House's Public Option: Good News and Bad News

The House released its America's Affordable Health Choice Act today along with a preliminary CBO scoring. It will include a robust public option. There is some good and bad news about the public health insurance option:

The Good News

-The public option will be available nationwide and from “day one” on the new national health insurance exchange.

-The public plan will be run by the Department of Health and Human Services.

-The public option will pay doctors the same rates as Medicare plus 5% for the first three years.

-The public option will have the power to directly negotiate drugs prices.

-Roughly a third of all people buying health insurance through the exchange are projected to select the public plan (around 11 to 12 million). This is not a high enough percentage that the public plan will “dominate” the exchange. Incredibly important!

-The public option's premiums will be 10% cheaper than a typical private insurance plans.

-The public plan will drive down the cost of overall reform. The size of subsidies will be based on the cost of the three cheapest plans. By offering a cheaper public plan, the size of subsidies are reduced.

-The public plan will self-sufficient and not increase the federal debt.

The Bad News

-The public plan will not be available until 2013. The Health Insurance Exchange will not start until 2013, so no one can purchase the public plan until then.

-The public option will only pay Medicare rates for the first three years. After that it will need to negotiate its own.

-Medicare providers are not required to accept the public plan. (On the positive side: providers that are part of Medicare's network will be part of the public plan's network unless they opt-out.)

-Large businesses will not be allowed to choose the public plan. It is only available to individuals and small businesses getting coverage through the exchange.

-Only 30 million Americans will be able to select the public plan because of the above restriction. (On the positive side: starting in 2016, the Commissioner might allow some larger employers to give their employees insurance through the exchange)

-The public plan's power to negotiate drug/service prices will weaken because of restrictions which strongly limit the number of Americans who can choose to sign up for it.

Overall, I'm fairly happy with the structure of the public option but unhappy with the restrictions on who can sign up for it. Expanding access to the pubic option should be an easier political fight than changing its structure. If I had to choose, I would select a well structured public plan restricted to a few, over a poorly designed public option open to all.

Most importantly, the CBO has determined that the public plan would save individuals, businesses, and the federal government money. The CBO has also concluded that a public plan will not hurt the private insurance market. In effect, the CBO has destroyed the two main arguments against the public option.

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