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December 6, 2019

How much would a 'public option' disrupt health care? More than you might think.

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    In the Democratic presidential debates, public option health plans are being positioned as more "moderate" and less "disruptive" alternatives to a single-payer proposals such as Medicare for All—but what's being lost in that framing is just how disruptive public option plans would be to the current system, Margot Sanger-Katz reports for the New York Times' "The Upshot."

    Where the 2020 Democratic candidates stand on health policy

    The rise of public option

    For some, the Medicare-for-All health plans proposed by Sens. Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.) that would eliminate private insurance entirely are "too disruptive," Sanger-Katz writes. "A government plan for everyone, the argument goes, would mean that tens of millions of Americans would have to give up health insurance they like."

    As an alternative, other Democratic candidates such as former Vice President Joe Biden and South Bend, Indiana, Mayor Pete Buttigieg (D) are pushing so-called "public-option" proposals, which would preserve the private insurance market while allowing people to choose Medicare coverage if they want it. In other words, "if you like your private insurance, you can keep it," Biden has said.

    While nearly all of the Democratic presidential candidates in some form have backed Medicare for All, many know are shifting their stances to public-option plans, which surveys suggest may be more palatable to the public, Sanger-Katz reports.

    The potential pitfalls of the public option

    But, while a public option might be less disruptive than Medicare for All, an "inexpensive and attractive" version of the program could still "shake up the private market and also wind up erasing some current insurance arrangements," Sanger-Katz writes.

    Larry Levitt, EVP for health policy at the Kaiser Family Foundation, explained, "The political appeal of the public option is it preserves the choice of private insurance." He continued, "But the better it works, then the less likely it is to actually preserve a private insurance market."

    For instance, if the public option is linked to Medicare, doctors who accept Medicare would also have to accept public option patients, Sanger-Katz writes. As a result, the public option could have an advantage in negotiating larger provider networks and lower prices for care. Over time, the public options could become a more appealing coverage options to patients than private insurance, Sanger-Katz writes.

    A public option also would give employees a new lower cost option to their work-based health insurance coverage. "Some workers, particularly those whose low incomes would qualify them for financial assistance in buying a public plan, might shift over," Sanger-Katz writes.

    All in all, the private insurance market would have to lower prices or offer more services in order to compete with the lower-priced public option plans. "Insurers would have to adjust" or risk "los[ing] a lot of customers," Sanger-Katz writes.

    Under such a competitive public option, providers also would have to adjust to potentially lower reimbursement rates, Sanger-Katz writes, as the public option may be more inclined to keep rates closer to those offered by Medicare, rather than the higher rates typically paid by private insurers. 

    "Conversely, a public option that is expensive and unattractive might not do much good at all," Sanger-Katz writes. She explains that, because the government covers so many beneficiaries, it reimburses doctors and hospitals for Medicare patients at lower rates than private insurance. "A public option, by contrast, would cover a smaller population at first, and might have to negotiate with hospitals for good deals, just as other insurance companies do," Sanger-Katz writes. That means the public option, at least initially, could "look a lot like existing insurance: pretty expensive, and covering a limited set of doctors and hospitals."

    Overall, Sanger-Katz concludes that "the effects [of a public option] might be less significant than under 'Medicare for All,' but they would tilt in the same direction" (Sanger-Katz, "The Upshot," New York Times, 12/3).

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