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What is the Public Option?

August 20, 2009 - by Donny Shaw

Conservatives call it a trojan horse for single-payer health care. Progressives call it the key to reform – a way to keep private companies in check and make health insurance more affordable. It’s not the only point of contention between Republicans and Democrats in Congress on health reform, but it’s the one the debate has been focused on the most, with moderates in the Senate trying to replace it with a system of non-profit insurance co-ops.

The public option as proposed in the House health care bill, is a government-run health insurance plan, like Medicare, that would compete along side private insurers in a new Health Insurance Exchange that the bill would set up. The exchange is basically a place where people who aren’t on Medicare or Medicaid and don’t have insurance through their employers would go to comparison shop for a health plan. One of the plans available on the exchange would be the public option. Like all plans on the exchange, the public plan would have to meet certain minimum standards for care – minimum services that must be covered, mental health benefits parity, a fair grievance and appeals mechanism, etc.

The public option and the private insurers on the exchange could still offer different levels of care – from catastrophic-only to comprehensive – but plans would be relatively standardized by type so that comparison shopping is easier for consumers. The exchange would be available to the public as a website and a toll-free hotline, and would be focused on making information about the plans more transparent.

Conservatives argue that the government-run public option plan would drive private insurers out of business because, not being burdened by the need to generate profit, they could offer the same level of care at a lower price. They fear that this would happen to such an extent that eventually there would not be any private insurers left. Liberals on the other hand see the competitive advantage of a public plan as a way to bring costs down throughout the industry, thereby increasing the number of affordable health insurance choices for consumers. Without the public option there will be no real change to the current system that has kept health insurance out of reach for millions of Americans, they argue.

Who’s right? The Congressional Budget Office (CBO), a politically independent, non-partisan government agency whose job is to provide economic data to Congress on the bills they propose, has done some analysis (.pdf) of the public option’s likely effects. This is as close as we can get to an unbiased, scientific take. Based on how the CBO sees the public option working, it’s safe to say that even if the conservatives are right and the goal is to crowd out the private insurers, as written into the bill, it’s not going to have that effect:

Another significant feature of the insurance exchanges is that they would include a public plan that largely pays Medicare-based rates for medical goods and services. CBO estimates that the premiums for that plan would generally be lower than the premiums of the private plans against which it would be competing. Because all plans offered in the exchanges would vary their premiums to reflect the costs incurred in each area, the difference in premiums between private plans and the public plan would vary geographically—but on average the public plan would be about 10 percent cheaper than a typical private plan offered in the exchanges. That difference in premiums is itself the net effect of differences in the major factors that affect all insurance plans’ premiums, including their payment rates to providers, their administrative costs, the degree of benefit management they apply to control spending, and the pool of enrollees they attract (the effects of which would be partly offset by the risk-adjustment provisions described above).

Enrollment in the public plan would also depend on the number of providers who chose to participate in it. Providers would not be required to participate in the public plan in order to participate in Medicare, and CBO assumed that some providers would elect not to participate in the public plan because its payment rates would be lower, on average, than private rates. Even so, CBO’s judgment is that a substantial number of providers would elect to participate in the public plan, in part because they would expect a plan run by HHS to attract substantial enrollment. Taking into account both the access to providers in the public plan and the relative premiums its enrollees would pay, CBO estimates that roughly one-third of the people obtaining subsidized coverage through the insurance exchanges would be enrolled in the public plan—so enrollment in that plan would be about 9 million or 10 million once the proposal was fully implemented. Given all of the factors in play, however, that estimate is subject to an unusually high degree of uncertainty.

This CBO report is from July. Since then, one of the three House committees with jurisdiction over the bill, the Energy and Commerce Committee, has marked up a version that would require the public option to be reimbursed on rates negotiated with the insurance industry. That would make the public option less competitive than it would be how it’s set up in the bill the CBO looked at (public option reimbursement rates based on Medicare rates). At this point, it’s unclear whether or not the Energy and Commerce Committee changes will be incorporated in the bill the House finally votes on.

If you want to read and comment on the official legislative text on the structure of the public option, it’s all in Title II, Subtitle B.

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Comments

Displaying 1-30 of 92 total comments.

Spam Comment

bassmac 12/11/2009 1:42am

So in conclusion, it is obvious that there are 4 types of politically minded people in America.

