Metro Group Inc. in no way supports any particular political view point. "Health Care blog" is a forum where both sides of the issue can state their point of view and make their case for their positions on the very important issue of Health Care Reform in the U.S.

By Kip Sullivan, JD

Both the Senate and House versions of the proposed “public option” require that corporations with expertise in health insurance “administer” the “option.” This fact received no attention until October 24 when the Washington Post reported that the “option” would “likely” be run by insurance companies. Several bloggers attempted to assure readers that this news was nothing to be concerned about. They asserted that Medicare has always contracted with insurance companies to process claims, and then leaped to the conclusion that the role of insurance companies within the “option” will be no more significant than it is within Medicare.

But this conclusion is clearly wrong if the Senate version of the “option” becomes law, and almost certainly wrong if the House version becomes law. This conclusion rests on the widespread belief that the “option” will “look like Medicare,” which is not accurate. The most important differences between Medicare and the “option” are size and the environment within which the programs will function. While Medicare enrolls 15 percent of the population, the “option” is projected to enroll somewhere between zero and 2 percent. While Medicare is a single-payer system, the “option” will function within a multiple-payer environment.

These two differences, plus provisions in the Democrats’ legislation authorizing the federal government to hire private corporations to administer the “option,” create a high risk that insurance companies and other types of corporations will play a role in the “option” that greatly exceeds the limited role they play in the traditional Medicare program. Private-sector firms will probably play a role within the “option” that closely resembles the role that defense contractors play in the production of weapons for the Pentagon. Just as Northrop Grumman, for example, carries out all tasks necessary to create a fighter plane, so private corporations (not public employees) will carry out all tasks necessary to create the “option” health insurance programs. Carrying out virtually all of the tasks necessary to establish and maintain “option” health insurance plans is obviously very different from, and more significant than, merely processing claims.

To comprehend the more dominant role insurance companies will almost certainly play within the “option” we must first disabuse ourselves of the myth that the “option” will “look like Medicare.” Although leaders of the “option” movement have vigorously promoted that claim, the claim has been demonstrably false since at least June when Democrats introduced legislation that would create tiny “option” programs that would, according to Congressional Budget Office estimates, insure no more than 10 million Americans.

Once we have determined that the “option” will be tiny, we must then ask whether a tiny “option” can be implemented as easily as Medicare was in 1966. Using just our commonsense and a rudimentary knowledge of the health insurance industry, it becomes obvious the answer is, No, a tiny “option” cannot be implemented as quickly and easily as Medicare was. Unlike Medicare, which was implemented at the national level using a few relatively inexpensive methods (such as press conferences and a public education campaign), the “option” will have to be implemented on a market-by-market basis. The “option” program will have to create one “option” program or plan for the California Bay Area market, another for the upstate New York market, and so on.

Of course, stating that the “option” will consist of numerous local plans and will, therefore, be harder to implement than Medicare was, sheds no light on whether public employees or private corporations will create and run those plans. For information on that issue, we must turn to the Democrats’ legislation. According to bills written by the Senate Health, Education, Labor and Pensions (HELP) Committee and by the House leadership (HR 3962), the Secretary of Health and Human Services will be authorized to contract with corporations “for the purpose of performing administrative functions … with respect to the public health insurance option” (as HR 3962 puts it; the HELP Committee’s bill uses nearly identical language). How we interpret the phrase “administrative functions” depends on our understanding of what has to be done to create the “option” program.

The tasks required to implement a small “option” are quite different from the tasks required to implement Medicare; the Democrats’ legislation indicates these tasks will be carried out by insurance companies and corporations with similar expertise. When we piece these facts together, we must conclude that private-sector corporations will very likely play a much greater role in the “public option” than they do in Medicare.

Read the rest of the article at Physicians for a National Health Program