As congressional committees work to craft health care reform legislation, the issue of whether or not to include a “public option” has become increasingly contentious. The details of the “public option” plans under consideration have been changing. It is key for reporters interested in health care reform to understand that not all “public options” are equal and to understand the limitations of a public option for improving access and controlling costs.

 

 

A public option is an insurance plan offered by the government that would be available to non-elderly Americans as an alternative to private insurance. Although administered by the government, the public option would resemble a private policy in that it would carry a premium and have deductibles, copayments and excluded services.

 

 

The idea of a public option is credited to Jacob Hacker, now a professor of political science at Berkeley. Hacker, in papers published in 2001 and 2007, proposed that Congress create a large Medicare-like program that would compete with the more than 1,000 private companies that sell health insurance in the U.S. Hacker’s proposal would put tens of millions of people in the program, including the uninsured and Medicaid and SCHIP (State Children’s Health Insurance Program) enrollees. It would have authority to use Medicare’s provider-reimbursement rates, and offer substantial government subsidies to individuals who choose the public option. As envisioned by Hacker, this public plan would offer competitive premiums and help control health care costs, as Medicare does, through its large size, low provider-payment rates and low overhead.

 

The Lewin Group, an insurer-owned consulting firm, reported that Hacker’s 2007 proposed public option would enroll 129 million people (50 percent of the non-elderly population) and would cut the number of uninsured to 2 million. It estimated that the public plan would have overhead costs of 3 percent of expenditures and pay doctors and hospitals 17-26 percent less than the insurance industry.

 

 

No. According to the Congressional Budget Office, the “public option” included in the House tri-committee bill might insure 10 million people; and the “public option” proposed by the Senate HELP committee (Health, Education, Labor and Pensions) is unlikely to insure anyone. Because of their small size, these “public options” will not realize any of the efficiencies of a large program and will have virtually no effect on health care costs.

 

 

The public option is envisioned as competing with private insurance companies.  Under a single payer system, the government would provide insurance for everyone, much as Medicare does now for elderly Americans. 

 

 

No. Single payer eliminates the administrative costs associated with having a system of multiple insurers. Adding a public option to our fragmented system of multiple insurers does nothing to reduce administrative complexity. The public option, unlike single payer, cannot recapture the $400 billion in administrative waste that private insurers generate in their drive to fight claims, deny care and screen out the sick. And although a public option may run more efficiently than private plans, it cannot run as efficiently as a single payer program such as Medicare, which is efficient precisely because it does not compete. It uses the Social Security system to automatically enroll everyone at age 65, disenroll them only at death, and deduct premiums from Social Security checks. In addition, a public option will not be able to bulk purchase medications and devices or use global budgets, two mechanisms by which single payer systems control overall health care expenditures.

 

 

No.  Competition in the medical insurance industry is competition to enroll healthy members and avoid paying for care. This lowers costs for the insurance company, but not for hospitals, patients or society. The addition of a public option will not change this; in fact, it may exacerbate it. Although regulators will try to prevent private insurance companies from “cherry-picking” healthy patients, leaving the sick to enroll in the public option, they have not been successful in preventing this behavior among the private plans competing in the Medicare Advantage program.