Innovation waivers and the public option

Last week, there was an argument in comments that the public option would be the gradual glide slope to single payer.

I don’t think it would be. My objection is purely mechanical.  For the public option to be a glide slope enabler for single payer, it would have to be the overwhelmingly best deal on the Exchanges.  In some states that would be true.  In most states, it would not be.

Most public option plans were based on either a broad Medicare network at a reimbursement rate of Medicare plus 5% or Medicare plus 15% or a negoatiated network where there was a possiblity of narrower networks with reimbursement somewhere between Medicare and Medicare plus a billion%. If the public option was passed and it bargained prices to  Medicare plus five, or Medicare plus ten with a broad network, its pricing would be good in West Virginia or southwestern Georgia where there is minimal competition.  A Medicare plus ten plan with a broad network including expensive providers would be a middle of the pack Silver plan priced above the 2nd Silver subsidy points in areas with fairly robust and competetive insurance markets. In my region, all the Exchange players have plans that are cost efficient narrow networks that are priced somewhere between Medicare plus 3% and Medicare plus 7%. A public option here would be just another plan clustered with everyone else.

The next chance for progressive activists to get a public option experiment is January 1, 2017. That is the date when states can activate innovation waivers for PPACA. Innovation waivers are powerful tools as they remove the training wheels of the Exchange structure for states that think they can meet PPACA’s goals through different and locally more palatable means:

known as 2017 waivers or Wyden waivers, 1332s offer wide latitude to states for transforming their health insurance and health care delivery systems. According to the statute, states can request that the federal government waive basically every major coverage component of the ACA, including exchanges, benefit packages, and the individual and employer mandates. But the cornerstone of 1332 waivers is the financing. To fund their reforms, states can receive the aggregate amount of subsidies—including premium tax credits, cost-sharing reductions, and small business tax credits—that would have otherwise gone to the state’s residents. Depending on the size of the state, the annual payment from the federal government for alternate coverage reform could reach into the hundreds of millions or even billions of dollars.

A better name for this program might be Waivers for State Responsibility, because they don’t exempt states from accomplishing the aims of the ACA, but give them the ability (and responsibility) to fulfill the aims in a different manner while staying between certain guardrails. State reforms must ensure “affordability,” cover a “comparable” number of people as statutory ACA implementation would have, and not increase the federal deficit.

If progressive activists think that the public option will help to cover more people, and cover them cheaper, the innovation waivers are a prime point of process and political pressure. States could create local public options based on either the Medicaid network, or state Medicare providers.

The big problem is that the states where this is likely to succeed are the states that would benefit from the public option the least. It would be implemented in states which have embraced the ACA where there is already active regulation of the insurance market, where there is already significant competition at the 2nd Silver clustering point, it would be in states where the marginal gain would be real but not massive. But since the stakes are smaller and simpler, these states would be a good spot for a proof of concept test of the public option where three or five years of data could be built up for Healthcare Reform Act of 2021.

36 replies
  1. 1
    Immanentize says:

    Thank you for this post. 1332 potential was a really interesting part of the negotiations for the ACA. Why can’t the Supremes In King v Burwell rely on the soon-to-be with us 1332 procedurets as a way of keeping the exchange mandate? Roughly saying the exchange mandate only lasts until then and therefore there is no structural harm. Alternatively, they could say the exchanges are not required (or allowed) as federal entities but keep the guardrails while allowing states out of exchanges now. It’s an interesting future you have suggested.

  2. 2
    Omnes Omnibus says:


    Why can’t the Supremes In King v Burwell rely on the soon-to-be with us 1332 procedures as a way of keeping the exchange mandate?

    Why hope for a complicated ruling when a simple one would be enough? Every Circuit court that has heard one of these cases has hit the nail on the head.

    ETA: Most of them did it without having to go en banc.

  3. 3
    Immanentize says:

    @Omnes Omnibus: Oh I’m with you on what should happen. But the fact they reached out to grab a simple ruling when there was no circuit split is not encouraging (I practice in that court regarding criminal law matters and fear such weird moves).

