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Checking In With Jacob Hacker

Jul 06, 2009

Political scientist Jacob Hacker created his signature idea for a public health insurance program a decade ago when he was a graduate student. Now, to his surprise, it has emerged as one of the most contentious issues in the health care debate . He describes the public plan as an effective way, “not… radical or untested,” to use the market to move the country toward its long-term goals of expanding health insurance coverage and bringing down spiraling costs. His rationale has been embraced by President Barack Obama and other leading Democrats, but is drawing the ire of many Republicans, insurance companies and others. Some opponents even call it a poison pill in the Democrats’ legislation.

Hacker, who teaches political science at the University of California, Berkeley, recently spoke with KHN reporter Jessica Marcy. He talked about the danger of setting an arbitrary ceiling on how much the U.S. will spend on health reform, why creating a public option is crucial to success, and why he believes the approach holds promise in bringing down insurance costs and making it easier for people to get secure coverage.

Q: You have said that placing an arbitrary ceiling of $1 trillion on the cost of health reform could do more harm than good. Why?

A: By setting an arbitrary cap on how much we spend without making clear what the priorities are upfront, we will simply bring our ambitions down to meet our cost cap rather than trying to achieve our ambitions and thereby keep the cost down.

Q: How much political pressure do you think there is to bring the cost down to $1 trillion?

A: [Those] … who wish to keep the price tag [in this range] should be willing to accept measures like a public plan. But, the reality is that the very members of Congress who are saying that we need to keep the costs down… are also saying that we shouldn’t have some of the key elements that we know are necessary to keep the costs down, such as a public plan. To me, it would be a mistake to think of the $1 trillion limit as another litmus test… because I don’t think that the price tag alone is really that crucial... Within a broad range, I think the crucial things are one, will it achieve the goals, and two, can it be financed.

Q: Compared with politicians, how concerned do you think the general public is about these cost issues?

A: Surveys suggest that Americans really want reform to happen, that they place expanding coverage at a very high priority, that they believe the government has a better capacity to control costs over time, and that they think that having a public plan competing with private insurers is a very, very important part of the legislation.

I think there is a disconnect between Washington policy and political elites and the public on this issue. For most Americans, the main thing is that health insurance is increasingly unaffordable and sometimes out of reach. They really want there to be a promise in reform that it will bring down their own costs, and make it easier for them to… have secure coverage.

Q: You have been a key proponent of a public plan, saying “if a public plan is designed properly, it will substantially help reduce the amount of money needed to finance reform.” Could you explain?

A: It’s really important to understand that the public plan has two effects. One, it will reduce the premiums for people getting coverage for the first time because those who enroll in [it] will be spending less and the federal government will be spending less to subsidize them when they get coverage. Two, the public plan is going to be critical to creating a benchmark for private plans...The public plan is a linchpin in the long-term strategy of expanding coverage while bringing down the rate of increase in cost.

Q: What would a properly designed public plan look like?

A: [It] would be national, would provide comprehensive benefits, would be built along Medicare’s broad infrastructure but separate from Medicare in crucial respects. It should be paying providers differently than Medicare does, although initially I think it should probably base its payment procedure on Medicare’s reimbursement procedures. I think it should also be competing on a completely level playing field with private insurance plans, by which I mean it should be subject to the same rules, that it should be self-sustaining, that it is funded by worker and family premiums and by the same subsidies for coverage that the private plans receive.

Q: How do you feel now that your signature idea -- the public plan -- has become central to the health care debate? Are you surprised by how contentious it has become?

A: It does surprise me because when I started to develop this idea in 2001 as a graduate student I could never have imagined that it would be [at] the heart of health care reform debate… But, on the other hand, I don’t think it’s that surprising because it is really very central to the broad vision of reform that Obama and leading Democrats have embraced. If we are going to move our nation towards a more secure foundation for coverage that allows us to control costs over time, we are going to have to have a strong public competitor that keeps an increasingly consolidated insurance industry from turning reform into another opportunity to continue with the old ways of doing business. To me, the public plan is… at the center of the debate precisely because it would represent a sharp break with the business-as-usual approach. But, it’s not – and I should be clear – a radical or untested idea. It builds on a long tradition in American commerce and American health care, of having… partnerships that involve the public and the private sectors working together and competing with each other. I think the real promise of the public plan is that it will move us to a more constructive debate about how we can use government and markets to best provide economic security to American workers and their families in an era where that economic security has dramatically eroded.

Q: Do you have any thoughts about the estimated cost of a health reform plan?

A: The reality is that many concessions are likely to have to be made to enact reform, including improving Medicare coverage for older Americans, sweetening the pot for medical provider groups and making sure that there is money up front to help struggling states with Medicaid. So [with] all those things the price tag might be… higher than what a pure bill would produce. But I think it’s realistic to expect that we could cover virtually all Americans over the next ten years for a price tag that is in the range of a trillion dollars. It’s really important to keep in mind that between $1 trillion and $1.2 trillion, we’re talking about a very small difference in health care cost spending growth over that period. What’s really important is that leaders in the House and Senate set an explicit goal for their legislation in terms of the degree to which it will reduce the number of people without health insurance and slow the growth in health costs. If that’s done, then I think that the costs to the federal government should be judged in [that] context.
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