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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 61-90 of 92 total comments.

moonlitwomyn 08/20/2009 5:17pm

Continuatin of previous post..Go out to yahoo France, Britain, Germany, or Canada, and talk to the people who live there. It’s time for this to stop. It’s time to use the internet and put the vote to the people. With all due respect…. Our Senators and Congress People have no right to make such a personal decision for us. I don’t remember being given the opportunity to vote on the type or level of healthcare they enjoy. Or… We can continue to allow 565 (or whatever) people on Capital Hill, to continue making the decisions about how 200 million of us will obtain healthcare. Now. If that isn’t socialism…. I don’t know what is! UNIVERSAL HEALTHCARE NOW!!!

Anonymous 08/21/2009 5:47am
in reply to Anonymous Aug 20, 2009 4:01pm

Anonymous posted on Aug 20, 2009 8:01pm that if a public option was adopted then why not a public option on everything? Gas, Food, clothing, vehicles and public works.

What he (she?) isn’t taking into consideration is the fact that a very large number of people don’t consider health insurance a very high priority; particularly many younger people who are still very healthy and not in need of any full-time coverage. They would just as soon pay for medical attention as needed, infrequently as it may be. You just can’t apply those criteria to the other items Anonymous mentioned such as Gas, food, clothing, etc. as you need all of those things ALL of the time; it’s like comparing apples to aadvarks.

Also anonymous

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 08/23/2009 8:37am
in reply to donnyshaw Aug 20, 2009 9:34pm

Private insurance companies set their premiums based on market conditions and not government fiat. The price of the public option will be set to undercut all private insurance; anything else will make it appear that the government is ignoring their ‘social obligation’ or some such nonsense. The plan will never make a profit and the tax payers will be saddled with the difference. Like Amtrak, the USPS, etc., we the people will pick up the tab when the plan cannot afford to repay these startup funds. Your assertion that the tax payers will not pay anything betrays a breathtaking ignorance in the way a free market actually works.

If you wish to know why prices are out of control at the moment, take a look at how the government is already interfering in the health care market. We should be reducing or eliminating government involvement rather than greatly increasing it.

brightbird49 08/28/2009 12:14pm
in reply to Anonymous Aug 21, 2009 9:38am

What makes you think that people can afford to buy an insurance plan that is only 10% cheaper than a private one? Most of those who are uninsured are uninsured because they don’t want to spend the money on health insurance. They will spend money on designer coffee every day and fancy cars but stop at spending the same on health insurance. Another portion are uninsured because they are illegal aliens and shouldn’t have access to our health insurance. Not everyone who doesn’t have health insurance is complaining about it. Everyone just wants everything for free. It can’t happen in a Capitalist nation but our president wants us to be a Socialist nation. Where has Socialism every worked well for the common person?

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.

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.

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.

donnyshaw 08/20/2009 9:34pm
in reply to Anonymous Aug 20, 2009 4:01pm

It won’t cost tax payers anything. Just like with private insurance companies, the public plan would be funded by premiums paid by individuals. The bill would set aside $2 billion in start-up funds, but it specifies that that money would be paid back over a ten year period.

If you’re asking about premiums for individual plans under the public option, that isn’t set under the bill. That would be decided on by the Secretary of Health and Human Services when the public option takes effect. The CBO report quoted above says, “on average the public plan would be about 10 percent cheaper than a typical private plan.”

Anonymous 09/01/2009 6:25am
in reply to brightbird49 Aug 28, 2009 12:14pm

I have any family members who are uninsured…and its not because they immigrated here or because they choose to spend their money on other things like starbucks or fancy cars…for example: My aunt and uncle are fairly successful organic farmers in VT, but they cannot afford insurance. It would cost them over 1,500 dollars per month, which is insane when they only make around 30-40 thousand a year. They are extremely frugal and have had the same car for almost 10 years, even though it is falling apart. My aunt has had to decide whether she can afford to see a specialist about her osteoporosis, or pay her mortgage.

If you do not have insurance in a group plan through your job, you are basically screwed, because insurance companies charge ridiculous amounts to individuals.

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?

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?

oderintdummetuant 08/22/2009 4:29pm
in reply to Anonymous Aug 22, 2009 1:36pm

Well anonymous if in fact those are my choices then I choose to not rationally reduce costs by requiring everyone to pay for it. I would prefer that cost stay high, perhaps we’ll see Darwin proven right. Also, no options are off the table. Everything is up for discussion thats the beauty of this country. Every elected politicians job is on the table, just like socialism or at least its starting point is on the table. Believe it or not I truly hope you enjoy victory in your pursuits, just so your grand kids know who to blame.

Anonymous 08/22/2009 1:36pm
in reply to oderintdummetuant Aug 21, 2009 11:11am

Un-reimbursed costs take three forms, those who have no income and incur costs, those who have incomes but incur costs greater than they can afford, and those who have incomes that could otherwise afford insurance, but who have not purchased it. This latter group generally consists of younger people, many of whom earn in excess of $75k, but, because of the hubris of youth, think they are medically invulnerable, when, as a class they are not.

Regardless, the law makes clear that medical treatment cannot be denied. It cannot be denied to those who cannot pay, and it cannot be denied to illegal immigrants. Hence, whether you like it or not, you pay those costs. At issue is whether you are willing to rationally reduce the costs by requiring everyone to obtain insurance to help pay for it.

The option of denying treatment to those who cannot or did not pay, is not on the table and is not up for discussion in any of these bills.

Anonymous 08/21/2009 6:51am

I’m sure they can all think of better ways to reform the insurance companies and provide for health competition. If they want to cover the poor, they have Medicaid. You could even change Medicaid to include a low-fee option and a supplemental option to help those people who have lost jobs and have too high deductibles.

