Opt-out clause creates 'incentive' for conservative states to harm public health care, Maddow argues

The opt-out clause now included in the Senate's version of health care reform could cause the entire public option to fail, because it would reduce its ability to keep costs down, MSNBC's Rachel Maddow told viewers Monday night.

Because the version of public health care currently being proposed would cover only the uninsured, and only in places where state legislatures don't opt out of it, the public health insurance plan may not have enough participants to successfully reduce health care costs, Maddow explained.

As Maddow's guest, Sen. Ron Wyden of Oregon, explained, the public option as it is currently proposed would not cover more than 90 percent of Americans. And that fact, Maddow argued, could cause the public system to fail.

"One of the main arguments for the public option is that it would be big, and it would not only have the potential to give people another option at the consumer level, another choice of whom you get your insurance from, it would also -- because it would be big -- have the potential to save the country a lot of money on health care," Maddow said.

"Part of the reason it would save money is that, if it's big enough, it can spread the insurance risk among that many more people. It also needs to be a big enough player in the marketplace to be able to bargain effectively to keep costs down. If they only take up a really small part of the market, they're not going to have much bargaining power with the people who control how high health costs are.

"The smaller the number of people that are allowed to participate in the public option, the more you restrict who can get it based on things like where people live or whether or not they already have insurance, the less effective it's going to be. The bigger it is, the more effective it's going to be at keeping costs down."

"So, politically, what has been created is an incentive in which conservative politicians can say, at the state level, 'The public option won't work.' And if enough of those conservative politicians can persuade their states to opt out of it, then that prediction it won't work could become a self-fulfilling prophecy," Maddow concluded.

But some observers say that getting states to opt out of a public option would be difficult, because of the negative optics that would come with denying people health care options. Writing in the New York Times earlier this month, columnist Paul Krugman suggested that the opt-out would force conservative state governors into an uncomfortable position.

"The idea of putting red-state governors on the spot, having to decide whether to deny their voters cheaper policies, definitely has some appeal," Krugman wrote.

Speaking on The Rachel Maddow Show, Sen. Wyden said it's not too late to change the Senate bill so that the public option can work more effectively. The Oregon Democrat praised Senate Majority Leader Harry Reid for his announcement yesterday that a public option would be included in the Senate's health reform bill, but criticized that public option in its current form.

"I continue to be concerned that the way this proposal is written, more than 90 percent of Americans -- seven years after the bill becomes law -- won't be able to hold insurance companies accountable, they won't be able to get the public option at the exchange, the marketplace, nor will they get additional private choices," Wyden said.

But "we have a lot of opportunities to turn this around," the senator added.

This video is from MSNBC's The Rachel Maddow Show, broadcast Oct. 26, 2009.

Download video via RawReplay.com