The 6% Solution

If you represented a segment of American business that controlled 6% of our gross domestic product – that’s well over $700 billion – and someone wanted to introduce a zero-profit competitor into the market, how would you feel? Would you muster as much Congressional support as you could? Create issues that would inflame grassroots’ sentiments? Even if you had to stretch the truth? Is it about “survival”?

With healthcare costs consistently rising at a multiple of the general cost of living, with giant companies literally collapsed by the cost of committed healthcare and pension benefits (look at the automakers!), as the cost of compensating civil servants skyrockets beyond affordability because of generous healthcare fringe benefits and with about 47 million (and rising) Americans without any healthcare coverage, what is the path to manage costs? If the government is going to subsidize healthcare at some level – beyond Medicaid and Medicare – should it subsidize an expensive system with a large profit factor or should it create an environment where costs are pressured downwards?

With a healthcare commitment that sucks up 16% of our GDP (including the above 6% in private care administrative costs that includes our gigantic health insurance companies), what is it worth to keep what’s left (after Medicare and Medicaid) in the profit-driven private health insurance sector? Despite all the claims that bureaucracies can’t get the job done, will be callous (“death panels” would limit life-saving benefits to the elderly, critics claim without much justification), and that governments tend to be inefficient, experience in places like the UK, Canada and even Massachusetts suggests that government-run programs actually cost less.

President Obama suggested the “public option,” a stripped-down basic “non-profit” healthcare plan provided and administered directly by the government, as a market alternative to private plans. He argued that the mere existence of such a public plan, cost-efficient because of the lack of a need to generate profits, would have created a general cost-cutting market pressure on the better and more complete “for profit” plans offered by private health insurance carriers. This would be an option in addition to private plans, not a substitute for such plans if people prefer the private path.

There has been a profound pressure from heavy campaign contributors in the private healthcare sector. Angry television commentators, protests at town hall meetings and a plethora of disinformation abound. The healthcare industry’s publicity arms are highly effective, and their behind-the-scenes battle to plant negative stories about the “public option” has forced some Democrats, maybe even the President, to rethink whether or not requiring such a public option can be passed against this well-funded opposition. The very viability of national healthcare might not survive this onslaught. Traditional healthcare providers argue that the ability of the government to “pool” large numbers of people into groups – that can take larger masses of customers to create economic leverage in order to negotiate better terms with private health insurance carriers – is sufficient to pressure the downward cost on healthcare costs.

That’s the “public option” debate in a nutshell. White House press secretary Robert Gibbs: “The goals are choice and competition. [The President’s] preference is a public option. If there are other ideas, he's happy to look at them.” What’s your call?

I’m Peter Dekom, and I approve this message.