The green-eyeshade meanies in the Congressional Budget Office took another whack at the public plan today, at least the one contained in the health reform bill passed by the Senate Health Education Labor and Pensions committee last June. Responding to queries from ranking member Michael Enzi (R-WY), CBO chief Doug Elmendorf noted on his blog that "premiums for the public plan would typically be comparable to the average premiums of private plans offered in the insurance exchanges."

The reason given was the HELP bill emasculated the public plan's ability to piggyback on the administrative efficiencies of Medicare and required it to be "financially self-sufficient."  

Meanwhile, it would have only a small effect on lowering overall costs, CBO said. Despite attracting "a substantial minority of enrollees" with its broad physician and hospital network, it would have a "limited" ability manage health care benefits. The only real cost savings would come in a few markets served by a limited number of private insurers where the public plan would add a "small amount of competitive pressure."

Princeton University sociologist Paul Starr has been warning for months that a poorly constructed public plan could wind up as a dumping ground for the sickest and most expensive patients. CBO today assumed that would be the case. The HELP public plan probably would:

Attract enrollees who, overall, are less healthy than average (for the same reasons it would attract a substantial number of enrollees). Although the payments received by all plans in the exchanges would be adjusted to account for differences in the health of their enrollees, the methods used to make such adjustments are imperfect. As a result, the higher costs of those less healthy enrollees in the public plan would probably be offset partially but not entirely; the rest of the added costs would be reflected in the public plan's premiums. Correspondingly, the costs and premiums of competing private plans would, on average, be slightly lower than if no public plan was available.

CBO's numbers suggest establishing a totally powerless public plan that serves as a dumping ground for the sick and near-poor may be worse than no public plan at all. Better the insurance industry should be forced to take all comers and have a tough and totally independent national regulator overseeing their behavior.