The second problem’s situation of “after-the-fact, event-driven payment under an acute care model for a population increasingly affected by chronic disease” does indeed have to be addressed. Some private (mostly not-for-profit) systems have addressed this concern in imaginative ways. As has, for that matter, the federal government’s VA healthcare system.

Goldsmith’s third concern regarding CMS bandwidth is a false one. It would be reasonable, and in fact essential, to assume that any new public plan would have to be self-supporting as far as staffing and other resources. Such concerns are unrelated to the “starve the beast” philosophy of CMS funding during the past several years from Republican legislators and administrations. Although its design was misguided, the operation of Medicare Part D demonstrates some logistical ingenuity in this regard.

Goldsmith’s fourth problem regarding the private insurance system is unrelated to the presence of a public plan. As he admits, the losses are due to the current economic situation, and not due to the presence of any competitor. The unspoken message is that “operating margin” also includes the aforementioned returns to shareholders from for-profit insurers.

I entirely agree that “If we want to consider seriously a single-payer option, which would involve deliberately sunsetting the private health insurance industry, let’s have that discussion up front and see where it leads.” However, to insinuate that any flavor of a public plan would lead to “back[ing] into a single-payer system” is not justified.

As Paul Krugman recently observed in the New York Times, proposed “concessions from the industry”, though newly minted, are already illusory.

Made acknowledgement of the questions about Lewin (“even partially accurate”). My main point is: setting up this plan will be a diversion of energy from the truly essential task of fixing the main public plan we already have. Medicare is the private insurance cost benchmark already. We don’t need to invent a new public plan to exert leverage on private insurance rate structures.

Opening eligibility to Medicare for boomers won’t risk taking 20-40 million existing customers from private insurers. 5-7 million is probably manageable. Key is: both public and private insurance will have to expand in order to accommodate the uninsured. How do we do this without inadvertently wrecking the less durable part of the private insurance market? There is just too much uncertainty about how to “enter” the commercial portion of the market to make it worth the risks.

Over the past three decades, the rate of health spending growth has been similar in Medicare and the private sector. The CBO reports that the excess growth in Medicare spending per beneficiary was slightly greater than excess growth in private sector spending from 1975 to 2005 – 2.4% per year for Medicare, compared to 2.0% for the private sector, with the same 0.4% gap for the 1990 to 2005 period – 1.8% in Medicare compared to 1.4% in private spending. By contrast, other researchers have found that Medicare spending growth per beneficiary was slightly lower than spending growth per privately insured person over the 1970 to 2000 time period.

Kronick then goes on to discuss various reasons why their rates of increase are about the same, and why Medicare lags the private sector (the most interesting part of his discussion; he claims private sector cost control and cost increases drive Medicare changes, not the other way around as is usually inferred), and concludes that both sectors have much to learn from each other in how to control costs.

The Lewin estimate of public plan premiums 30 percent below those of private plans is almost certainly exaggerated, due to its dependence on raw payment rates. The 30 percent figure is at odds with the experience of Medicare Advantage, in which the average differential is only 14 percent and some plans’ initial bids are below FFS projections. It also overstates private sector administrative costs (insurance exchange pools should be similar to large groups) and understates or ignores differences in utilization due to private plan UR and other controls (a point that Jeff makes in the context of his remarks about the Kronick paper).

Kronick’s spending growth numbers, taken from CBO data, seem to be at odds with CMS national health care expenditure figures and also (as he notes) with other researchers’ figures. And, as always, it is possible to select a different span of years for data analysis and reach a different conclusion. Even assuming that the CBO growth rates are accurate, some part of the differential may be due to differences between the two populations and the resulting medical trends in the care provided.

One risk not mentioned by Jeff is that of implementing a public plan in combination with a play-or-pay mandate (still the political favorite, in various guises). The more financially attractive the public plan, the more employers who will dump their group coverage. Since almost all play-or-pay proposals assume that players’ premiums will be higher than payers’ payments, the result is likely to be a further shortfall in reform funding.

In spite of my agreement with Jeff’s basic conclusion about the risks of a public plan, I found his suggested alternative options a little puzzling. Allowing the over-55s to buy into Medicare sounds like a public plan to me, while expanding SCHIP puts more pressure on private plans that already charge below market rates for SCHIP eligibles. It’s hard to disagree with his recommendation for on-line enrollment in an insurance exchange, but the real savings from an exchange will come from price competition, not IT (and as a former CIO, I wouldn’t want to bet health care reform on a government-inspired electronic exchange).