  4. 4
    Omnes Omnibus says:

    @Immanentize: It only takes four to grant cert.

  5. 5
    Immanentize says:

    @Omnes Omnibus: i know that rule better than most. The sad correllary is that it takes five to grant a stay of execution.

    So the question in King is, which four voted to grant cert.?

  6. 6
    Omnes Omnibus says:

    @Immanentize: I have trouble believing that the Court will overturn basic principals of statutory interpretation. Roberts is smart enough to know that chaos it would generate and he has a legacy to protect. And Kennedy is an old school conservative; unless he has come completely unglued, he should have the sense to know what a decision for plaintiffs would mean.

  7. 7
    JPL says:

    @Omnes Omnibus: Bush v Gore.

    Kennedy already showed that he is not above partisan politics.

  8. 8
    Punchy says:

    Not sure we should be thinking about 2017 until July 2015. Pretty good odds that July 2015 will have us talking about death spirals and skyrocketing premiums.

  9. 9
    Bobby Thomson says:

    @Omnes Omnibus: nope. Hobby lobby and Shelby County prove conclusively that Kennedy is a first order hack and Roberts doesn’t give a shit about appearances.

  10. 10
    gene108 says:

    there was an argument in comments that the public option would be the gradual glide slope to single payer.

    There’s a subset of liberals, who view private for profit enterprise as inherently bad for society and anything that can cut back on private for profit enterprise, such as a public option or single payer, will be inherently better.

    I think the problem with a public option and with single payer – from our existing single payer experiment that is Medicare – is setting reimbursement rates high enough that it would not “shock” the health care provider system by paying substantially less than what they are getting from private insurance now.

    I think there a multiple ways to get to universal health care coverage in the USA and single payer is inherently better than other paths, especially in the case of the USA, where we would have to tear down one system, our patchwork system of private insurance, and build a new one, single payer, in its place.

    I think, if we’d started with single payer in the 1940’s or 1950’s, it’d be different, but bulldozing something that works adequately for most people, with something brand new has its own risks that usually outweigh the rewards.

  11. 11
    peach flavored shampoo says:

    And Kennedy is an old school conservative; unless he has come completely unglued, he should have the sense to know what a decision for plaintiffs would mean.

    IIRC, he voted to completely axe the ACA. Why would he vote any differently now? If he thought it was unconstitutional in 2012, pretty sure he’s going to do what it takes to kill it this time.

    Roberts is the only “open” vote, IMO.

  12. 12
    Baud says:

    @peach flavored shampoo:

    Last time Kennedy voted to repeal the ACA. Unprincipled but easy to accomplish. This time, he would be voting to make a mess of the ACA. Still don’t trust him, but it’s not the same as before.

  13. 13
    raven says:

    @Baud: You’re never going to convince these nervous Nellies.

  14. 14
    Omnes Omnibus says:

    @peach flavored shampoo:

    Why would he vote any differently now? If he thought it was unconstitutional in 2012, pretty sure he’s going to do what it takes to kill it this time.

    Perhaps because it is a completely different case based on completely different reasoning. This isn’t a case about the limits of the Commerce Clause or Congress’s power to tax, it is about baseline principles of statutory interpretations and the downstream results of a decision in favor of the plaintiffs in this case would be huge. You’ll also note that I allowed for the possibility that he has become unglued.

  15. 15
    NonyNony says:

    @Omnes Omnibus:

    Roberts is smart enough to know that chaos it would generate and he has a legacy to protect.

    Roberts refused to gut the ACA last time he had a chance. On the other hand, he could just as easily make this a “one-time only, non precedent setting” decision that Congress screwed up and could “easily” remedy their screw up by amending the law in this one case. I could see him doing that, though it would open up a hell of a can of worms as all kinds of people will come out of the woodwork thinking that they have another case no matter how much they write it as a Bush v. Gore decision that isn’t supposed to set precedent. (The one thing that holds me out for Roberts, actually, is that he’s a pro-business hack. And there apparently aren’t any business groups on the side of the plaintiffs in this one and quite a few on the side of the government. That gives me some hope.)

