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Should the States Run Public Insurance Instead?

Yes, sort of, answers our correspondent as he compares the landscape of Europe's smaller states with the 'United' ones.

A few ideas dribbling out of the Senate last week set off another flurry of debate over health care: Maybe it should be state-based! The principle appeals to Republicans because it keeps the federal government about as far as possible from running a public insurance plan. One version of the idea appeals to some Democrats as a reasonable compromise, although liberal blogger Jane Hamsher compares the "opt-out public option" scheme to bad football. "God I love Democrats," she writes. "Headed for the end zone, they pick up the ball and run it 10 yards in the wrong direction."

The principle of letting states manage health care seems OK on the surface. No European country with decent medical coverage has a population even approaching that of the United States. Germany, Britain and France are all about twice the size of California, roughly speaking. They have tens of millions of people to provide for, not hundreds of millions. And the idea of a European system analogous to an American plan — some sort of EU-wide coverage, managed from Brussels — would be nightmarish.

But the question is: What is the government's job? The Obama team keeps saying the goal of health reform is not necessarily to get Washington, D.C., into the health-insurance business; the goal is to harness national resources to make American health coverage more honest, efficient and affordable.

The only way to do such a thing is by setting standards from Washington. Whether the government runs its own insurance plan is irrelevant. But minimum coverage guidelines, handed down from on high, are essential. Germany has no government-run insurance: Its deceptively named "gesetzliche Krankenkassen," or statutory plans (more than 200 of them!), are federally regulated but privately run.

There's no reason why the U.S. can't have 50 different versions of a Washington-mandated "public option" — state-level interpretations of a strong statutory plan. There's also no reason why these state-level plans shouldn't be offered across state lines. Some German Krankenkassen are more regional than others, but they all provide a reliable level of brown-wrap coverage.

Both warring sides of the health care debate in America rave about competition, but both are hypocritical: A strong public or statutory option would of course give the current insurance industry a needed kick in the pants. But so would ending state barriers to competition. The way these ideas have broken down along a passionate left-right divide looks incomprehensible from Europe.

The American left needs to be careful about playing into the hands of corporate interests. State barriers must look just as tasty to big health care providers as a law mandating universal coverage; that's one reason both ideas have survived on Capitol Hill. Federal lawmakers need to concentrate on making denial of basic or life-saving medical procedures illegal — as it is (in theory) in Europe — and backing up the more expensive mandates with, say, pools of money for high-risk patients.

The difference between this idea and other state-level notions floated last week (like the Carper plan) is the level of Washington's insistence on basic coverage. Sen. Tom Carper of Delaware "wants to allow states to individually decide whether to create a private-insurance competitor such as a government plan and a nonprofit insurance cooperative," writes, "or to open up state-based insurance pools for government workers to every resident." European plans don't allow so much leeway. The result, in Germany and Switzerland (for example), is a field of largely identical plans where no one has to worry about having a kidney transplant denied. The plans compete on cost and a few smaller details, like dental cleaning or eyeglasses. Coverage is paid for using government-managed pools of money — a European idea that even some Republicans have warmed to.

Washington's role, in other words, can be pretty small. It has to mandate with a stronger hand than most conservatives have argued for, with more gusto than the insurance companies would prefer; then it has to organize funds. The states can do the rest.

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