The Public Option

by Ganesh Sitaraman

  Incremental reform of the public school day and calendar would be a solid first step toward a public option in child care. Today, some schools—but not all—provide before- and after-school care programs, which offer reasonable quality at an affordable price. In 2014, the number of slots demanded for after-care exceeded 50 percent of school-age children. But demand outstrips supply: the parents of nearly 20 million children reported that they would enroll their children in school-based after-care programs but did not have access to one.30

  Another potential reform is full-year schooling, an idea that has gained some traction. But some of the models still overlook the child care component of public education. Most “full-year” programs still operate only 180 days per year, leaving parents to cobble together care during periodic long vacations. The popular 45–15 plan, for instance, calls for forty-five days of school followed by fifteen days of vacation, repeated for four terms a year. That plan requires parents to gear up child care for four vacations of three weeks each.31

  We believe America can and should think bigger, moving toward a universal public option for child care. A public option along these lines could incorporate three elements: public infant care (for kids under three), full-day public preschool (integrated with public schools), and public before- and after-care (integrated with public schools).

  To see how the public option might work, imagine a hypothetical child, Sophie, born ten years from now, when the public option is securely in place. Both of Sophie’s parents work full-time. Her father, Will, is a nurse, and her mother, Jess, is a police officer.

  After Sophie is born, and Will and Jess have taken parental leave (ideally, paid leave for three months each—another reform that is well worth considering), Sophie is ready for day care. The local public infant care center received an automatic enrollment from the hospital when Sophie was born, and Will and Jess went online and filled out a registration (much like a public school registration) to confirm the placement. The infant care center is clean and well staffed, with dedicated rooms for newborns, young toddlers, and older toddlers. All the teachers have college degrees in early childhood education, and they tailor activities and schedules to the needs of each age group.

  When Sophie nears age three, she graduates from infant care to a guaranteed spot in her local public school’s preschool program for three- and four-year-olds. Here, too, the teachers have degrees in early childhood education, but the staff-to-child ratio is higher, because the children are older. The facility is clean and offers stimulating spaces for active play, quiet play, and pre-reading activities. The staff structures the schedule to balance rest and playtime, and they have plenty of outdoor recess and some age-appropriate field trips.

  Will and Jess need not worry about how to pay for Sophie’s care. Ideally, the public option in child care should be free, just like public schools. But the program’s costs could be reduced significantly by charging a fee on a sliding scale. For instance, the program might charge an affordable rate of a few hundred dollars a month, with tuition payments capped as a percentage of family income.

  When Sophie reaches age five, she can—just as she can today—attend her local public school kindergarten. The key difference is that Will and Jess can count on affordable, guaranteed before- and after-school care. The care programs include breakfast and dinner as part of the fee, and they provide playtime, homework help, sports, and even music lessons. These programs run until Sophie is fourteen.

  All of these programs would run year-round, Monday to Friday, with limited holiday breaks. All of them would guarantee spots to all eligible children. And all of them would have transparent, public standards for staffing, quality, and wages.

  Of course, not everyone would take up the public option. Jess’s friend Hannah sent her son to public infant care, but she preferred religious schools for her preschool and school-age children. Will’s brother, Robert, took the 100 percent private route. Busy lawyers with unpredictable hours, Robert and his wife hired a nanny, then paid for private preschool, and then a private K–12 school. Robert and his wife were able and willing to pay quite a bit for even longer school hours and super-high-end amenities, like fencing lessons and private tutors.

  We are not alone in calling for an expanded public role in child care.32 And a public option already exists for preschools in a few places. For instance, the State of Oklahoma now enrolls 75 percent of children in the public pre-K program, which requires teachers to have college degrees and pays teachers on the public school scale. The program limits class sizes to twenty children per two teachers, and it prescribes a curriculum dedicated to child development as well as academic readiness.33

  The City of Boston has also implemented a high-quality, universal pre-K program. Boston’s pre-K teachers must have the same qualifications as public school teachers and are paid on the same scale. The program operates for a full day, and evaluations have given the program high marks for the educational and emotional quality of teachers’ interactions with children.34

  The evidence on these efforts is in, and it’s enormously positive. Both the Oklahoma and Boston programs produce measurable effects on academic achievement for all groups of children, and—in an important step toward social equality—the programs help close gaps in achievement between white and minority children and between children from low-income and higher-income families.35

  The scenario we’ve just described might sound like science fiction to American parents. But about 90 percent of this public option scenario exists today in France. The French child care system is famous, and justly so. It encompasses three elements, just as in our hypothetical situation. Public crèches provide infant care to children under three. The écoles maternelles provide preschool to the three- and four-year-olds.36 For children age five and up, the French public schools take the reins.

