My first topic is the various "public option" proposals.
First off I support a strong public option. I think it is good policy, contributes to cost control, and mitigates some of the affordability and feasibility issues that arise with an individual mandate. The strongest public option proposed so far is a national plan using Medicare payment rates and tied to participation in Medicare, administered by HHS. Ideally everyone would have access to this public plan using some type of voucher mechanism where employer contributions towards current coverage could be applied to the cost of the public plan (similar to what is proposed in the Wyden-Bennett bill). This has the maximum bang for the buck in cost control/leverage with providers, and administrative simplification. In addition any positive changes implemented in payment from the new independent MedPAC would flow through to the public option (FYI MedPAC produces many informative reports on Medicare payment and has a great series on the Medicare payment basics ).
Current State of the "Public Option" in the committee bills. Given the political landscape it seems likely that the house version will end up closer to the strongest public option proposed.
The house bill passed by Rangel's committee is the strongest version of the public options - offers a national plan using Medicare + 5% for physicians + opt out, Medicare rates for hospitals - the Energy and Commerce committee ammendment : "Require the public health insurance option to negotiate rates with providers so that the rates are not lower than Medicare rates and not higher than the average rates paid by other qualified health benefit plan offering entities" (http://www.kff.org/healthreform/upload/healthreform_sbs_full.pdf) This is much weaker.
In the Senate the HELP bill requires negotiating with providers with the "public option" plan paying no more than average payment rates of the other plans in the exchange. http://www.tnr.com/blog/the-treatment/can-states-take-care-the-public-option# The Finance committee bill so far does not have a public option and relies on State Exchanges. Maria Cantwell's amendment allows states to create a program for 133-200% of Federal Poverty Line modeled on the Basic Health plan in Washington State - this is not a public option and is more akin to SCHIP as an incremental state-run program for a small slice of people/why not just extend medicaid to 200% of FPL - arguably a better incremental measure.
State based Co-ops as proposed in the Finance bill are unlikely to work or do much for costs as proposed.
Sen. Tom Carper floated the idea of states opting to create a public option/open their public employees plan in their exchange and/or banding together with other states to form regional exchanges and public options - . There are a couple of problems with this idea one it puts the onus on the state to proactively create a public option from scratch (and prohibits them from using Medicare rates even with an added percentage), adding a bunch of states together may create some administrative efficiencies but as far as increasing leverage with providers it is not very effective (maybe on the East Coast there are some areas where it would increase leverage, but in most of the country what matters is market share in the local area that rarely spans states) . Fundamentally the problem with making provisions state based and optional is that many states do not have the institutional capacity to effectively implement them, it perpetuates the fragmentation of our health insurance system *and* there is a danger of creating unfunded mandates which state budgets are in no position to absorb,.
The flip side is the new compromise proposal gaining momentum of a national public option with states having the ability to opt-out. Even if this turns out to be a relatively weak public option I think this is far better than an optional strong state-based public option. In practice there are budgetary mechanisms that can make it extremely difficult for states to opt-out - think conditions for receiving federal transportation funds. Any state that opts-out is one that would not likely opt in to create a public option in the first place and when a strong national public option proves popular and effective it is much easier to participate in an existing program than start a new state based one.