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Public Option: What would it really mean for hospitals?

    For much of 2020, the elections have been overshadowed by a multitude of major world events. But with November 3rd fast approaching, the country has slowly but surely refocused its attention. And unsurprisingly, health care continues to be a central issue—if not the central issue—in both the Presidential and Congressional races.

    The reelection of President Trump would largely mean a continuation of the status quo for the health care industry, with the biggest uncertainty being around the administration’s response in the (unlikely) scenario of a full invalidation of the Affordable Care Act by the Supreme Court. A win for Biden, however, would have more far-reaching implications for the industry; most notably because of the former Vice President’s commitment to not only protecting the ACA, but building upon it through a public option.

    What a 'public option' would mean for the health care industry

    Any public option's impact will depend on two factors: (1) how many people switch to the public option, and (2) the rates paid to providers, which can vary dramatically.

    But both of these figures are tough to pin down. Estimates for switching behavior vary based on the how much the public option differs from traditional insurance and whether it's available outside of the individual market. And proposals for provider rates range from current Medicare levels to those approaching 150% of current Medicare rates (still well-lower than typical commercial rates).

    For the purposes of this analysis, we looked at a range of scenarios for Antares. Each scenario assumes that the majority of nation's remaining uninsured partake of the public option, and that the plan is financed with patient premiums with normal cost-sharing, leading to little change in overall utilization.

    If payments to providers are relatively high, premiums are likely to be higher too—and relatively few people will switch to the public option. In that scenario, the plan is net positive from the reduction of uninsured.

    But if payments are relatively low, more people will switch from commercial insurance—resulting in the worst-case scenario for most hospitals and health systems (absent major government subsidies).

    When we look at the impact for Antares, most scenarios are slightly to moderately negative because the modeled rates would still fall well below commercial levels.

    Some major caveats here:

    • Patient mix. This analysis assumes a uniform commercial population, but in reality, the impact of a public option will depend on which patients switch into the public option. For example: Do beneficiaries in the public option have high levels of chronic disease? Will they consume more procedural care?
    • Payer mix. Organizations with a higher amount of government payers, such as rural and safety net hospitals, could see an overall increase in revenue. Antares has a large number of commercially insured patients, and therefore is more likely to see an overall decline in revenue when patients shift to a lower-reimbursed public option plan.

    What to watch for

    Justice Ruth Bader Ginsburg’s passing had temporarily shifted attention to the future of the Affordable Care Act and the candidates’ stances toward coverage expansion. But President Trump’s Covid-19 diagnosis is sure to place both his administration’s response to the pandemic—as well as Vice President Joe Biden’s proposed response—squarely in the limelight in the coming days and weeks. And with the prospects of additional debates between the two candidates looking uncertain, it seems increasingly unlikely that we’ll get full clarity on Biden’s public option proposal before the election. Still, we’ll be watching to see what the President’s diagnosis means for the final days of both campaigns. One thing is for certain: health care—in some way, shape, or form—will continue to be the main headline in the final weeks of the election cycle.

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