Read the bill – at www.FaithfulinPrayer.wordpress.com

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?

Anonymous 08/22/2009 1:27pm
in reply to donnyshaw Aug 21, 2009 10:14am

Donny, analysis presented here http://commonwealthfund.org/~/media/Files/Publications/Fund%20Report/2009/Jun/Fork%20in%20the%20Road/PDF_1290_Davis_Fork_in_the_road_FINAL_v2.pdf
by the CommonWealth fund suggests that Health costs of consumers would be reduced by nearly $3T over the next ten years if it includes a Public Option that pays out at medicare rates.

The CBO suggests that, nevertheless, taxpayers will incur an additional $1T over that same time period.

Can you discuss how both analyses may be true. That the TOTAL payout takes place in three basic forms, by private individuals, and private employers directly in the form of premiums, and by the same groups, indirectly in the form of taxes. That government cost obligations will increase over but some portion of that trillion is projected to occur regardless of the bill, and that the total private costs to individuals and employers may be reduced by amounts greater than the increase in total public costs.

oderintdummetuant 08/21/2009 11:11am
in reply to donnyshaw Aug 21, 2009 10:14am

So am I not discussing it? Tell me how the relate to the individual mandate for middle income people. The discussion isn’t degraded by someone pointing out that you can call it whatever you want as a matter of fact tell me what you call it when you take from one (against his will) to give to another? I’d call it theft. I’m trying to discuss it but it keeps circling back to taking from those who have earned to give to those who haven’t. I’m trying to have discourse but I get no straight answer. What do you call taking from those who’ve earned to give to those who haven’t? What do you call it when you do it against the will of those from whom you are taking? Why is a public option necessary to provide competition? Would competition not occur with what I proposed in my first post, by health insurance not being geographically restricted? Pretty sure thats discussing it, and still I’ve gotten no straight answers. Just rhetoric and accusation.

Anonymous 08/21/2009 3:53am

Hey Donny, do me a favor and address my first post. Answer the questions I pose there. Where does the 2 billion dollar start up come from? Didn’t they have a recent program they underestimated by around 2 billion (cash for clunkers). Maybe you and I aren’t reading the same information about how this public option is intended to be funded. You say its supposed to be funded by premiums. Are you sure there aren’t provisions for small business to pay in essence a penalty for not offering health care? That those with income of $250,000 or more won’t be paying a tax to pay for it?

Anonymous 08/24/2009 3:30pm
in reply to donnyshaw Aug 21, 2009 10:14am

You can’t compare health care coverage to purchasing items such as food, gas etc and other commodities as access to these items is fairly accessible to all. You don’t need to have a job to buy oil or groceries and the price for these items remains the same regardless of your physical state. No one can deny you access to the purchase these items or demand you return the items once you have purchased them, unlike healthcare.
The public option is vital to the success of healthcare reform. Healthcare companies are trying their best to spread fear and misinformation in order to protect their HUGE profits. Any company that can afford to pay their CEO in excess of 10 million dollars annually will tell any lie to protect their profits.

oderintdummetuant 08/21/2009 10:05am
in reply to donnyshaw Aug 21, 2009 9:48am

So those things will fund (pay for) other people’s insurance? Man are you serious? I’m unemployed right now and I don’t have insurance, but I do have a college education and enough life experience to know how bad an idea this is. Why is it we feel the need to provide for people who won’t provide for themselves? Social Security is broke and broken. The VA is broke, the economy is broke. Our current president has spent more money in the first year of his presidency than the last president did in 8 years in office and our plan is spend our way out? I love your optimism, I really do and I hope to God you and your fellow believers prove me wrong but I think you all have a serious common sense deficit.

oderintdummetuant 08/22/2009 4:36pm
in reply to Anonymous Aug 22, 2009 1:47pm

Insurance is a for profit industry who do you think they care about. Insurance has nothing to do with people, its about money. Government oversight, perhaps good with stringent left and right limits. Government run…, for the sake of argument tell me how well government has run medicaid? social security? public education? the train wreck that is the Patriot Act? want me to keep going? cash for clunkers? bottom up communication in our military? civil rights? the economy?
I swore to protect this country from all enemies, foreign and domestic and I’m doing my best to continue to keep that promise.

Anonymous 08/22/2009 1:47pm
in reply to oderintdummetuant Aug 21, 2009 9:56am

Here is a study done by the AMA showing that merger and acquisitions have eliminated competition from most markets. http://www.ama-assn.org/ama1/pub/upload/mm/368/compstudy_52006.pdf

“…the country’s largest health insurers have continued to pursue aggressive acquisition strategies.

While large health insurers have posted very healthy profits since 2000, premiums for consumers have increased without a corresponding increase in benefits. … consumers have faced increased deductibles, co-payments and co-insurance. This has effectively reduced the scope of their health benefits coverage.

It is clear that patients… are not benefiting from these mergers. The AMA is concerned that the United States is heading toward a system dominated by a few publicly traded companies that operate in the interest of shareholders and not primarily in the interest of patients."

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 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 1:27am
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.

need_to_comment 08/23/2009 6:29am
in reply to Anonymous Aug 22, 2009 2:03pm

You claim administrative costs will be far less in Government run bureaucracy. You must be kidding. Since when does government at any level run with minimal administrative costs?
Private insurers would have incentive to reduce premiums if we were actually free to purchase insurance. I can only purchase insurance that is licensed to sell in my state. It should be like car insurance were they can save me money in 15 minutes or less!! I had to purchase insurance from a different company just last year because my rates were increased. We need that freedom in health insurance too.

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

Spam Comment

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

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