  As in America, private options exist alongside the public, but many parents—even well-off ones—prefer the public option. Pamela Druckerman, an American journalist in Paris, was initially skeptical of “government employees changing my baby’s diapers.” But, having tried the system, she loved it and ultimately sent three children through the system from infancy on.37

  The French system isn’t perfect. In urban areas, the demand for public care, especially infant care, can outstrip demand—parents in Paris are advised to seek a place during pregnancy or adoption planning, and once they have been allocated a spot, they should claim it within ten days.38

  And, of course, not all of the features of the French system would translate readily to this side of the Atlantic. For instance, French child care—like French public culture more generally—emphasizes a shared culture rather than a heterogeneous one. So French preschoolers sit down to lunch with knives, forks, and cloth napkins. That’s kind of cute, but there is (to American eyes) a dark side to the French insistence on cultural homogeneity. For instance, French schools ban religious symbols like crosses, turbans, and head scarfs on the grounds of laïcité, the French public commitment to secularism for all.

  But none of these cultural features is necessary to the public option. Indeed, the French prohibitions on religious observance would violate our Constitution. The bigger picture is that it is entirely feasible to offer a workable and attractive public option in child care.

  Objections

  We acknowledge that a public option for child care could be costly, particularly if the cost to parents is zero. But freedom and equality are deeply valuable. Right now, the United States lags the rest of the developed world in its child care spending. In 2013, for instance, we ranked thirty-fifth among thirty-eight developed countries in spending on child care and early education as a percentage of GDP. Put another way, the United States now ranks behind Bulgaria, Slovenia, and Mexico in its public investments in young children.39

  Even in purely utilitarian terms, the cost of a public option would be recouped as parents experience less stress and children encounter healthier developmental conditions. The universa
l pre-K program in Tulsa, Oklahoma, for instance, produced benefits (including children’s eventual higher earnings, higher tax payments, and lower crime propensity) that outweighed costs by a factor of two to one.40 A proposed California universal pre-K program was projected to produce similar benefits—not even counting less easily measured benefits like improved worker productivity.41 And the Chicago economist James Heckman estimates that high-quality preschool produces a 13 percent return on investment for society.42

  A public option in child care could be a win for American business as well as for parents. Turnover and absenteeism in the workplace are tremendously costly. Secure, high-quality, and affordable child care could transform the workforce. Parents who now must leave work early or worry about a latchkey kid or a shady day care could relax and focus on their work.

  Critics might object that a public option would produce low-quality care, with kids warehoused in large, bureaucratic facilities. But public child care need not be impersonal or sterile: just as in the public schools, each teacher would interact with a small group in a small classroom, tailoring the environment to the children and to the curriculum. Studies suggest that public child care can be powerful: when the youngest children (under age three) were enrolled in Early Head Start (rather than informal care), children showed academic readiness and better behavior.43 Further, school-based preschool programs typically have higher quality and better outcomes than private ones, probably because the school-based programs “are operated under standards set by the education system.”44

  Indeed, the U.S. military has an excellent child care system that answers all these objections. The Department of Defense made child care a priority, because good child care assists military readiness by assuring parents that their children are well cared for. High-quality care is offered in regulated child development centers. And child care teachers are paid on the normal Department of Defense pay scale, which reduces turnover and ensures high-quality staffing.45

  Only one constituency has a great deal to lose: mediocre private child care providers could find themselves out of business. But that should be counted on the plus side, because it would fix one of the key pathologies of the private market in child care, which is the quality problem. A public option would provide a baseline to all parents. Private providers could compete if they had something additional to offer—whether better amenities, religious education, or something else. The net losers would be the low-quality, low-cost operations that too many parents use today because cost and convenience must take priority over quality. With child care as close as the local public school, no longer would parents scramble for a slot in a cheap, local day care and cross their fingers on matters of safety and quality.

  Finally, a common rap on universal preschool comes from conservatives, who say (in effect), “We’ve already tried it, and it’s failed.”46 Many of these critics have in mind the Head Start program, which for several decades has provided government-funded preschool to disadvantaged children. In fact, many studies have found that the Head Start program improves children’s health and behavior and can foster lasting academic progress and raise high school graduation rates.47 The controversial part comes when studies measure Head Start’s cognitive impacts (that is, the program’s effect on children’s IQ scores). Although studies have found that Head Start produces short-run cognitive gains, these effects tend to fade out after the end of the program.48

  Some critics conclude that cognitive fade-out and modest behavioral and social benefits prove that Head Start—and public preschool more generally—doesn’t work. But that’s a wild overreading of the social science evidence. For one thing, many Head Start programs are only short-day and short-term, and they serve a very disadvantaged group of kids. So it’s actually kind of amazing that they produce the lasting social and behavioral benefits they do. For another, studies have shown that more intensive, higher-quality preschools can produce major improvements in a range of educational and life outcomes, including educational attainment and adult earnings.49

  But the Head Start debate is mostly a distraction when it comes to thinking about a universal public option for child care. The intense focus on cognitive fade-out might be critical if preschool were valuable only as an IQ booster. When we take a wider perspective, preschool serves a critical function as quality child care, which benefits parents and kids. Whether or not such programs boost IQ over the long term, they provide safe, stimulating care every day that they’re open.

