Mark Thoma sends us over to Jack Roberts who is looking back to the public/private power debate of the 30's
Public option shouldn’t be deal breaker for reform
Public option shouldn’t be deal breaker for reform Recent reports that the Obama administration may (or may not) be backing away from a public option for health care reform are likely to raise the decibel level of the debate even higher. Unfortunately, the result may be to reduce further the chances of getting health care reform passed at all.
For some reason, the issue of whether the final reform bill includes a public health insurance option has taken on apocalyptic proportions. Both proponents and opponents have made it the defining factor in whether health care reform will succeed. Yet, ideology and emotion aside, there is no reason to believe the exaggerated hopes or fears on either side.
To a great extent, this is reminiscent of the great debate in the 1930s over public vs. private power, a controversy that catapulted Wendell Willkie, a utility lawyer who’d never held elective office, into the Republican nomination for president in 1940. Nowhere was this debate more contentious than in Oregon.
Public power advocates believed that private utilities were strangling the economy and robbing ratepayers, while opponents insisted that public power was a sure route to socialism. Sound familiar? The only thing both sides seem to agree on was that one system or the other must prevail and that public and private power could not coexist.
Jump ahead 70 years. Here in Lane County, most people receive their electrical power from municipal utilities, cooperatives or a people’s utility district. Private utilities such as Portland General Electric and Pacific Power serve most of the rest of the state.
Today, we may use euphemisms such as “consumer-owned” and “investor-owned” utilities, but it is still the same public vs. private power distinction. Except for the Bonneville Power Administration’s public power preference for low-cost hydropower, however, there is actually little difference in the way public and private utilities operate.
The reason is that both public and private utilities are funded by their ratepayers. Public utilities are not subsidized by general tax dollars, as private power advocates once feared.
It’s true that private utilities distribute a portion of their profits to shareholders as dividends. But public utilities rely heavily on bond financing and retain their “profits” as reserves and reinvest them in expansion projects, modernization and employee compensation. Ultimately, the differences are far less than most outsiders imagine.
There is little reason to believe that a public health insurance option would operate much differently from private health insurance companies, either. Already there are nonprofit health insurance companies that operate more or less like their for-profit competitors. Their incentive to hold down costs and operate in a conservative, cost-effective manner is no less than a for-profit company’s. After all, their top management still wants to keep its jobs and be compensated for good performance, too.
Probably the best example of how a public health insurance option could operate is Oregon’s experience with a quasi-public worker’s compensation insurance company, the State Accident Insurance Fund. Formed in 1914, it operated as part of state government until 1979, when the program was converted to the nonprofit corporation that still operates today.
True, its principal private sector competitor, Liberty Northwest, complains about unfair competition, primarily because of the large reserves SAIF was able to retain from its days as a public entity. Yet in a state that requires businesses to carry worker’s compensation insurance, SAIF serves as a critical provider of affordable workers’ comp coverage for thousands of Oregon companies, large and small.
No doubt private health insurance companies see SAIF, with its predominant role in the Oregon workers’ compensation market, as an example of exactly what they fear from the private option. But most Oregonians don’t regard SAIF as representing a government takeover of workers’ compensation, much less a harbinger of socialism. If a public health insurance option works the same way SAIF does, I think most Oregonians will think they are well served.
Yet Oregon’s workers’ comp system is not so clearly better than the 25 states that have no equivalent to SAIF as to render their mandatory workers’ compensation laws worthless or unworkable. The fact is that mandatory workers’ compensation laws were a major step forward for business and workers in America, with or without a public option for providing worker’s comp insurance.
Adopting universal health care coverage will be equally revolutionary in its effect on our society, whethert it initially includes a mandatory public option, and whatever the precise form that option originally takes.
The real key to health insurance reform is to prevent insurance companies from excluding people from coverage or charging higher premiums based on a person’s pre-existing health condition, and then to mandate coverage for everyone.
If we can accomplish these two things, the rest of the details will evolve over time, including whether to have a public option.
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