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08.17.09 12:28 PM ET

Who Needs a Public Option?

Even without it, health care would be the greatest piece of liberal legislation in years.

The progressive political world was sent into a tizzy over the weekend as Health and Human Services Secretary Kathleen Sebelius indicated on Meet The Press that the Obama administration would be okay with a health-reform plan that doesn't include a so-called "public option." Sen. Kent Conrad (D-ND) added fuel to the fire when he reiterated both his personal opposition to such an option and his doubt that a bill featuring a public option could pass the Senate. The level of panic about this is somewhat overstated, because the administration's position hasn't really shifted, notwithstanding alarmist headlines like the administration's position hasn't really shifted notwithstanding alarmist headlines like "'Public Option' in Health Plan May Be Dropped." But more important, it's overstated because one can still easily imagine a health-reform plan that would be a monumental progressive achievement even without a public option.

It's no exaggeration to say that even without a public option, a health-care bill would be the greatest progressive legislative accomplishment in four decades.

Indeed, for all the fetishization of the public plan among liberals, it's worth emphasizing that the sort of plan being envisioned by congressional liberals would affect relatively few people. Moreover, the flipside of Barack Obama's promise that the currently insured won't be forced to change their coverage is that the currently insured also wouldn't be allowed to drop out of their current plans and opt in to a new public one.

Which isn't to say that the main plans currently being offered don't have a lot to offer the insured majority. In fact, they offer a great deal, most notably a set of consumer protections that would cap out-of-pocket health costs, guarantee access to preventive care, and prevent insurers from treating people well as long as they're healthy only to start monkeying around when they get sick. This would be a big deal. The bills in Congress also envision expanding the Medicaid program that currently serves the poor. This would only help a relatively narrow slice of the near-poor, but for those who are helped, the help would be enormous.

Finally, and critically, the plans in Congress aim to fix the broken individual market for health insurance.

Most kinds of insurance you can just go and buy for yourself. But health insurance doesn't work like that because nobody wants to sell an insurance policy to anyone who would want to buy one. The fear is that you'd let yourself go uninsured until you find our you're going to need medical care, and then go buy some insurance. This problem of so-called "adverse selection" means health insurance can only work when an employer can bundle together a big group of people, leaving the self-employed, the unemployed, and those working for small firms at a huge disadvantage. All versions of health insurance reform before Congress would offer a three-fold fix to this. First, force insurers to offer a defined set of benefits to all comers at a fixed price—no discrimination based on gender, health status, whatever. Second, fix the adverse-selection problem this causes by mandating that everyone get themselves some health insurance. Third, to fix the economic hardship this might apply to some families, offer generous subsidies to ensure affordability for all.

This would, if done correctly, more-or-less solve the problem of the uninsured. And those of us who do have insurance would be spared the insurance-related anxiety that's endemic in contemporary American life. No longer would the state of your health care need to be a dominant decision in making career choices, and no longer would the risk of job loss also be the risk of preventable death or medical bankruptcy.

The idea of the public option is that instead of the menu of choices available to consumers on this new individual insurance market ("the exchange") being restricted to existing private insurers, the government would also create a new competing entity. This is a good idea, that holds some promise for improving quality and reducing costs. But even without it, everything outlined above would still happen. That would be a huge win for the uninsured, the poor, the anxiety-stricken middle class, and ultimately for the economy as a whole. It wouldn't be an ideal health plan or the best bill you can imagine. But it's no exaggeration to say that it would be the greatest progressive legislative accomplishment in four decades, and that's nothing to sneer at.

Matthew Yglesias is a Fellow at the Center for American Progress Action Fund. He is the author of Heads in the Sand: How the Republicans Screw Up Foreign Policy and Foreign Policy Screws Up the Democrats.