A public option could also be a way to stabilize the exchanges because a government-run plan could be used to enroll the people with the most expensive medical conditions. The private insurers would be more enthusiastic about selling policies because they might have to worry less about losses.
Linda Blumberg, one of the authors of the Urban Institute analysis, says the public option could serve as an alternative to the plans that offer inexpensive policies with very narrow networks of health providers. She also thinks having a public option could allow private insurers to negotiate better deals by letting them pay hospitals and doctors rates that are closer to Medicare but well below what they are paying now. Do you think any of these ideas sounds promising?
Margot: I think the public option seems like a weird match with the market structure of the Affordable Care Act. Imagine this scenario: The public option can get every doctor and hospital to accept Medicare prices, and it’s able to achieve really low administrative costs. In that case, it’s an insurance plan with a lot of structural advantages over the competition. The existing insurance companies, mostly, are already losing money in this market, and several of them are already leaving or going under. Why would they stick around longer if they can’t get many customers, and they can’t make money on the ones they keep? In another version, the public option doesn’t have any special advantages, and is just another insurance plan in the marketplace. In that case, do you think the government will do a better job of running an insurance company than the insurance industry? We’re learning that this is a hard business. I guess, in that case, it would operate as another choice.
Reed: This is where the advocates point to Medicare as an example of the government’s ability to run an insurance program, and they also like to point to Medicare Advantage as proof that you can have it both ways — people have a choice of the government-run program or a choice of a private plan.
But it seems to me the real debate is whether the only way to make care affordable is for the government essentially to dictate prices. The hospitals and doctors are none too happy about that prospect.
Margot: Maybe. There is, of course, some sort of utopian health insurance plan that is able to be affordable because it manages care so well and keeps people really healthy without requiring a lot of medical services. But the government Medicare program is not really like that. It gets most of its cost advantages through price controls. Of course, Medicare is changing a lot. The Obama administration has been experimenting with new ways to pay doctors and hospitals, designed to improve quality and squeeze out wasteful care. But, so far, those experiments aren’t making a big difference to the bottom line. Realistically, I think the best chance for a public option plan to compete with insurers right away is probably just to pay doctors and hospitals less — and maybe spend less on overhead and profits. That could change over time.
Reed: Another idea, floated by Donald Trump — who would do away with the exchanges in any event — is to induce competition by allowing insurers to sell across state lines. But, as you’ve written, that may not work any better to give people a wider choice of plans at better prices. If Hillary Clinton wins, what do you think the political odds are for adopting something like the public option? Do you think Congress would go along? Would state legislatures?
Margot: Maybe state legislatures in some states, but then we’re not talking a Medicare-like program. Remember there are states — Vermont, Colorado, California — where there is an active and somewhat mainstream movement to get to a single-payer health care system. This is not exactly that, but it is a way of socializing more of health care, and I could see political support for the idea, especially if things get worse in the marketplaces. Of course, ironically, the most receptive states tend to be the ones with the most stable exchanges. If I were a legislator in California, I might think twice about voting for something with the potential to destabilize a functional market.
In terms of Congress, it seems really unlikely, given that it was a no-go even with Democratic control of both branches in 2010.
Are there other ways you could see this new push shaping the future debate about health reform?
Reed: The threat of price controls, and Congress is looking at you, too, pharma companies, could finally get people talking about the underlying medical costs that make insurance so expensive. My guess is there is going to be more pressure on hospitals, doctors and the drug and device makers to lower prices.
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