1st. Those who watch CNN and believe every word.
2nd. Those who watch FOXnews and believe every word.
3rd. Those who don’t have a clue.
4th. Those who wish they could reach out and choke the first two groups.

bassmac 12/11/2009 1:37am
in reply to happycamper Nov 08, 2009 6:07pm

Or, and I’m just spit-balling here Happycamper, you could keep your current insurance provider. That’s right. While everyone without insurance can get more affordable coverage through this bill, you could chose to stay with what you have now! That’s why they call it the public OPTION! Noticed how I capitalized the word option. This bill is suposed to be aimed at creating lower costs by providing cheaper alternatives as competition for private ran insurers. This would imply that your annual cost would be more likely to get lower, not higher.

Better idea, you could tell us all who your insured with at $1,000 a year, and we could all use your provider, too. Then, only those suckers out there who thought insurance was too expensive will spend $5,000 on Gov health care.

Have a great day

bassmac 12/11/2009 1:27am
in reply to zigman61 Aug 22, 2009 6:07am

Don’t be so literal silly rabit. Read between the lines, or make up your own as so many who have posted are doing. It’s fun. Let’s try it.

The average American familly income is $1.00 a year and health insurance costs a familly $100,000,000 a day so I just can’t seem to afford it right now.
Maybe if the Government hadn’t spent 3 Trillion dollars on semi-atractive interns and covering up innapropriate love affairs with teenage boys last week, then we could afford to simply give every familly it’s own private live-in doctor.

OMG. These posts are driving me insane. If I weren’t having so many laughs I would stop reading.

bassmac 12/11/2009 1:16am
in reply to zigman61 Aug 22, 2009 6:06am

Those countries share a common interest in health care avalability(among many other government ran programs) by equally paying slightly higher tax percentages to pay for same level care and expertise as in our great but confused country. Thier doctors are as skilled and capable as ours and also enjoy the luxuries being very well paid for thier job.

Like all things in life, there are exceptions. The anonymous reply to your question is a case in point. If you look for it, you will find it. You can find every excuse for why our current way of providing health care is better than theirs as an alternative. The opposite holds true. Reasons why their way is better can also be found. Truth is, There way and our way is diiferent and people resist change for no reason other than the unknown and uncertain. Average Americans, especially us Repubs, are afraid of change and give in easy to propaganda and words like communism.

bassmac 12/11/2009 1:03am
in reply to oderintdummetuant Aug 22, 2009 4:36pm

Oderint,
Why did you get out? If you are still in, you would have health insurance. If you retired or were medically discharged, you would be entitled to health care. The only way you are uninsured is if you got out some other way, like ETS or less than honorable discharge.

I am curious about your fealings in regards to bottom up communication and civil rights as failed Government ran projects. Are you a racist control freak? No civil rights and only you can make decisions(assuming you are a leader).(are you still unemployed?) You don’t feel that subordinates can make a positive contribution to our military’s success. You don’t believe that people of many colors and ethnic backgrounds have the same rights as middle-aged white men. Please tell me I misunderstood your point.

bassmac 12/11/2009 12:48am
in reply to Anonymous Sep 05, 2009 6:31am

If the solution were as simple as “Open up the free market, allow insurance companies to offer coverage regardless of geography ..” then why hasn’t this been done?

Has it been suggested or studied? What does your Congressman think of this idea? When you mailed him or visited his office, or called his office? When you organized a town meeting to gather support for this approach, what did your congressman think about that?

You tried some of these approaches, right?

bassmac 12/11/2009 12:34am
in reply to Anonymous Aug 22, 2009 1:36pm

Do you think denying treatment as part of the bill should be an option? If so, could you elaborate?

bassmac 12/11/2009 12:31am
in reply to bassmac Dec 11, 2009 12:31am

I’m sure you have a reason you aren’t working, so as an educated American do us a favor:(this goes for all of you, myself included) instead of bitching about how this bill isn’t going to work, or defending it with uninformed generalized statements and grossly inflated stats, let’s use our time and energy to come up with a solution that will work while keeping everyone’s best interests in mind.