  11

  Health Care

  “I did not come to Washington to hurt people.” With statements like that one (from Senator Shelley Moore Capito, a Republican from West Virginia), the effort to completely repeal Obamacare in the summer of 2017 died. For seven years, ever since the passage of the Affordable Care Act in 2010, Republicans fought the nation’s new health care law tooth and nail—in Congress, in states across the country, and in the courts. With the election of President Donald Trump in 2016 and majorities in the House of Representatives and the Senate, Republicans were poised to kill the signature achievement of President Barack Obama.

  Republicans spent months attempting to draft a bill that could pass, only to find that their reform efforts would result in north of 15 million Americans losing health insurance, massive tax cuts for the wealthiest Americans, and a disaster in the insurance markets. Every time they tried to pivot to a different strategy for repealing Obamacare root and branch, they found themselves trapped between bad and worse options.1

  A series of close but decisive negative votes in July 2017 left Obamacare in place. Senator John McCain, recovering from brain surgery, cast the vote that “drove a long knife through the cold heart” of efforts to repeal the Affordable Care Act.2 And just like that, in a matter of weeks, the seven-year effort to repeal the Affordable Care Act was over. Congress was left with only the power to force through a repeal of Obamacare’s tax penalty provision, and the vast majority of the Affordable Care Act remained as the law of the land.

  Why was it so hard for Republicans to repeal and replace Obamacare? For that matter, why was it so hard for Democrats to pass Obamacare? And now that Obamacare lives on, how can policy makers address the high cost of health care and the millions who remain uninsured? Perhaps predictably, we think public options will play a big part in the unfolding story. But before we get there, we need to start with an understanding of the past, present, and structure of the American health care system.

  The Jumble of American Health Care

  America’s health care system defies logic and common sense. The jumble of providers and insurers, public and private, eligible and ineligible patients reflects generations of layering policy on top of policy, with attempts at progress constrained by the realities of politics. So before we can talk about a public option, we need a brief historical tour of health insurance in the United States.

  In the Progressive Era of the early 1900s, what limited health insurance there was operated through associations. Some unions covered their members through health care funds, and Montgomery Ward offered a limited program to its employees starting in 1910. The origins of modern American health insurance are usually pegged to the year 1929, when Baylor University Hospital created a prepaid coverage program for hospital care. The Baylor model spread, and by the end of the 1930s, the American Hospital Association was using a Blue Cross symbol as a way to brand these programs. At the same time, state medical associations started programs for non-hospital care, like office visits and house calls. These became known as Blue Shield plans.3

  But the critical moment in the creation of America’s health care system was World War II. Prior to the war, health insurance was expanding quickly as a benefit of employment. During the war, the government established price and wage controls to prevent the economy from going off the rails. As a result, if companies wanted to recruit workers, they couldn’t entice them with higher wages. Companies therefore provided health insurance as a benefit because it was excluded from wage control
s.4 Predictably, the number of Americans with employer-based health insurance continued to increase. After the war, Harry Truman attempted to push for a national health care system, like the ones that countries in reconstructing Western Europe were adopting. But Truman’s efforts failed, and America instead doubled down on the employer-based system.

  In the decade after the war, there were three moments that turned out to be decisive in entrenching the employer-based system. First, in 1945, the War Labor Board ruled that when the war was over and there was no longer a shortfall in labor, employers couldn’t back out of providing health insurance. They had agreed to it by contract and had to keep that commitment. Second, the National Labor Relations Board ruled in 1949 that unions could negotiate for health insurance and other benefits during the collective bargaining process. And finally, in 1954, the IRS determined that money paid for health insurance was excluded from workers’ taxable income.5

  Looking back, this last change was perhaps the most important, although it seemed incremental enough at the time. The IRS decision meant that neither workers nor employers would pay taxes on employee compensation paid in the form of health benefits. The perhaps unintended result was that an extra dollar of (tax-free) health benefits was worth more to workers than an extra dollar in (taxable) wages. That might seem like an innocuous benefit, a smallish giveaway to nudge employers into insuring their workers. But it opened up a Pandora’s box. Among other pathologies, the tax benefit encourages more and more expensive health insurance policies. And the federal subsidy is upside-down, shoveling more dollars to high earners than to low earners.6

  Taken as a whole, the employer-based system America backed into distorts not only the health care system but the economy at large. The system tends to work for well-paid workers at big businesses, which can offer coverage. But it isn’t great for small businesses or individuals, who have to buy health insurance on the market without any bulk discount.7 The system subsidizes expensive “Cadillac” plans. At the same time, it leaves out (or underinsures) the self-employed and low-paid workers. The employer system can also lock workers into their jobs because people don’t want to risk losing their health insurance. Would-be entrepreneurs face a double whammy: they not only lose the security of employer-based coverage but must also throw themselves on the mercy of the uncertain market for individual policies.