UPDATED: Hillary finally answers the question...and her answer looks pretty good so far.

A huge shout-out to Dan Diamond and Rachana Pradhan of Politico for breaking this story:

Clinton revives support for health care 'public option'

Hillary Clinton wants to bring back the public option, offering a competing vision to Bernie Sanders’ support for a more progressive health care system.

Clinton's campaign has updated its website to note her continued support for the government-run health plan that was dropped from Obamacare during the law's drafting. The idea was popular among progressives who prefer a single-payer plan -- like the one Bernie Sanders is touting.

...A new version of Clinton’s campaign website suggests she won't try to push the public option through Congress, but instead will work with governors using existing flexibility under Obamacare "to empower states to establish a public option choice." That may be a reference to a waiver program taking effect in 2017 that lets states assert greater control over their health care systems.

If she's serious about this, this could be very interesting indeed.

For weeks now, I've noted that while Bernie Sanders's National Single Payer plan is promising way too much, way too quickly, Hillary Clinton's healthcare plans seemed to be "not nearly enough, possibly ever". I couldn't say that definitively, though, because while the proposals she has put forward would improve the ACA in various ways, none of them would really be a dramatic step forward for achieving affordable, universal coverage. I wrote up a few ideas of my own about how a Clinton administration might try to do just that, but what I've really been wanting is for Hillary herself to state flat-out just what she has in mind for not simply nipping/tucking the ACA, but substantially expanding it.

WIth this move, it sounds like Hillary may have found her way to do so, thanks to the Section 1332 State Innovation Waiver portion of the Affordable Care Act:

Section 1332 of the Affordable Care Act (ACA) permits a state to apply for a State Innovation Waiver to pursue innovative strategies for providing their residents with access to high quality, affordable health insurance while retaining the basic protections of the ACA.

State Innovation Waivers allow states to implement innovative ways to provide access to quality health care that is at least as comprehensive and affordable as would be provided absent the waiver, provides coverage to a comparable number of residents of the state as would be provided coverage absent a waiver, and does not increase the federal deficit.

State Innovation Waivers are available beginning January 1, 2017. State Innovation Waivers are approved for five-year periods, and can be renewed. Waivers must not increase the Federal deficit.

The ACA's State Innovation Waiver is one of the secret weapons which has been quietly hiding under the radar until now. It's Section 1332 which is what's allowing Colorado to attempt to move to Single Payer at the state level via their upcoming ColoradoCare Ballot Initiative.

Before I get to the Public Option stuff, let's take a look at the other changes to her healthcare page which have quietly popped up this week. I'm not 100% sure which parts were already there, but I think everything here is brand new:

• Hillary has never given up on the fight for universal coverage—and she won’t stop now. Building on the Affordable Care Act to expand coverage for millions of Americans, Hillary will:

Note that she's emphasizing the "universal coverage" part much more strongly now)

• Make premiums more affordable and lessen out-of-pocket expenses for consumers purchasing health insurance on the Obamacare exchanges. Hillary believes that in order to expand coverage for families, we need to reduce the cost of purchasing health insurance on the Affordable Care Act exchanges. Her plan will provide enhanced relief for people on the exchanges, and provide a tax credit of up to $5,000 per family to offset a portion of excessive out-of-pocket and premium costs above 5% of their income. She will enhance the premium tax credits now available through the exchanges so that those now eligible will pay less of a percentage of their income than under current law and ensure that all families purchasing on the exchange will not spend more than 8.5 percent of their income for premiums. Finally, she will fix the “family glitch” so that families can access coverage when their employer’s family plan premium is too expensive.

The $5K deductible/co-pay tax credit was already listed previously, but the beefed-up APTC subsidies are new, as is the "family glitch" fix proposal. The part I'm really interested in here, however, is this business about ensuring that "all families" who purchase on the exchange would spend under 8.5% of their income for premiums. The ACA already allows mandate penalty exemptions if the lowest-cost Bronze plan premiums cost more than 8.05% of your household income, so I'm not sure I understand what she has in mind, but it's worth watching.