Take a note from unemployed oderintdummetuant. At least he has posted an alternative. At least he is trying to spark discussion for other options.

bassmac 12/11/2009 12:31am
in reply to oderintdummetuant Aug 21, 2009 10:05am

To quote a great American, “With all do respect…” .Ricky Bobby.
So let me get this straight. You are unemployed and surfing the internet at 2:05pm on a weekday instead of looking for a job. Are you drawing unemployment checks or just getting by on the money you’ve saved not paying for health insurance. I only ask because I do have a job and I pay my taxes which helps pay for things like unemployment for people who aren’t willing to go out and get a job.

ConsumerLady 11/13/2009 12:12pm
in reply to Anonymous Oct 09, 2009 8:29am

If you are a family making 3K a month and your mortgage is 2K a month (for a small cape cod home- nothing elaborate) your car insurance is $1800 a month, electric, phone and heating oil I guess you could pay $500 a month if you chose not to feed your frickin family! you are a jerk. $500 a month is extremely expensive when you are on a limited budget. put yourself in someone elses shoes. You are being arrogant and unreasonable. Not everyone has $500 a month to pay for health insurance! How stupid can you really be?

ConsumerLady 11/13/2009 12:07pm
in reply to Anonymous Sep 01, 2009 6:25am

Most of us who have no health insurance are in this situation because we cannot afford it.. not that we choose fancy coffee and clothes and shiny new cars.. get a grip. We CANNOT afford health insurance – and 10% off is not going to make us afford it any better! I live in NJ and our taxes are the highest in the nation. I pay $1800 every six months for auto insurance (no accidents or violations for 20 plus years!) We are struggling just to put food on the table.. health insurance? puleeeze, we cannot afford it & no government plan is going to make it any more affordable. I hear that those who do not pay for this will be fined.. so who knows maybe a good many of us will be posting from prison.

ConsumerLady 11/13/2009 12:01pm
in reply to Anonymous Aug 21, 2009 6:23am
“It won’t cost tax payers anything. Just like with private insurance companies, the public plan would be funded by premiums paid by individuals.” ??? WE ARE the tax payers & We ARE the individuals. WE have to pay for this. What about those of us who just cannot afford health coverage? I cannot afford health insurance or life insurance & judging by the premiums I have been quoted, 10% off is not going to make a dent to where I could afford it anyway!.. Something is underhandedly being done. I found a website that has some pretty freaky & scary information & I just wanted to post it here http://www.h1n1666.com/ &

http://www.h1n1666.com/adverse.html Read those links & then tell me about our lovely government.

donnyshaw 11/12/2009 12:11pm
in reply to jdavis1510 Nov 12, 2009 11:31am

Yeah, the $2 billion in start up money would be from federal (taxpayer-supported) funds. But it would be fully paid back to the Treasury over a 10 year period.

jdavis1510 11/12/2009 11:31am
in reply to donnyshaw Aug 20, 2009 9:34pm

I am just wondering – Where is the 2 Billion Start up funds coming from? If not my Tax Dollars then where?

happycamper 11/08/2009 6:07pm

Well,according to the House version our insurance will cost us at least $5,000 a year,maybe more. What I have now only costs me about $1,000. Boy, I’m gonna be so much better off. I won’t even have to pick my Dr they’ll just assign me one. Wow!

kendradawn10 10/29/2009 5:36am
in reply to oderintdummetuant Aug 20, 2009 3:11pm

Well health care is very important to have and this just allows people the oppurtunity to have afforable health care. I would much rather have afforable health care compared to other things we need as an individual. People need health care and I think it is a way to compete with other states, but more of a way to help our people who need it.

Anonymous 10/27/2009 8:38pm
in reply to Anonymous Oct 01, 2009 10:45pm

I think you mean republic..

Anonymous 10/25/2009 2:35pm

Unless we have (at the very least) a public option, “reform” will not be acheived. We need to transition from the current profit making business of private health insurance to an industry that is focused on providing quality healthcare to all its citizens.

