Pulling out of the death spiral

So, community rating fans suggest that Edwards's plan can prevent Medicare II (a program "modeled on, but separate from Medicare") from being subjected to the adverse selection death spiral because it:

1. Requires plans to admit anyone, regardless of preexisting conditions
   
2. Requires plans to charge everyone the same
3. Requires certain minimum standards for what is covered

The first two features of community rating actually make it more likely that plans, whether public or private, will offer benefit menus that are as stingy as legally possible. Otherwise, they will attract people who are likely to have high costs. (One exception to this are benefits, like subsidized gym membership, that are attractive to people with lower expected costs.)

The third feature does limit how stingy plans can become, but this floor is less solid than you might imagine. Plans can technically meet the legal threshold while making it very difficult or annoying to actually take advantage of the mandated benefits. They also will still have incentives to spend a large portion of premiums on marketing to those with low expected costs.

Even if Medicare II were allowed to compete in this system, it would also have to respond to these pressures. If it didn't (perhaps because of political pressures), it would end up with a sicker than average pool and have to charge more or receive government subsidies (which could be implicit ones). Possibly, making it the default option or its lack of a need for profit margin could allow it to remain competitive, but that's just a hope.