UPDATE: Thanks to Andrew Sprung for clarifying the distinction here: At the moment, the ACA allows subsidized premiums to cost up to 9.6% of your household income, completely apart from the 8.05% mandate exemption. It sounds like Clinton is talking about dropping this down to 8.5%. I'm not sure how that would play into unsubsidized policies, but that's a separate issue.

• Support new incentives to encourage all states to expand Medicaid. Hillary will fight for health insurance for our lowest income residents living in every state across the nation. Hillary will follow President Obama’s proposal to allow any state that signs up for the Medicaid expansion to receive a 100 percent match for the first three years, and she will continue to look for other ways to incentivize states to expand Medicaid to meet the health needs of their most vulnerable residents.

• Invest in navigators, advertising and other outreach activities to make enrollment easier. Today, as many as 16 million people or half of all those uninsured are eligible but not enrolled in virtually free Medicaid coverage or exchange coverage for as little as $100 a month or less. Hillary will ensure anyone who wants to enroll can understand their options and do so easily, by dedicating more funding for outreach and enrollment efforts. She will invest $500 million per year in an aggressive enrollment campaign to ensure more people enroll in these extremely affordable options.

• Expand access to affordable health care to families regardless of immigration status. Hillary sponsored the Immigrant Children’s Health Improvement Act in the Senate, which later became law and allows immigrant children and pregnant women to obtain Medicaid and CHIP. She believes we should let families—regardless of immigration status—buy into the Affordable Care Act exchanges. Families who want to purchase health insurance should be able to do so.

I made suggestions regarding all three of the above points in my piece over at healthinsurance.org, although I admittedly wrote off the "undocumented immigrant expansion" part as being a bridge too far politically...at the national level, anyway.

And finally we come to the most exciting bullet point:

• Continue to support a “public option”—and work to build on the Affordable Care Act to make it possible. As she did in her 2008 campaign health plan, and consistently since then, Hillary supports a “public option” to reduce costs and broaden the choices of insurance coverage for every American. To make immediate progress toward that goal, Hillary will work with interested governors, using current flexibility under the Affordable Care Act, to empower states to establish a public option choice.

There's a lot to unpack here. First of all, it's important to note that YES, Hillary did strongly support a public option during the contentious 2009-2010 battle over Obamacare, even though she was no longer in Congress to vote on it.

Secondly, while the part that jumps out here is that she's talking about a PO at the state level, she emphasizes that this is to make immediate progress. In other words, she isn't talking about leaving it at the state level, but starting it there since there's no way in hell that the current Congress is gonna agree to a PO nationally.

So what's the story on doing this at the state level? Well, the first and most obvious item is that only perhaps a dozen or so of the most progressive-leaning states would be likely to sign onto such a plan; I could see a bunch of Northeast states like Vermont (of course), Rhode Island, Delaware, etc, along with Washington, Oregon and the big kahuna, California. Then again, as Richard Mayhew noted via Twitter a little while ago, the irony here is that the states which are most likely to come on board are the ones which need it the least, since they tend to have fairly stable markets already. On the other hand, as I noted, there may be a few red states which are in truly dire straits such as Alaska which might actually welcome a Public Option (Alaska is the one state which really is experiencing the dreaded "Death Spiral", and their legislature has been considering dramatic moves such as merging the risk pools of the individual, small group and large group markets...which, to be honest, sounds like a good idea to me anyway).

OK, so we'd only be looking at half a loaf here (well, 1/4 of a loaf, anyway). What else?