    And Kennedy is an old school conservative; unless he has come completely unglued, he should have the sense to know what a decision for plaintiffs would mean.

    Kennedy HAS come completely unglued. Look back at the previous ACA decision and what he signed onto. Kennedy is a nut who has some gay friends and so can be counted on to do the right thing when it comes to gay rights. But beyond that he’s become a wingnut in his old age and should be counted on to vote in the most wingnutty way possible (and when he doesn’t, you should take it as a bonus and not an expectation).

  16. 16
    Baud says:


    I have no idea how the 5 will rule. I just see no basis for predicting the outcome based on the last case.

  17. 17
    MomSense says:

    In 2010 the public option became this rallying cry for the Obama sold us out crowd whose complaints about the PPACA were often nearly as misinformed as the tea bagger loons.

    King v, Burwell really has me spooked in part because I live in a state that would be hurt by this and also because there is no sound legal or rational reason for this case to be heard.
    In Maine we have really high health care costs because we have an older population and because we are so spread out. Rural hospitals do not have enough consumers to support the services they provide and we can’t really consolidate services because the distances are just too great between hospitals. Medicaid expansion would be a huge help but that is not going to happen. And now our Givernor has a reverse Robin Hood tax scheme that is only going to cause more suffering for the same people who are being screwed over by his refusal to expand Medicaid. Our economy is lagging way behind the rest of New England, our infrastructure is in serious decay, and the opposition is completely unable to do much of anything to stop it. It’s discouraging .

  18. 18
    Omnes Omnibus says:

    @Baud: Yeah, this should be a 9-0 decision. That fact that it will not be is cause for consternation.

  19. 19
    NonyNony says:


    It takes at least 4 votes to grant cert. That means there were 4 people who took an unusual step in granting cert to a case where there wasn’t really a circuit split, and where the question at hand is a pretty dodgy interpretation that flies in the face of prior court decisions on how minor drafting errors are supposed to be handled.

    My reaction to that is that there are at least 4 votes for “gut it because reasons”, because otherwise there’s nothing interesting about this case. If Kennedy isn’t one of them, I’m hard pressed to figure out who the 4th vote to grant cert would be.

  20. 20
    Baud says:


    Isn’t the legislature Democratic? If so, the tax scheme won’t go anywhere, will it? The rest of the stuff is sad but unavoidable. Thanks Cutler and Obama!

  21. 21
    raven says:

    @Baud: No one does but it would be irresponsible. . .

  22. 22
  23. 23
    Baud says:

    @Omnes Omnibus:

    I only care about 5 votes. I’m troubled that two GOP judges on the DC circuit bought into the argument, however. It suggests that possibility that the 5 GOP justices will feel comfortable enough with that interpretation.

  24. 24
    rikyrah says:


    King v, Burwell really has me spooked in part because I live in a state that would be hurt by this and also because there is no sound legal or rational reason for this case to be heard.

    no sound or rational reason – at all.

  25. 25
    MomSense says:


    It is but not by much and honestly LePage did much better in CD1 than he should have.

    I looked at election results by precinct and it is seriously distressing. I’ve done enough of the grunt work over the years to know the composition of the precincts pretty well. Maine did not suffer from low voter turnout like most of the rest of the country. Shit is actually fucked up and bullshit here.

  26. 26
    Baud says:


    That’s sad to hear. I like Maine and Mainers. I hope they don’t choose the Kansas model.

  27. 27
    MomSense says:


    Republicans control the Senate. Dems still have the chamber but we lost seats.

  28. 28
    john fremont says:

