The Case for the Weak Public Option

Even the weakest public option makes future health care regulation eligible for budget reconciliation.

In a thoughtful post, Ezra argues that even a weak public option can be useful because it could pioneer some system delivery innovations, such as pricing based on comparative effectiveness research.

But I think that even a weak public option’s value is even greater than that procedurally — which is why the insurers and other providers have campaigned so hard against it.  The answer, like so much else, turns on the reconciliation process.

Recall that both the Byrd Rule and the Budget Act of 1974 require that that anything added to a budget bill concern, well, the budget.  That’s sensible enough.  The problem is that just about anything relates to the budget.  How about repealing DOMA?  Well, that would expand Social Security survivor benefits to gay couples, which is a budget outlay, and thus that would qualify.

But of course it wouldn’t qualify, because the Rule and the Act say that any outlays from a provision cannot be “merely incidental” to the provision, and with DOMA repeal, that surely is the case.

Back to the weak public option.  Suppose that it doesn’t do much, or becomes a dumping ground for bad risks, and that the insurers game the system because of lousy “risk adjustment” rules that allow insurers to dump bad risks on the public option.  So then the Senate HELP Committee strengthens the risk adjustment rules, or tries harder to regulate Pharma.  Is that “merely incidental” to the budget?

Not if there is a public option, it isn’t. It’s a much stronger argument — not a slam dunk, but much stronger — to say, “if we don’t change the risk adjustment rules, or clamp down on big Pharma, then that will put the public option’s finances in peril.”  Because there is a government plan, a lot of private health care regulation normally outside the budget process (and not coincidentally, outside Senate Finance jurisdiction) now comes into the budget process.  That means reconciliation is possible.  That means you don’t need 60 votes to pass it.

What comes in and what goes out of a budget bill, in the final analysis, is a political judgment made by the members of the Senate.  but they have seemingly agreed — against the clear text of the law — to hand the intial determination to the Senate parliamentarian.  He or she will find it much more reasonable to include all health regulation in a budget bill if there is a public option.

And that’s one reason why the insurers and Pharma are so intent on killing it.

Author: Jonathan Zasloff

Jonathan Zasloff teaches Torts, Land Use, Environmental Law, Comparative Urban Planning Law, Legal History, and Public Policy Clinic - Land Use, the Environment and Local Government. He grew up and still lives in the San Fernando Valley, about which he remains immensely proud (to the mystification of his friends and colleagues). After graduating from Yale Law School, and while clerking for a federal appeals court judge in Boston, he decided to return to Los Angeles shortly after the January 1994 Northridge earthquake, reasoning that he would gladly risk tremors in order to avoid the average New England wind chill temperature of negative 55 degrees. Professor Zasloff has a keen interest in world politics; he holds a PhD in the history of American foreign policy from Harvard and an M.Phil. in International Relations from Cambridge University. Much of his recent work concerns the influence of lawyers and legalism in US external relations, and has published articles on these subjects in the New York University Law Review and the Yale Law Journal. More generally, his recent interests focus on the response of public institutions to social problems, and the role of ideology in framing policy responses. Professor Zasloff has long been active in state and local politics and policy. He recently co-authored an article discussing the relationship of Proposition 13 (California's landmark tax limitation initiative) and school finance reform, and served for several years as a senior policy advisor to the Speaker of California Assembly. His practice background reflects these interests: for two years, he represented welfare recipients attempting to obtain child care benefits and microbusinesses in low income areas. He then practiced for two more years at one of Los Angeles' leading public interest environmental and land use firms, challenging poorly planned development and working to expand the network of the city's urban park system. He currently serves as a member of the boards of the Santa Monica Mountains Conservancy (a state agency charged with purchasing and protecting open space), the Los Angeles Center for Law and Justice (the leading legal service firm for low-income clients in east Los Angeles), and Friends of Israel's Environment. Professor Zasloff's other major activity consists in explaining the Triangle Offense to his very patient wife, Kathy.

5 thoughts on “The Case for the Weak Public Option”

  1. Excellent post. There is one point you didn't develope. What keeps the weak public option weak ? In 2010, why can't 50 Senators plus Biden say the public option agency pays medicare plus 5%. That would be a direct cut in outlays. I don't see how any parlimentarian could claim the effect on the budget is incidental. I mean it is just deciding to send less money to health care providers, what's more budgetary than that ?

    Note Evan Bayh is practically begging progressives to notice this so they'll let him off the hook

    Actually even Lieberman is talking about how they can come back to the issue later. I interpreted that as a standard rhetorical trick for any opponent of any reform, but he might have been saying "Let me get my way now, because I want it, I will hold my breath until I turn blue if you don't, and, besides, I won't be able to stop you next year." It actually makes more sense than anything else he's said in years.

  2. Hello Robert —

    Thanks. I'm sorry I didn't make it clearer, for that was the intent of the post. If it is made weak now, then problems can be fixed later through the reconciliation process. The important thing is that it exists in the first place.


  3. Jonathan, I think you're getting at a correct argument, but the one you actually make here is incorrect. The impact of the public option on the deficit does not stem from the fact that the option is a "government program" whose finances might be imperiled. The finances of the PO do not (or as the legislation is currently drafted, cannot) have a budgetary impact. All expenses of the public option plan are to be borne by participants. However, a cheaper public option will have a major budgetary affect by reducing the level of spending through tax credit subsidies that the bills make available to families earning under $88K. So you're right that the move to Medicare-linked pricing could be accomplished through reconciliation, since it would have a demonstrable and large impact on the deficit, but that's because it reduces future subsidies, not because of any government responsibility for the PO's finances.

  4. Hi Rich —

    Thanks for this; I think you are right, and are in fact saying what I MEANT to say but couldn't quite articulate. I will update.

    That said, I was also thinking that if the public option begins to have fiscal difficulties, Congress has two choices. It can 1) just let the thing go under, and put a whole lot of people at the mercy of the private market; or 2) start subsidizing the public option. I think that the politics would lead to Option #2. Without a public option, there IS no Option #2. But subsidizing the public option can also be done through reconciliation because it is about spending. It's sort of six-of-one, half-a-dozen of the other: either Congress subsidizes the public option, or it strengthens insurance regulations (i.e. risk adjustment) in order to protect the subsidy pool. They are both about reconciliation.


  5. Gee, we were cruising along on the same line and then you went batshit. Look, the wars are not helping the freaking economy. If everyone has single payer, then all of the freaking money is spent in the US instead of being diverted to the off shore tax havens, capice? Freaking idiot.

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