Well, there was already a lot of hand-wringing that this would be the same thing as going back to John McCain's "State Level High Risk Pool" idea which everyone hated before the ACA was passed. HOWEVER, assuming I'm understanding what Hillary has in mind here, there would be some major differences (again, thanks to Richard Mayhew for helping explain some of this to me):

• In the State-Based HRPs, the funding was done at the state leve, meaning that it was at the mercy of whoever the governor/legislature was at the time. In this case, I presume that the funding would be done at the federal level, and pretty much guaranteed assuming the waiver was approved and the requirements were met.

• In the State-Based HRPs, even when fully funded, the states never had enough money to provide enough in subsidies; as a result, the premiums/deductibles were still absurdly high, and there was still a mile-long waiting list to get into the programs. Again, here the funding would be beefed up, federal and guaranteed.

• Mayhew also notes that an ACA-approved state-level Public Option should also include the risk adjustment funding, which would mean private insurance money being transferred over to help stabilize the costs further. Imagine that: Instead of public money subsidizing private corprations, it'd be the other way around!

• The State-Based HRPs were limited to those who were high risk, which meant "adverse selection" by definition; they were insanely expensive because everyone enrolled in the program was expensive to treat by definition, making the risk pool increasingly ugly. In this case, I presume anyone (or at least a much wider population) could buy in, meaning a more stable/less expensive risk pool.

In other words, state-level public options wouldn't be as efficient/low cost as a national one (not as much economy of scale, etc), and would likely only be taken up by perhaps 1/4 of the states...but they have one major advantage over a national PO: Congress couldn't do a damned thing to stop a given state from setting it up, because it only requires two parties to agree: The state itself (governor and/or legislature)...and whoever the HHS Secretary is at the time.

Furthermore, there's nothing preventing additional states from signing on in the future, assuming the state PO's were successful. Like Medicaid expansion, I could easily see such a program spreading slowly across additional states bit by bit (grudgingly in some cases, no doubt).

And if that worked out, I believe the ACA even has provisions allowing multiple states to sign onto regional PO programs, which would improve the risk pool/economy of scale further, and so forth. Eventually you might be looking at...ta da...a national public option after all...without Congress ever having to have lifted a finger.

OK, that's getting way ahead of myself. Perhaps Hillary has something else in mind here, but that's my best read of what she's talking about...and if I have everything above correct, it's the most exciting healthcare-related idea I've seen her propose so far during the current campaign.

UPDATE: As noted by FarmBellPSU in the comments, the 1332 waivers also require that the state in question be running their own ACA exchange (I'm not sure if that means a full exchange or if a "Federally Facilitated" one the way OR/NV/HI/NM are doing it would suffice), which goes right back to the point about blue/progressive states being the ones most likely to take them up on it. Basically, the dozen states running their own full exchanges (with the exception of Idaho...and likely Kentucky) are those most likely to go for it.

I also wanted to re-emphasize something else here: People have already pointed out that setting up a public option, even at the state level, would still be a royal pain in the ass for a variety of reasons even if the state politicians were game. That's true. However, there's a big difference between something having, say, a 5% chance of success and a 0% chance, which is where I truly believe Bernie's National Single Payer plan stands. OK, call it 0.001%, but you get my point.

To put it another way: I agree that you shouldn't start negotiations on the 50-yard line. However, it's equally true that you have to at least start off inside the stadium. These ideas (or similar ones along the lines of those I've written about before) strike me as being a reasonable point in between.

UPDATE x2: A couple of months ago, before Bernie Sanders rolled out his new Single Payer plan, Hillary was blasting him because his previous SP plan (the one he introduced in Congress 3 years ago) relied on it being managed by the states, not by the feds. She pointed out that the last thing you want is for a wingnut like Greg Abbott or Scott Walker to have control over everyone's healthcare plans and funding. And yet here she is 2 months later, calling for "state-based" public options; huge hypocrite, right?

Well, no, actually. For one thing, Bernie's (previous) SP plan would have made it mandatory for every state to implement the SP law...but left a lot of control over it up to them. That's a recipe for disaster (to put it in ACA exchange terms, now that King v. Burwell is out of the way, it's a damned good thing that hostile states like Texas and Mississippi didn't implement their own exchanges after all).

