Mitt Romney's Public Option

If you want to be a serious presidential candidate, you have to offer just enough detail in your policy proposals that it appears that you're genuinely grappling with the issues, but not so much that you give people too much material with which to find fault. To that end, Mitt Romney has offered a plan that includes the following about Medicare:

Medicare should not change for anyone in the program or soon to be in it. Nor should tax hikes be part of the solution. Reforms must honor commitments to our current seniors while giving the next generation an improved program that offers the freedom to choose what their coverage under Medicare should look like:

• Give future seniors a choice between traditional Medicare and many other health-care plans offering at least the same benefits

• Help seniors pay for the option they choose, with a level of support that ensures all can obtain the coverage they need; provide those with lower incomes with more generous assistance

• Allow beneficiaries to keep the savings from less expensive options or choose to pay more for costlier plans

• These reforms will encourage insurers to lower costs and compete on the quality of their offerings

• Gradually raise the retirement age to reflect increases in longevity

There are some bad things here—raising the eligibility age, for instance, is a terrible idea that will only increase overall health-care costs—but there's something interesting going on here as well. As Ezra Klein pointed out, Mitt is proposing the very thing Republicans fought so ardently against during the debate over the Affordable Care Act: a public option. In other words, he wants people to be able to choose between the government plan or private plans. So while he and other Republicans felt that a public option was disastrous for the non-poor and non-elderly (i.e. those not covered by Medicaid or Medicare), they think it's great for the elderly.

Let's be honest: Republicans feel private insurance is inherently superior to Medicare, and if they could entirely privatize it, they would. But they realize that proposing to do so is politically dangerous, because Medicare recipients are very happy with their coverage, much more so than people on private insurance. Which is why Mitt's proposal, like every other Republican one, tries to reassure seniors that "Medicare should not change for anyone in the program or soon to be in it." In other words, "My reform is fantastic, but seniors, you don't have to worry that you'll actually be subjected to it." But aren't liberals equally hypocritical, since they support a public option for those on private insurance, but not for those on Medicare? Well ... sort of, but not really. I think that liberals would be happy to support a system of fair competition between public and private plans, whether it's for seniors or anyone else. But the devil is in the details. Take Medicare Advantage, a program under which seniors have their Medicare benefits administered by private companies. When it began, Republicans argued that since private insurers can tap the magical power of the market, they would be able to offer better benefits at lower prices. In fact, that's not what happened: Medicare Advantage cost more, and as a result, taxpayers picked up the difference. We were paying insurance companies to administer Medicare benefits, for more than it costs to just have Medicare do it.

Fortunately, the ACA phases out those overpayments, so the Medicare Advantange insurance companies will have to sink or swim on their own without being subsidized by the government. Once that takes effect, I have no problem with Medicare Advantage. I'm skeptical that the insurers will actually be able to provide the same benefits for the cost of Medicare, given their high overhead, advertising costs, and so on. But if they can, that's fine. And the same principle should apply to insurance for people who aren't seniors: There ought to be a public plan that people can choose if they want, and if Republicans are right that it would be awful, then no one would choose it. But if Democrats are right that it would be quite good, then many people would choose it. That's the market in action.

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