The Public Option is Not Dead Yet

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The Senate Finance Committee voted down two amendments that would have added a government run insurance plan to the Senate health care bill. Three Democrats -- Max Baucus, Kent Conrad and Blanche Lincoln -- voted against both amendments. No Republicans voted for either. That's to be expected, but it's also bad news for liberals who hitched their wagons to the public option. Still, as Billy Crystal said of Wesley in the Princess Bride, I think the plan is only mostly dead, not all dead.


Round one went to the public option opponents. But there are more rounds in this bout. Next up is the full Senate, and then the House, where a public option could conceivably slip into the statutes. As the New York Times acknowledges, there is

wider support for a government-run insurance plan in the House, where the Democratic caucus is more liberal. And if the House bill includes a public option, as Speaker Nancy Pelosi has indicated, the issue will ultimately be decided in a conference proceedings to reconcile the Senate and House bills.

Megan McArdle makes a cogent point about the constituent conundrum that moderate Democrats face:

The big remaining issue is the subsidies. Make them too big, and your constituents will murder you because their taxes will go up. Make them too small, and your constituents will murder you because they have an expensive new mandate to buy insurance. I'm not sure there is any "just right" in this scenario.

I think that's probably a good mind-read, but it's worth pointing out that those aren't the same constituents. The tax burden to pay for generous subsidies will likely be a surtax on the top one percent. But a small surtax on the rich could happen with or without a public option. Meager subsidies will squeeze the bottom quintiles for cash to pay for their mandated insurance. But, considered in a vacuum, that sounds like a good reason to consider a public option for poorer people to fall back on. The more immediate reason senators like Conrad sound nervous about the public option is that it could hurt hospital, doctor and insurance profits who already find Medicare rates too stingy.

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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