For another, Bernie's (earlier) SP plan would have put everyone's healthcare coverage in the same basket: Medicare, Medicaid, the VA, employer insurance, etc...with that basket being managed by those same hostile Governors/state legislators. THAT was Hillary's major objection.

In this case, only the states which were genuinely interested would have to implement the public option, and I believe the funding would come from the federal government, not the states, which means no monkeying around with funding. Furthermore, it's a public option, not a public requirement. The entire individual market is less than 10% of the total population, and even then many people would still choose to stick with their private carrier. Let's say you have a state with 10 million people, of which 1 million are potential exchange enrollees, of whom only 500K have signed up so far. Adding a public option to that state just means that the other 500K have another option (as do the first 500K if their current policy is too steep).

In other words, even if the state does start trying to screw with it, only 5-10% of the state's population at most is at any risk of shenanigans. In addition, I'm not sure of all the details of Bernie's earlier plan, but I presume there are differences between the two in terms of how much actual managerial control the states would have over both the administration as well as the funding of the programs.

IMPORTANT UPDATE: I may be misunderstanding how the funding of the state-level Public Option would work. If the funding came from the state after all, then yeah, that does open up some of the same concerns Hillary expressed about Bernie’s 2013 SP plan. However, it’s possible that said funding would have to be legally guaranteed for the full 5 year term of the waiver, preventing an incoming legislature/governor from fucking around with it.

UPDATE: Oh, one more thing: Yes, Bernie Sanders does deserve a lot of credit for pushing Hillary on this issue. While I noted above that she has always supported a PO, it’s clear, from the fact that she waited this long to bring it up, that it wasn’t really a priority until now. Obviously Bernie pushed her on it, so she’s responding...and now she’s very much on the record about it, so it’ll be much, much harder for her to back off during the general election if she wins the nomination (or once she takes office, assuming she wins).

UPDATE x3: Just a quick follow-up to the “funding” issue above:

Even if a state-level PO would have to be “funded” by the state, it’s important to understand that this would primarily be one-time startup funding. After that, the PO would presumably have to pay for itself on the exchange market just like every other carrier. The point is that they wouldn’t require ongoing funding from the state, after the first year or so, although they might need some emergency funding injections from time to time if necessary.

In this sense, the state-level POs would amount to an improved version of the Co-Ops which were created by the ACA, but without a lot of the baggage which weighed the Co-Ops down (and I should note that while half the Co-Ops have gone belly-up, the other half are still chugging along). If done right, unlike the Co-Ops, the state-level POs would:

• Be established using one-time grants instead of loans with strict repayment terms
• Be allowed to use that start-up funding to actually advertise/promote themselves in a mature market
• Be allowed to cooperate with/coordinate with state agencies to properly target pricing and the markets
• Be able to review and learn from the mistakes made by their predecessors (the Co-Ops) in terms of things to avoid, etc.

The thing that people need to understand is that even the national public option that we all clamored for back in 2009-2010 wouldn’t have saved that much over the private market. They’d still have operational costs/overhead, though it would be much lower since they wouldn’t need to make a profit or pay their CEO $10 million/year, but you’re talking about perhaps a 5-10% savings over the private carriers, not 50%.

At the state level you might be talking 3-6% savings instead of 5-10%. However, it would still serve two other functions:

• In states like North Carolina where there’s currently only 1 carrier on the exchange, it would ensure at least some competition (and, in the emergency case where that 1 carrier drops off, would ensure at least one exchange carrier no matter what).
• It would still prevent private carriers from going crazy with their rates (although there are already other provisions of the ACA, like the 80/20 MLR rule and rate review laws in many states which help prevent this anyway).

The thing is, both of these were the primary arguments for the federal PO in the first place. At the state level they wouldn’t work as well, but it’s better than not having them at all.