The man who invented health care's 'public option'

Jacob Hacker, professor, Yale

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WASHINGTON (Fortune) -- As President Obama tries to hit the restart button on the health care debate next week, it's make or break time for the public option idea. That's the government-run plan that would compete with private insurers.

Moderate Democrats are pedaling back from it, and the White House has signaled a willingness to compromise as well. Yet it's easy to forget that the public option idea was itself a compromise -- first proposed in 2000 by Yale political science professor Jacob Hacker and later embraced by the Democratic presidential candidates during the 2008 primaries.

Hacker wanted to create a plan that would preserve the employer-based system but provide a safety net for the uninsured. He pointedly avoided proposing single-payer national health insurance or individualized Health Savings Accounts -- any change to the system had to be politically palatable.

So he proposed that employers be given the choice of providing coverage directly to their workers or contribute to a public plan fund for their employees. Any American without ties to the workforce could also enroll in the public option.

Somewhere along the way, the public option became either a boogeyman proxy for big government or the savior of all health care reform, depending on whom you ask. We recently spoke to Hacker to find out what he thinks of all the hoopla around his idea, and whether his academic work still has a chance of making the leap to reality.

What do you make of the fixation on the public option, both from the left and the right?

I think it's understandable that the public option has attracted a lot of attention from both sides. But I think it has also taken on an importance that has exceeded its intrinsic value. Both sides of the debate see health care reform and the way in which it's done as symbolic of how government should deal with economic insecurity in the United States.

For those who are supportive of the public option, the fact that a reform proposal that doesn't include it would be requiring individuals to obtain health insurance from the same private insurers that have gotten us into this present mess is deeply troubling. On the other side, the public option somehow symbolizes the specter that is entirely mythical that expanding coverage to all Americans is tantamount to government takeover.

It's important, as we consider what options for the public plan are being proposed, that we understand what it's meant to do. It's not meant to become the sole insurer for most Americans, but instead to provide a critical counterweight to private insurance in markets where private insurance plans are increasingly consolidated.

Some Democrats say health care reform without a public option is not worth doing. Do you agree? Is it essential to meaningful health care reform?

I think the reform proposals that are on the table would be very weak without a public plan. I could envision more comprehensive reform proposals that would be able to broaden coverage and bring down costs. The current proposals really hinge on the public plan to provide a source of long-term cost control and to limit the federal government's liability for health care.

It's a roundabout way of saying health care reform is an elastic concept. There are a lot of valuable things that can be done that would not follow the public plan. But if we are seeking to provide affordable quality care to most or all Americans, then I think a public plan is essential.

What do you think of the idea for nonprofit co-ops instead?

I think it's pretty much a joke. I don't believe that the cooperatives will be able to fulfill any of the vital goals. They're not going to be easy to create, and they're not going to be able to provide a strong counterweight to private plans.

The public option was itself a compromise, a moderation of the single-payer model -- is that right?

That's right. I thought very much of it as threading the needle between the idea of Medicare for all on the one hand, and a truly private system on the other that would be built on tax credits for individuals.

And indeed, when I first presented my proposals in 2001, I called it "Medicare Plus," the idea being there would be a new Medicare-like program that would be offered to people who didn't get coverage from employers, and employers would get the option of offering it or helping to pay for it.

If they wanted to opt out altogether, they could do that. That's one of the things that should be emphasized: The idea is not to take choices away from people but make sure that for people who really don't have choices today -- either because their employer doesn't offer coverage or their employer doesn't offer coverage that has reasonable options --there would be something else out there that would be available.

Why do you think it's so hard to pass health care reform in this country?

The most important reason we can't pass universal coverage today is we've failed to pass it in the past, and we came to rely on employer-provided health insurance. I believe this is a case where our history has put us into this trap, where we can have such wide discontent with the system and yet at the same time be unable to fix it.

I'm reminded of a column written by Dave Barry during the last heath care debate. At the conclusion of the debate, he wrote: We have decided two things beyond doubt. One is we have the best health care system in the world, and two, we have to do something about it.

I think we've arrived at a different place today. We've decided, one, our health care system is failing us. And two, we can't do anything about it. The proposal that has been advanced in Congress by Democrats is very appreciative and accommodating of the political constraints on change and very eager to make sure Americans won't see big disruptions in key aspects of their coverage and care.

But we do need some disruptions to make this work. We have to disrupt the aspects of the system that are not working. I would like to see disruptions of medical bankruptcies. I would like to see disruptions of the problems of uninsured. We should not prize stability for its own sake, and we should not prize stability when it means embracing a system that is failing so many.

So you have not given up hope on the public plan?

Not at all, not at all. I don't think we should give up hope on health care reform, and I don't think we should give up hope on having a strong public plan.

Ultimately, I have a great deal of faith the cause is just and the argument is correct. We have had many, many debates over health care that have resulted in failure, and it is not at all easy to be optimistic. But I still feel there is a real chance of victory.