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EconomicPolicyInstitute August 18, 2009

EPI research has repeatedly shown that a public health insurance option should be the cornerstone of health care reform — it would help to lower health care costs in the long run while providing coverage to millions of the uninsured. Today, as the public option is in danger of becoming a casualty in the impassioned debate over health care reform – partly because of widespread mischaracterizations over how it would work – EPI highlights the body of research it has produced in support of a public option.

Greater competition
In the policy memo, Why a Public Insurance Plan Is Essential for Health Reform, EPI researcher Alexander Hertel-Fernandez argues that the lack of competition in the U.S. health care market is the source of the country’s uniquely high and rising health costs. A public plan option would inject some badly needed competition into the system, he writes, and “force private insurers to compete on efficiency and quality,” rather than the way they currently compete for business by trying to enroll the lowest-cost workers and businesses. Hertel-Fernandez also cites independent research showing that a public health insurance option would have significantly lower operating costs than private insurers, which could result in windfall savings for employers and their workers. Unlike private insurance companies that often earn hundreds of millions, or more, in profits each year, a public option would not have to earn profits.

Health care for all
Elise Gould, director of Health Policy Research at EPI, along with Hertel Fernandez, argue in A Public Plan Option as Backup Insurance for all Americans, that even though a majority of Americans get health insurance through their employers, millions do not. Even among full-time workers, the authors note, 17% do not have insurance: more than one-third of the uninsured work full time. They also point out that job loss and job changes often result in lost coverage, at least temporarily. Gould’s 2008 briefing paper, The Erosion of Employer-Sponsored Health Insurance, showed that the workers earning the lowest wages were least likely to have employer-sponsored coverage, although workers at all income levels have suffered declining rates of coverage in recent years.

Cost savings
In Seeing the Big Picture on Health Reform and Cost Containment, EPI economist Josh Bivens shows how those who protest about the cost of creating a public health insurance option fail to account for all the savings that would be achieved over time. Bivens shows how per capita health spending in the United States far exceeds that of any of its 20 closest international peers, while U.S. government spending on health care is the lowest of the group. He also shows how the government-operated Medicare health insurance system has done a much better job than private insurers in reining in costs. “It is possible to increase federal costs while still economizing overall,” explains Bivens.  “Sometimes you have to spend money to save money.”

Saved by the stimulus  
In other news, six months after the passage of the American Recovery and Reinvestment Act (ARRA), stimulus investments are starting to produce results. In The Recovery Package in Action, EPI Research and Policy Director John Irons and policy analyst Ethan Pollack write that “The stimulus has already been integral to keeping the economy from a full-blown nose dive.” The authors note that the economic contraction in the second quarter of 2009 was just 1%, compared with an annual rate of 6.4% in the first quarter, and multiple economic forecasters say that without the stimulus, the latest quarter would have shown a contraction of two to three percentage points. They also note that the Recovery Act saved between 500,000 and 750,000 jobs during the latest quarter.

Jobs still scarce
That good news notwithstanding, the economy remains weak and jobs are still scarce. The latest Job Openings and Labor Turnover Survey (JOLTS) report from the Bureau of Labor Statistics showed that, in June, there were nearly six unemployed workers for every one job opening in the United States. EPI President Lawrence Mishel noted that although the ratio was unchanged from May, the June JOLTS report represented the first time in more than a year that its ratio had not increased from the prior month.

The San Francisco Chronicle quoted Mishel, who stressed that talk of an economic recovery was premature since it would take several years for the economy to recover the 6.7 million payroll jobs lost during this recession. “To me, you haven’t really recovered until you have at least as many jobs as you had before the recession started,” Mishel said.

Also in the news
A Boston Herald story cited research from EPI’s John Irons explaining why the Cash for Clunkers program is a win-win scenario for the economy and the environment. The Philadelphia Inquirer quoted EPI Economist Heidi Shierholz in a story about young workers’ struggles to find jobs. “Lower levels of experience are the last hired, first fired,” Shierholz said.

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