Public Insurance: Two Questions for Washington

With so little known about the specifics of a possible public insurance option, it's difficult to have a serious debate about the plan—and its potential effect on healthcare.

One only has to look at recent industry dialogue to see that we're all confused about what will happen to the various healthcare players if it becomes reality. And Washington hasn't been particularly helpful in opening up the topic for serious debate. Nancy-Ann DeParle, White House health reform director, shed little light on the plan in her Kaiser Family Foundation media briefing. DeParle's definition of a public insurance plan is one sponsored by the government with low or nonexistent administrative costs compared to private plans.

But beyond that definition, the White House health reform director does not go into any detail except to say that a public option could follow the same rules as private insurers or it may have its own regulations. The public plan could pay physicians at the Medicare rates or it could pay at the private payer level.

In other words, we're getting the Washington spin.

This lack of information is causing much consternation in healthcare. In particular, health insurance plans want to know how they should prepare to compete with a public plan.

The way I see it, a public insurance option could begin to take shape if policymakers answered two key questions:

• What does the government hope to accomplish by creating a public insurance option? Does it want to provide competition for private insurers, which could ultimately reduce costs? Or, is it a safety net to protect Americans from being uninsured?

This gets to the reason behind a public insurance plan and what will influence its benefit design. It also explores whether the public plan will offer expanded programs found in private insurance, such as vision and dental, or become a lower cost option that provides basic coverage and protects Americans from exorbitant healthcare costs while offering preventive services.

• Will the public option pay doctors at Medicare rates or closer to private insurer levels?

Paying at a rate similar to Medicare will lead to lower premiums than private insurance, which will woo many currently insured under private plans to the public option. But it could also cause a battle with physicians because it will mean lower reimbursements. I'm sure many doctors are wondering whether the lower administrative costs associated with public insurance can realistically offset the lower reimbursements.

On the flip side, if a public plan pays similar to private payers, it will have to feature premiums similar to private insurance, which would erect cost barriers for the poor and uninsured. Higher reimbursement rates coupled with lower administrative costs is the recipe physicians would love, and would create an acceptable option for private insurers, but would also price out many Americans.

Having the answers to these questions would lead to a better understanding of a public insurance plan. But don't expect anything out of Washington for awhile.

Comprehensive healthcare reform bills are not expected until June at the earliest, and Health and Human Services secretary nominee Kathleen Sebelius is still not through the Senate confirmation process. Once Sebelius is in place at HHS, the secretary should make sure that her office works with Congress to present more specifics about the public insurance option so the industry can have an informed debate—and prepare for the future.