Yesterday's post discussed the potential advantages of the public option in making health care more affordable. However, in its evaluation of the House and Senate health care reform bills the CBO didn't think that the public option would have much of an impact either on the federal deficit or on overall expenditures for health care.
In its report of November 13, 2009, evaluating the effect of the House bill on the federal budget, the Congressional Budget Office predicted that while the costs incurred by the public plan would likely be lower than the cost of private insurance largely because of lower administrative expenses, premiums for coverage under the public option would likely be higher than the cost of private insurance purchased through the exchange. The CBO explained:
We estimate that the public plan would have costs that were 5 percent below the average level for private plans but that the public plan premiums would be roughly 4 percent higher than private as a result of antiselection by enrollees. (Page 6)
In other words, sicker persons would likely enroll on the public option thus raising the cost of the program. In the absence of a public option, the additional expenses attributable to higher administrative costs and the cost of caring for sicker persons will have to be absorbed by the rest of the health care reform program.
Finally, the CBO stated that only a relatively small percentage of Americans would sign up for the public option, and that the public option itself would not have a significant impact on costs or the number of uninsured.
We further estimate that about 25 percent of the approximately 25 million people with Exchange coverage would choose the public plan option, the actual percentage could be substantially different, although the impacts on Federal costs and the number of insured persons are not especially sensitive to this estimate. (Page 7)
The figures cited by the CBO later in its report are slightly different, but the final result is the same. On page 19 of the report, the CBO predicts that in the year 2019 18.6% of the American population would purchase private health insurance through the exchange, and that 6.2% of the population would purchase insurance through the public option. On page 30 of the report, the CBO states that people's expenditures for health insurance on the public option during the same year would amount to $42 billion, while expenditures for private insurance through the Exchange would be $121 billion. In other words, one-fourth of persons purchasing insurance through the Exchange would select the public option, and the cost of that insurance would be slightly higher than the cost of private health insurance.
The November 18, 2009, CBO scoring of the Senate health care reform bill assigns an even smaller role to the public option, and as it found with respect to the House bill, the public plan would not be likely to save money because the government program would be less likely than private insurers to engage in utilization review - i.e., to deny coverage for desired procedures. At page 9 of its report the CBO states:
Roughly one out of eight people purchasing coverage through the exchanges would enroll in the public plan, CBO estimates, meaning that total enrollment in that plan would be 3 million to 4 million. … CBO’s assessment is that a public plan paying negotiated rates would attract a broad network of providers but would typically have premiums that were somewhat higher than the average premiums for the private plans in the exchanges. The rates the public plan pays to providers would, on average, probably be comparable to the rates paid by private insurers participating in the exchanges. The public plan would have lower administrative costs than those private plans but would probably engage in less management of utilization for its enrollees and attract a less healthy pool of enrollees.
In short, if the Congressional Budget Office is correct in its estimates, the public plans in the House and Senate bills would not have covered many people and would not have saved much money.
There are liberals for whom the public option is the be-all and the end-all, and conservatives for whom the public option is the devil incarnate. But perhaps liberals should not be so quick to dismiss the Senat health care bill as it now stands. Even without the public option the legislation will extend health insurance to tens of millions of Americans and improve the coverage of everybody else. If the free market can be regulated in such a way as to reduce health care expenditures we should all be pleased. And perhaps conservatives should not rejoice over the demise of the public option. If the CBO is wrong and the public option would indeed substantially reduce the cost of health care, then that would reduce the amount of premiums and taxes that everyone would have to pay. If in the future health care costs continue to escalate out of control, we will have to consider adopting a government-run system.
I wish I were smart enough – and prescient enough – to tell you precisely what will happen if we do or if we don't include a public option in the health care bill. But I would like to remind you that all of us are in this together, and that when injury or disease strikes us or our loved ones it won't make a bit of difference whether we adhere a liberal or a conservative ideology. When that happens the only thing that we will want is for medical care to be available, affordable, and of high quality.
Let's leave partisanship and ideology behind, and seek to solve our nation's problems using a rational, fact-based approach.
Visit Professor Huhn's website on health care financing reform for links to information about proposed legislation, studies and reports, public agencies, and private organizations concerned with this issue.
