The general reaction to Harry Reid’s announcement that he is including a public option in the Senate health care reform bill, along with a State opt-out has been to praise Harry for his courage and for “standing up for the American people.” Jane Hamsher, however, expresses her misgivings about the State level opt-out, because it has the potential of denying the PO to many needy people, most probably concentrated in Red States, and she points that “the devil is in the details” of the State opt-out. We know very little about those details at this writing. But it seems likely that the States won’t be able to opt-out until after the PO is operative, most probably in 2013, and people in each State have some experience with it. Then the States would have until 2014 to opt-out.

Jane and also Jon Walker are right in emphasizing that the details of the opt-out provision are critical in evaluating the quality and likely effectiveness of Reid’s bill. But today, at least, neither has discussed a number of other critical aspects of the bill, that there is no indication that Harry Reid has even made an attempt to fix. These include the following requirements of many progressives who have been paying attention:

— We need the starting time of the PO and the exchange to be within one year. A 2013 start date makes the bill unacceptable to many progressives, since if people don’t see benefits from the bill immediately, I think there is a good chance that Democrats will lose at the polls in 2010 and 2012, and they would deserve to lose as well for failing to serve their core constituencies. The 2013 start date is rationalized by the supposed need to make the bill deficit neutral over a 10 year period since that period begins in 2010 and no Government expenses for subsidies, the planned exchange, and the PO itself wouldn’t be operative until 2013, the bill is likely to stay in the $900 billion range preferred by the President, and can be paid for in ways the Administration thinks would not be too politically controversial. Of course, the whole issue of deficit neutrality is artificial, and should not have a priority anywhere near as high as stopping the 45,000 annual deaths and the 1 million annual bankruptcies caused by the current insurance non-system. But for this centrist Administration, it evidently does have a higher priority, so progressives have a tough issue here, and still need to exert very heavy pressure on Reid, Pelosi, individual Congresspersons, and Senators, and the President to get that 2013 date moved up to 2010.

— We need the PO to be available to everyone, and not restricted only to the unemployed, and those who can’t get insurance through their employment. Without this, there is a good chance that the PO won’t be able to compete with the private insurers and won’t lower insurance prices because it won’t be able to achieve the same economies of scale. People disagree on this point. But CBO has forecast that eligibility restrictions will mean that the PO won’t have more than 10 million people enrolled in the first five years. Recent changes to the House bill, if accepted by the Senate, lift this forecast to 12.5 million. This means that the PO would have a much smaller clientele than the largest insurance companies. It would seek, with this forecast of 12.5 million, to recruit a network of providers sufficient to provide quality equal or better than the private insurers. But why would providers whose billing rates to private insurers are likely to be higher than the PO will be able to muster, and whose networks are likely to be able to provide many more customers to those providers, want to provide services to customers of the PO? If the PO is to compete with the biggest private insurers, which it needs to do, to lower insurance costs, it should at least be able to compensate for lower rates of reimbursement, by providing more customers to providers. But with the current eligibility restrictions, it won’t be able to.

— We need the PO rates to be tied to Medicare rates. Pelosi’s Medicare + 5% is OK, but we also need careful structuring of Medicare rates so that rural/urban differences don’t kill the PO in rural areas. The PO needs to be tied to Medicare rates to provide it with a bigger competitive advantage over private insurance companies in the market. But its rates must be realistic both for urban and rural environments so that it has provider networks in both types of environments. Without both of these conditions, the PO will be less competitive in the market and also less able to build the provider network necessary to attract customers. There is a delicate balance here. If it is not struck, the PO may never get off the ground and reach a critical mass of members.

In my view, the above issues are so critical for a good PO bill, that if Harry Reid doesn’t settle them in a way that strengthens the PO, I’m afraid the resulting bill, will emerge with only a window dressing PO that is dangerous to progressives and Democrats alike, because it will confirm the Republican narrative that “Government can’t solve problems.” A bill without a robust PO, is worse than no bill at all. It should be defeated by progressive Congresspersons and Senators so that next year we can give “Medicare for All”, single-payer a chance in the panicky election year environment. What rationality, and principle can’t accomplish, naked fear of defeat may.

(Also posted at the Alllifeisproblemsolving blog where there may be more comments)