‘Medicare for all’ is unlikely if Democrats take power, but an Obamacare ‘public option’ seems inevitable

For reasons outlined in previous posts, creating a mandatory national healthcare plan along the lines Harris suggested would impose tremendous costs and cause massive disruption, which will create ultimately insurmountable political obstacles. It would cost a staggering $32 trillion over a decade, requiring significant increases in taxes, including on the middle class. It would mean kicking 177 million people off of private insurance plans that are satisfactory to an overwhelming majority of people who have them. And it would cause access problems as the government would be offering the promise of free care while cutting payment rates to doctors, hospitals, and other medical providers to contain costs.

Even if there are some liberals who are eager and willing to go this far, any plan is going to require at least majority support in the Senate, assuming a theoretical Democratic majority will either nuke the filibuster or pass something through reconciliation. Right now, Democrats have just 47 seats in the Senate, one of which they’re almost certain to lose in 2020 because it’s in Alabama. So, they have to gain at least four seats in a Senate map without significant pick up opportunities, just to get to the position where a vice president could act as the tie-breaking vote. Any majority they gain will likely be razor-thin, but any larger majority would have to mean that they won some races in traditionally red states where any candidate will have had to run as relative centrists.

Politically, a “public option” would be a much easier sell. Now that much of the heavy lifting of Obamacare has already been done, it could be pitched as merely creating another alternative for individuals purchasing insurance on the exchanges. This would have several advantages for Democrats over current “Medicare for all” proposals. One issue is the Congressional Budget Office. Whereas CBO would likely be harsh on the national healthcare program, adding an optional government-run plan to the exchanges would make it much easier to manipulate the CBO model.

For instance, the CBO can only score what’s put in front of them. If the legislation is written in such a way that says the government plan will be fully supported by premiums, then the CBO has to assume it will be self-sustaining once operational, after relatively small start-up costs. Furthermore, the CBO model will assume that a government plan would have lower premiums than private insurance and thus lower the amount of Obamacare subsidies being given out. In 2013, the CBO determined that adding a government plan to Obamacare would actually reduce deficits by $158 billion. Even if an updated analysis would have different assumptions,* under any measure, Democrats will be able to tout a CBO score that’s nowhere near the cost of “Medicare for all” and portray it as a reasonable compromise.

In addition, they could stave off attacks about disruption by arguing that they are simply providing another choice to consumers and preserving private insurance for those who prefer it.

To be sure, a “public option” itself would be vulnerable to attacks from both the Right and the Left. Opponents of the plan would argue (rightly, in my view) that the government option is really just another step toward the ultimate goal of a socialized healthcare system, that it would eventually have to be subsidized, that regulators would rig the game in favor of the government plan so that they could eventually do away with private insurance over time anyway, and that it will lead to many of the same access problems. Democrats would also be risking a repeat of the “if you like your healthcare plan, you can keep it,” trap, because the changes that would have to be made to create a government plan would inevitably be felt in the private market.

Liberals would likely argue that the ship of trying to work within the confines of the current system has already sailed and the only solution is to blow it up. A government-run plan funded by premiums would not be a guarantee of healthcare for all, nor would it have the bargaining power of a government-run plan that everybody is enrolled in. They’d also argue that either way, opponents are going to attack it as a government takeover, so Democrats may as well go for the whole thing and reap the benefits.

Ultimately, I think both of these lines of attack could (and likely would) be overcome. Liberals have proven time and again, most recently with Obamacare, that they’re willing to take incremental gains if it moves them in the direction of their ultimate goal. Furthermore, legislation could be written in such away that it pumps more money into Obamacare subsidies to put insurance within reach of more people and fixes issues such as the “family glitch.” If they wanted to accelerate the migration to a government-run plan, they could change Obamacare so that larger employers could use it to get coverage for their employees (though this would certainly increase the backlash). The bottom line is if something like a public option has the votes and “Medicare for all” does not, they’ll take what they can get. Sen. Bernie Sanders, I-Vt., would not be voting against a public option type plan, if it were that or nothing.

Though opposition to an optional government-run plan would be fierce, given that all the focus has been on a $32 trillion “Medicare for all” plan that would eliminate insurance that covers 177 million people, even a plan that pumped a few trillion into Obamacare and caused disruption could be portrayed as a reasonable compromise for nominally salvaging private insurance. Red-state Democrats need to be able to claim some sort of scalp, so if they can say that they fought off the more radical idea. Interestingly, the “public option” served this purpose during the Obamacare fight, ultimately playing a useful role in getting centrists Democrats on board once it was eliminated. There is no way on earth I can imagine say, a Joe Manchin-type, getting behind a “Medicare for all” plan, but I can see a scenario in which somebody like him takes the plunge with Democrats on some sort of “public option.” Also politically convenient: The transition to “Medicare for all” would take years to put in place, meaning it couldn’t be implemented in time for the 2024 presidential election, when the inevitable transition chaos would make it a giant pinata. On the other hand, given that Obamacare’s infrastructure already exists, adding a government-run plan at this point would be a much smaller lift. If passed in 2021 or early 2022, it could probably be up and running by the next presidential election.

To be sure, I wouldn’t rule out the idea that Democrats will eventually be able to create a socialized health insurance system in the U.S. In fact, the failure of Republicans to rally around an alternative is making it more and more likely that it’s where we’ll end up. But I don’t think it’s going to happen with one massive piece of legislation that uproots a mature $3.5 trillion healthcare industry in a matter of a few years.

*The analysis might be different if evaluated today, as much of the assumed deficit reduction was predicted to come from increased revenues. At the time, the CBO assumed that many employers would drop coverage and allow workers to purchase insurance on the exchanges. This, they assumed, would mean that employers would shift more compensation to salary, which is taxable, as opposed to health benefits, which are exempt from taxation. In practice, many fewer employers have stopped offering coverage under Obamacare than the CBO had assumed.