Public Option Health Plan Could Lower Costs, Expand Coverage

The Urban Institute estimates the savings that come with a public option health plan, capping provider payment rates, and financial aid for the middle-class.   

The federal government could save $12 billion and add 1.2 million people to the health insurance rolls if it adopted initiatives that include a public health plan option, according to a new analysis from the Urban Institute.

The public option, along with capping provider payment rates, and offering targeted financial assistance to middle class families, would lower premiums and out-of-pocket costs by $9.2 billion.

The initiatives would also cut the cost of individual insurance premiums by $200 a month—2% of the current cost—for people earning more than $49,960 a year (400% of the federal poverty level), according to the study, which was commissioned by the Robert Wood Johnson Foundation.

"Creating a public option or capped provider payment rates along with extending financial assistance to middle-class Americans would make a significant difference in improving healthcare affordability for millions of consumers," Linda Blumberg, Institute Fellow at the Urban Institute, said in a media release.

Medicare for All and public-option health plans are getting a lot of media play as the Democratic candidates for president jockey for position, but it's almost certain that no action would be taken on either sweeping reform before then 2020 election. And even then, Democrats would likely have to control the House, the Senate, and the White House.

Former Vice President Joe Biden, currently leading Democratic presidential candidates in the polls, has rejected single-payer but he supports a public-option plan as a workable alternative. Other candidates, including Sen. Bernie Sanders, I-Vermont, are calling for Medicare for All, although the Democratic Socialist has yet to say how much it will cost, or how he'd pay for it.  

Democratic-controlled states have attempted to implement public option plans, but have been hobbled by costs and political pressure. The Connecticut House earlier this month overwhelmingly passed a public-option bill, but a watered-down version stalled in the Senate. Proponents of the legislation said it was kneecapped by powerful insurance companies that threatened to leave the state if the bill was passed.  

The Urban Institute's Blumberg said a public plan could reduce premiums in the non-group insurance market by setting payment rates for healthcare providers at Medicare levels.

Or, private insurers selling individual coverage in Affordable Care Act marketplaces could see their payment rates capped at the same levels.

Either approach would best help rural areas with scant competition among health, and low-earning, older adults who are now ineligible for premium assistance. However, the reforms would also require larger prescription drug rebates in the non-group market, the study said.

"These two reforms alone wouldn’t address every gap in America’s health care system," Blumberg said, "but would provide significant savings for people in areas where premiums tend to be higher and for some people ineligible for ACA tax credits today. Importantly, the two reforms combined would not require new sources of federal revenue."