Public Option Could Save $250 Billion

Now that I have some official numbers from the CBO I can do a better analysis of just how much the public option would save the taxpayer. Since in the HELP committee's bill, the size of government subsidies given to individuals to buy health insurance is based on the average of the three cheapest plans (the “reference premium”), offering a cheaper plan would reduce the size of the subsidies given out.

I'm assume, as is widely agreed, the public option would be the cheapest plan offered. If there was a strong public option (basically a full Medicare opt-in) it would be about 30% cheaper. If there was a weak public option (the Schumer plan) it would be about 10% cheaper.

With the weak public option the “reference premium” would be 5% less, and the total size of subsidies should be reduced by roughly 7-10%. That means a weak public option will make the HELP committee's health care reform bill roughly $90-130 billion cheaper.

With the strong public option the “reference premium” would be 10% less, and the total size of subsidies should be reduced by roughly 15-20%. That means a strong public option will make the HELP committee's bill roughly $200-250 billion cheaper.

I have not seen the details to Conrad's co-op plan, (because they do not exist) but similar co-ops currently operating are not significantly cheaper than other private insurance plans. Conrad's co-op should have almost no impact on reducing the cost of the bill.

*all numbers are rough estimates and can change dramatically based on the size of subsidies, eligibility, and structure of the public option.