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Public Plan Could Slow Healthcare Cost Increases

Janice Simmons, for HealthLeaders Media, June 29, 2009

While a public insurance plan option simultaneously has been one of the most hotly contested healthcare reform proposals, a recent report noted that a public plan as part of a comprehensive healthcare reform approach could slow healthcare cost increases more quickly over a 10-year period.

This cost decrease is not so much related to more people joining a public plan, but to increased competition that would make healthcare insurance more competitive, says Stuart Guterman, an assistant vice president with The Commonwealth Fund.

Guterman is co-author of a new study released last week that found the potential savings for families, businesses, and the federal government will vary depending on whether or not a public insurance plan option is included. This is illustrated under three different scenarios:

  • A public plan option in which healthcare providers are paid at rates falling between current Medicare rates and private plan rates
  • Another one that includes a public plan option that relates payments more closely to Medicare rates
  • An option that relies exclusively on private plans and includes no public plan.

The cumulative health system savings between 2010 and 2020—compared with projected trends for that period—would range from:

  • $3 trillion under the scenario that includes a public plan paying providers at Medicare rates in competition with private plans
  • $2 trillion for a public plan paying providers at rates halfway between current Medicare and private plan rates
  • $1.2 trillion in the private plan scenario

All three approaches would make affordable coverage available to everyone.

Each of the scenarios includes a national health insurance exchange that provides consumers with a choice of insurance plans, along with federal assistance to make coverage affordable. Other than reforms related to the public plan, the cost estimates for all three options include the same payment, system, and insurance reforms.

"In all of these proposals, more people would end up with coverage, and most of that coverage would be through their employers—as it is now," Guterman says.

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