    @gene108:Agreed about the reimbursement issues while transitioning to a public single payer system. One group of providers would get hit pretty hard going to public, not for profit insurance and that would be ambulance services, both ground and air medievac. There are many public agencies that perform this service in the US but plenty of municipalities and hospital networks contract private ambulance operators to provide this service.
    In rural areas especially, reaching a Level 1 or 2 Trauma Center within the “Golden Hour” can only be done by helicopter. In bad weather, this can be only done if the aircraft is certified to fly under those conditions, otherwise it’s a long ride in the back of an ambulance. Operating a medical helicopter is expensive enough. Operating one that is all weather capable is even more expensive.
    These operators also provide inpatient transfer services for hospital networks, for example, transferring a toddler from the local county hospital ER to the regional children’s hospital. The point is is that these ambulance operators could not provide their services just on the reimbursement rates from Medicaid and Medicare. Private insurance companies, whether for profit or not for profit, pay much better reimbursement. To cite an example, Canada, with its single payer system has about 50 air ambulances to cover the entire nation.
    The US ,on the other hand, has almost 1000 aircraft providing the same service. As far as ground ambulances the stats are pretty similar.
    Perhaps Canada doesn’t need as many ambulances is because they have many more Level 1 ER’s per a given area. In the US though, IIRC, hospital networks have consolidated ER’s in many areas thus leaving more demand for ambulance services.

  29. 29
    BBA says:

    I wonder how many votes there are to overturn Chevron v NRDC, the doctrine that courts should defer to executive interpretations of ambiguous statutes. It’s an obviously necessary rule given the realities of the modern administrative state. Of course the hard-core libertarians are against it, but they only have Thomas’s vote. What I’m wondering is whether the right wing of the court will make the calculation that Republicans will control Congress for the foreseeable future so crippling the executive branch can only hurt Democrats.

  30. 30
    jayackroyd says:


    I don’t see the public option as a glide path to single payer. I think one thing the government should provide is baseline services for products and services that have a large collective component. In some cases, state provision of the products and services will turn out to be superior, as with fire departments. (Not so much for cops; private security flourishes these days.) But in many cases–mail delivery, for instance–there would be plenty of opportunity for competition. The private sector entity would have to be better than the public entity in some respects to be profitable, but that’s often a low bar. Obvious examples are public schools, postal banking, internet services. A public option would work like that, create a minimum standard that the private sector would have to compete with.

  31. 31
    jayackroyd says:

    @MomSense: whereabouts are you? I grew up in Cumberland county.

  32. 32
    richard mayhew says:

    @Punchy: I’m talking 1/1/2017 because if any state wants to implement something significantly different as part of a Wyden Waiver for 1/1/2017, planning has to start now, and plumbing needs to start by the start of this year’s 4th quarter.

  33. 33


    I think that the necessary next step will be convincing for-profit healthcare providers that they will not be able to make the same insane profits they have been accustomed to, and they should leave the field open to nonprofits or convert back to nonprofits. I think that’s more urgent than further tweaking the insurance side right now.

  34. 34
    bvernia says:

    The following very modest proposal is somewhat off-topic, but relates enough to the public option that I’ll post it here. One lingering pain in the ass of private health insurance programs is the need to get, present, and update health care providers with current insurance information. If I switch plans (or, more likely, if changing employment or insurance company strategies compel me to switch plans), for my family of five I probably have something like 15 providers who all need to get copies of the new cards, etc. Despite the fact that magnetic strip technology has been around since the 1960s, for some reason both insurance companies and doctors offices still pass this information around on little pieces of cardboard.

    What I propose is that the US issue a single health card and, something like the Internet’s domain name system, this would be mapped to the appropriate insurance plan (federal or private), including ID number, group, etc. In addition to the primary benefit of saving everyone about a billion person-hours, it would get people used to the idea of government-linked health insurance long before they reach Medicare age.

  35. 35
    Fred Fnord says:

    @gene108: It’s always nice to see the traditions of BJ — “Anyone to the left of me must be inherently unbalanced and stupid” — being kept up. So it’s not possible that people believe that the profit motive is not the best way of dealing with health care in particular, it must just be that we are all insane rabid anti-free-market Marxists.

    How about I do one? “There’s a subset of people who believe they’re liberals, who nevertheless view any actual change in the direction of actual liberalism to be bad. In their eyes, we are now living in a liberal paradise, and if the Democrats could take over Congress and make one more appointment to the Supreme Court, then they shouldn’t change anything because everything is perfect. And anyone who thinks that there should be actual change must be insane, because after all, they’re the liberals, so they get to decide what the limits of reasonable thought on the left should be.”

  36. 36

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