The New Republic

Editor's Note: Jacob S. Hacker is co-director of the
Center for Health, Economic, and Family Security at U.C. Berkeley; a fellow at the New America Foundation; and the editor of Health at Risk: America's Ailing Health System--and How to Heal It. He's also a regular guest contributor to The Treatment. His "Health Care for America Proposal," published through the Economic Policy Institute in early 2007, is widely considered a rough model for the reform plans many Democrats, including President Obama, have since embraced. When a recent analysis suggested that a plan along these lines would cause a rapid and radical decline in employer-sponsored insurance, we asked him for a response. Here's what he wrote:

The Lewin Group, a respected health care consulting firm, has caused a stir with a new report arguing that public plan choice--an idea embraced by leading Democrats, including President Obama and Senate Finance Committee Chair Max Baucus--could lead to a massive shift of Americans from private insurance into public coverage.

According to the group’s new analysis, if all employers and individuals in the country could buy into a national public plan that paid Medicare’s rates to doctors and hospitals, over 131 million Americans would enroll in the public plan. That number is half the population not covered by Medicare today, and a much higher enrollment in the new public plan than any previous analysis of proposals of this sort have come up with--including the Lewin Group’s own analysis of my 2007 proposal for health care reform, a proposal that includes public plan choice and which looks a lot like, but not identical to, the proposal that President Obama embraced during the campaign. (The Commonwealth Fund has also advanced a proposal along these lines, which the Lewin Group has also examined.)

Conservatives have predictably seized on the Lewin Group’s findings to argue that the proposal to have a public plan compete with private plans is a “Trojan horse” for a universal Medicare-for-all program of national health insurance. A case in point is a new editorial from the Wall Street Journal, titled "The End of Private Health Insurance."

But the Lewin Group’s new report suggests nothing of the sort. While it does indicate that the savings from having a public plan compete with private plans could be huge (as has every previous analysis of public plan choice), it has virtually no bearing on the question of how large enrollment in the public plan would be under a reform proposal like mine, or like President Obama’s campaign proposal, or like Senator Baucus’s 2008 “White Paper”. That’s because the illustrative proposal that the Lewin Group analyzed is fundamentally and strangely different from these proposals--in ways that assure that enrollment in the public plan will be much, much larger.

I have posted a long (fairly technical) discussion of the Lewin Group analysis and where it goes awry on the website of the Institute for America’s Future. Readers interested in the gory details should go there. But in a nutshell, the Lewin Group looked at a hypothetical proposal in which employers could buy into a national public plan by paying the plan’s premium. What’s more, in the hypothetical proposal that the Lewin Group examined, new rules would be imposed on employment-based health insurance that would vastly increase the cost for some firms of providing coverage. No wonder the public plan was projected to be big!By contrast, all the proposals that are actually on the agenda today have employers  buy into an “exchange” that has both a public plan and private plans as a choice within it. Moreover, all these proposals have at least large employers enroll their workers in the exchange by paying a payroll-based contribution, not the public plan’s premium. Finally, none of these proposals includes substantial new regulations on employment-based health insurance. All these may seem like small distinctions, but they’re not. They are the difference between the huge public plan that Lewin’s analysis foresees, and the likely effects of the proposals that are actually being debated today--which, according to prior estimates by the Lewin Group itself, result in more Americans having private insurance after reform than they do today.

I am not sure why the Lewin Group came up with such an odd proposal so discordant with existing plans for reform (or why they described it so vaguely in their report--the details described in this post came from private correspondence with a representative of the Lewin Group). But I do know that the new report has basically nothing to say about the effects of proposals similar to mine or Senator Baucus’s or President Obama’s campaign plan on the distribution of public and private coverage.

--Jacob S. Hacker

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