Anonymous 10/25/2009 7:17am
in reply to Anonymous Oct 19, 2009 6:47pm

Hey move to the middle east if you like Alla so much. We are tired of catering to you. MOVE

Anonymous 10/25/2009 7:14am
in reply to Anonymous Oct 19, 2009 6:47pm

Alla is the evil of America. There is no OBAMA nation. It’s the nation of the US citizen in collaboration with the President. US citizens are losing their voice and our voices should be heard!

poormanslobbyist 10/23/2009 3:04pm

The Public Option is to health insurance as the post office is to postage, so that you don’t have to pay $5 everytime you want to mail a letter. Some folks will choose UPS and FedEx (the presence of USPS didn’t put them out of business), but it’s important to have the USPS public option. I find it interesting that the “socialists” are arguing for competition, while the “capitalists” are arguing for monopolies. I have many more thoughts on this in a blog post at http://blog.poormanslobbyist.org/2009/10/public-option.html

Anonymous 10/19/2009 6:53pm
in reply to Anonymous Aug 21, 2009 6:23am

do you know how much your Emergency room visit costs? do you know, if you are diagnosed with cancer, how much your insurance will pay? how much the bill will be for you? I just came back from the doctor. No doctor accepting insurance will tell you, or can tell you your final bill because they have to be “approved” by the insurance companies. Do you know how they approve it? because I called mine, and they couldn’t, because of the codes of services that need to meet certain criteria’s. So, yeah, i will trade uncertainty for 10% cheaper uncertainty.

Anonymous 10/19/2009 6:47pm
in reply to Anonymous Oct 01, 2009 10:54pm

this is one of the best written, fair articles I have read in a long time. To bad, people with too much time, have to ruin it for everyone else. Is there not one wall where these loud mouths havent made ignorant claims!

Anonymous 10/09/2009 8:29am
in reply to Anonymous Oct 01, 2009 10:23pm

Really?? I graduated college this summer and was dropped from my mother’s health insurance plan TODAY because I’m no longer enrolled in college (Disclaimer: I graduated Summa Cum Laude. Hopefully this will dispell any notion you may possess that parallels being uninsured with laziness and a desire for handouts). My health insurer explained that I can sign up for their most basic plan which is $650 per month.

In light of budget constraints at my place of employment they can only afford to keep extending my employment as an “Intern” which does not include a benefits package. Therefore, I am left without any insurance coverage, and I can only pray that I don’t get sick or injured. This is a great system we have isn’t it?

So, to the ignorant individual that I am replying to, I would say it is better to not throw out phony statistics about healthcare costs without actually knowing the facts. It discredits your entire argument, which was very weak and juvenile to begin with.

geofrog 10/08/2009 9:07am

please remove the dictatorial practicies of the pharmaceuital and the medical insurance companies fromt he practice of medicine. Dictating to doctors what they will provide as treatment is not good medicine. Remove the influence of the medical insurance providers and the pharmaceuitical companies from the delivery of our health care system. These practicies drive the cost of medicine up and up and keep the spirial of out of control costs of medicine fueleed. Let doctors practice medicine without the non-professional dictating what he can and can not do to help an consumer seeking medical care. SSGT RET USA Joseph A DiMeco, JR !00% Disabled Veteran

Anonymous 10/01/2009 10:57pm
in reply to Anonymous Aug 20, 2009 4:01pm

EVERY EXTRA DIME YOU MAKE!!!! GIVE IT TO BIG BRO NOW!!!!! THANKS FOR VOTING!!!! SUCKA….

Anonymous 10/01/2009 10:54pm
Link Reply
+ -1
in reply to oderintdummetuant Aug 20, 2009 3:11pm

REPUBS SUCK!!! JUST PAY FOR MY HEALTH CARE AND SHUT UP!!! OBAMA IS GOD AND GOD IS OBAMA… ALLA SHALE BE PRAISED!!!!! WELCOME TO THE USSUSA THE NEW AMERICA.. YUO WORK FOR BIG BROTHER AND DON’T FORGET IT!!!!!!!!!

Anonymous 10/01/2009 10:47pm
in reply to donnyshaw Aug 21, 2009 9:48am

BILL THE CHINESE BECAUSE THEIR GONNA PAY FOR THIS HEALTH CARE BILL ANYWAYS…

Anonymous 10/01/2009 10:45pm
in reply to Anonymous Sep 05, 2009 6:22am

YOU VOTED THEM IN NOT ME…. OH WAIT, IS IT FREE??? THEN YES I VOTED THEM IN. THANK GOD I SPEAK CHINESE BECAUSE THATS WHO IS MY NEW SLAVE MASTER.. GOD SAVE THE YAUN…

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