanwhile, major insurers such as UnitedHealth Group and Aetna have withdrawn from all but a handful of states, leaving nearly a third of U.S. counties with only a single company offering plans on their exchange markets next year, according to estimates from the nonpartisan Kaiser Family Foundation.

Republicans say those problems, along with skyrocketing premiums, are signs that the Affordable Care Act has failed and must be repealed.

Democrats, though, say it’s time to go bigger and give the government a more forceful role in providing coverage.

Rep. Chris Van Hollen, a Maryland Democrat with a commanding lead in his Senate bid, says a public option is the next logical step in health care reform as Mr. Obama falls short of his dream of universal coverage before leaving office.

“This would be an important step toward creating a Medicare for All System,” Mr. Van Hollen says on his campaign website.

More than six years ago, as Congress debated Mr. Obama’s health care reforms, the House passed a bill that included the public option, but the idea was stripped by centrist Senate Democrats, who feared the party was trying to do too much or that a public plan would break the federal budget.

The final Obamacare legislation, written by the Senate, had the government set standards and organize markets but relied on private companies to provide the choices for consumers. The hope was that companies would compete for business, lowering costs for Americans even as they covered millions more people.

That "hope" never came to pass.  And as numerous critics pointed out, it never had a chance of working.  There was no incentive for young, healthy people to purchase insurance from the exchanges because the penalty for not doing so was less than the cost of buying an Obamacare policy.  Instead of a mix of healthy and sick customers, most insurers were stuck with older, sicker Americans buying their policies who caused a tsunami of red ink. 

So what would the public option look like?

One proposed version is akin to federally run Medicare: The government acts as an insurer, and patients choose their providers. Another version would have the government contract with private companies to set up doctor networks or handle other aspects of running the plan, said Elizabeth Carpenter, senior vice president at Avalere Health, a Washington-based consultancy.

“There are a lot of details yet to be determined,” she said.

How many Republicans would join with Democrats to save Obamacare by imposing a public option on consumers?  Unless the GOP can come up with its own alternative that would maintain coverage for the millions of people who have purchased policies while removing many of the more onerous requirements of Obamacare, there are likely to be a significant number of Republicans terrified of throwing millions of Americans off their health insurance plans and who might vote with the Democrats. 

But that probably won't happen.  The GOP has been hammering out an Obamacare alternative for the better part of two years.  Reports indicate that it would eliminate most of the mandates in Obamacare, maintain most of the subsidies, reform other anti-market aspects of the health insurance industry, and keep the Medicaid expansion.  The package would be acceptable to a majority of Republicans, and at least some Democrats might climb on board to prevent a total meltdown by Obamacare.

Currently, Obamacare is not sustainable in its present form.  No matter who controls Congress, big changes are going to have to be made to the law, or the entire health insurance industry could collapse.

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